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Authentic reporting in challenging times

We have all heard the words “unprecedented times” a lot lately. Companies are figuring out how to continue working through this crisis, while making very hard decisions. For companies that will have to report on the impact of COVID-19 in their annual report, starting with the March-year ends, addressing such matters may be challenging. We’ve put together some tips to help get you across the finish line.

Some annual reports are already showing an authentic approach to reporting on the pandemic

We reviewed the available reports of all FTSE 100 companies, and although the majority of December-year ends have not mentioned COVID-19 in their annual reports, a number of companies, including ones operating in the Oil & Gas and mining industries, have addressed it. This is mainly due to the fact that the majority of companies with December year ends published their reports in February, before the wide-spread impact of the crisis.

Companies that published in March have been able to provide more commentary around the implications of COVID-19 on their business. However, for companies with March year ends, communication around this issue will be more challenging to address as they will have experienced the effects of the crisis, both financially and operationally.

What we have seen thus far

So far, most companies have addressed the potential impact of COVID-19 in a few key sections:

Market section: Companies have provided detail on how the market growth may be impacted by COVID-19 and what it means to the overall company’s strategy and outlook.

Tip: It is important not to place COVID-19 in the “macro trends” review only, rather it is paramount to address how the pandemic has been affecting the specific industry, such as potential impact on supply of raw materials, consumer spending and so on.  

Risk section: There have been different approaches here, but most of the companies addressed COVID-19 within the “economic and political uncertainty” areas, while others have mentioned it as a risk on its own - often in a pull-out text box within the risk management framework.

Tip: There should be a balance between these two approaches with some detail on mitigation activities carried out thus far and a brief insight into the company’s focus going forward. Moreover, within the relevant principal risks, information on specific COVID-19-related activities for mitigating the economic and political uncertainty, supply chain disruptions, Health & Safety activities and employee impacts should be addressed.

Governance: Among the companies reviewed, only one mentioned COVID-19 in the governance section of the report, specifically in the audit committee report, in relation to the going concern statement.  

Tip: The auditors will be working very closely with the company until the very end, as post-balance sheet events might have to be reported on. Thus, consider including a case study to address the work carried out in conjunction with the auditor as a result of COVID-19. Moreover, as the company may have taken a number of decisions affecting stakeholders, make sure that this information is addressed in the report, as there will be exceptional focus on this going forward.

Remuneration: Only one company reviewed has addressed how COVID-19 may impact the executive remuneration next year, as targets will be revisited in the year in light of the crisis, and discretion will be applied in the year.

Tip: One key matter to address in the report is any deviation in approach to executive remuneration. Some companies have already provided information to the market that the executive remuneration will be affected next year, however more detail should be provided on how this is in line with the wider company approach to remuneration.

What the future may hold

Stakeholders, stakeholders and stakeholders

Things are changing fairly quickly, to say the least. Thus, it is almost impossible to predict what the next three months will look like, but one thing is certain, the scrutiny of companies’ reports will be accentuated and more information on stakeholder engagement and ESG matters will be on investors’ agenda. It will be key to bring actions and considerations made in line with section 172 effectively in reports, perhaps by including case studies to demonstrate how specific stakeholder groups have been taken into consideration and engaged in relation to board decisions. The company’s strategic priorities may be affected over this period, so information on how stakeholder feedback was sought over the year could be discussed.

Purpose will be put to the test

Companies’ purposes will be put to the test this year as well, thus it is fundamental to ensure that companies provide a joined up story on how purpose, business model, strategy and governance are linked. Now more than ever before, a company’s purpose will be questioned by various stakeholders. Companies should develop a narrative to demonstrate how their response to the crisis is linked to their purpose. This is an opportunity to step up the game and use creativity to clearly express the company’s position. Moreover, business models may be changing over the course of the year in response to direct and indirect impacts of COVID-19 on their business, thus it is important for companies to set out the changes that may result from the crisis and how the company continues to focus on both tangibles and intangibles.

The nitty gritty of reporting

Due to the financial and operational impact of COVID-19, auditors may be challenging the going concern’s assumptions, covering a period of at least 12 months, and may ask more questions and for more evidence from directors. Another aspect of reporting that will have to be revisited is the viability statement, with specific focus on stress-testing. When it comes to reporting the financial position of the company, it is important to address revenue and outline how this has changed or would have manifested if it wasn't for the crisis. Remuneration will also be a key area of focus from investors, as well as journalists and wider stakeholders. Thus, it is paramount for companies to make it clear how the executive remuneration is aligned with the wider company pay policy, as well as explaining how the remuneration committee has applied its discretion in the year.

Ultimately, try to focus on the end game

Over the years there has been a shift in how companies balance past information with forward-looking statements. It is important that this sentiment doesn’t change even in the midst of the pandemic’s impact on reporting approaches.

So while it remains important to acknowledge what companies will report and communicate in light of mitigating the impact of COVID-19 on their operations and financial positions, it is equally necessary to provide consistent forward-looking information. This includes reassurance of the company’s priorities and ability to achieve its objectives going forward, sustainability actions and evidencing that employee wellbeing will remain the board agenda going forward.

Black Sun’s six principles of trust remain a relevant yardstick to keep corporate disclosure balanced. These principles are purpose, culture, diversity, stakeholders, value creation and long-term thinking. Effective application helps companies to build trust, which in these challenging times, is a commodity worth investing in.

If you would like to leverage more of our insights, or want to continue the conversation, please contact our Insights team: Insight@blacksunplc.com.


Black Sun is a stakeholder communications company. We help businesses to communicate authentically how they deliver value to inspire, engage and influence their important stakeholders. We believe that inspiring strategic communications can spark positive change and drive long-term, sustainable performance. We want to work with companies who want to build better businesses through better communications.