Corporate reporting: Does it need to change with the times?
December 01, 2020
For someone immersed in the reporting agenda for over 20 years I get rather excited (some might say unhealthily so) at discussions about what the future holds. It was, therefore, with great anticipation I awaited the publication last month of the Financial Reporting Council’s (FRC) paper on the Future of Reporting.
For over 15 years my team and I have looked at reporting practices of the FTSE 350 and watched as improvements in the depth, breadth and quality of reporting moved at glacial speed.
This has left me with a dilemma. I recognise the hard work many companies put into their reporting and if I was to compare most reports with their equivalent from 10 years back they would be chalk and cheese. But, after so many years of slow but steady progress, I have to ask whether the net effect is enough.
Despite improvements, recent PwC research into annual reports has found they have continued to grow by an average of 13% over the past three years. They remain largely retrospective, with only 5% of strategic statements clearly looking out over more than a year. And they are fragmented. Only 60% align their strategy with their KPIs, while just over 20% align their strategy with sustainability activities.
Attitudes towards accountability and the role of business in society are changing and advances in technology have put a whole host of new and developing communication tools at our fingertips. Against this backdrop, is the focus on a predominantly backward-looking, pdf document appropriate?
It was with these mixed emotions that I recently hosted a virtual workshop with two of the key individuals behind the FRC paper: Paul Druckman, Chair of the paper’s Advisory Group; and Deepa Raval, Director of narrative reporting at the FRC. We discussed the background to the paper and the ideas it presented. It was a lively discussion and the level of interaction with attendees suggests the paper has hit a nerve. There was a sense that it caused people to pause and reflect and it generated a lot of interest and questions.
The ideas outlined in the paper may not provide every answer and I certainly don't agree with all of them. But I applaud the FRC for triggering a necessary debate. They offer ideas that are worthy of consideration and challenge and in doing so create an opportunity for a more radical approach.
This is a moment to engage in a wider discussion around what value means in the 21st century; to ask what incentives are required to encourage greater transparency and accountability; and to consider how corporate reporting fits within the wider information ecosystem. And finally to reflect on how technology might fundamentally disrupt the status quo.
I encourage you to take a look at the paper and get in touch if you would like to share your views with us.