By Ian Morris
The Financial Reporting Council published a discussion paper on Thursday setting out radical proposals on the future of corporate reporting that would see companies, among other proposals, split up their annual reports, provide additional information tailored to non-expert readers, and embrace technology to make reports more accessible.
The FRC said its ideas are designed to challenge existing thinking about how companies can most effectively meet the information needs of investors and – crucially – a wider group of stakeholders.
Address wider stakeholder groups? Use technology to improve accessibility? This will sound very familiar to corporate communications professionals (and an increasing number of business leaders), many of whom have been banging these drums for some time.
It is a year since the Financial Times launched its campaign, The New Agenda, calling for a reset of the principles of capitalism, promoting stronger corporate purpose beyond just shareholder returns.
It is over a year since the chief executives of many leading US corporations signed up to a statement by the US Business Roundtable affirming their commitment to all of their stakeholders, supporting the communities in which they work, respecting the people in their communities and embracing sustainable practices.
And nowadays most corporates can articulate a broader purpose and many of them are much more proactive in considering their impact on employees, customers, the environment and the communities they serve.
So changing the way companies report to reflect this evolution makes perfect sense. If companies are to serve the interests of a broader set of stakeholders, then it stands to reason that those stakeholders should be able to easily access and understand what it is those companies are doing. Which is certainly not the case with a lot of annual reports as it stands, which are frankly too long and often inaccessible to most eyes. They are still rooted to the old world of hard copy, following a strict editorial formula that is as much dictated by printers as it is by auditors. With modern websites offering so much more potential for information sharing and story telling there is really no excuse to continue with the old ways.
In 2020 there is more interest in and scrutiny of companies than ever before, from a much wider cross-section of society. This interest is not only in their revenues, profits and dividend payments (as important as they are) but also in what value they are providing to society as a whole. Business behaviour is being closely watched and for companies, communicating what they are doing in a transparent manner to all these audiences is more important than ever.
The FRC is inviting interested parties to comment on its proposals until 5 February 2021. I would urge companies and advisors to do so. The move to make companies communicate in as clear, transparent and accessible manner as possible is a hugely important one, and corporate reporting is a vital part of that.