The First 25: New decade, new rules, new normal
The defining trends and insight from the first set of December year-end annual reports.
Each year, we review the first 25 FTSE 350 annual reports as they are released. This year we have the first reporters to fully respond to the revised UK Corporate Governance code and new reporting regulations, while external pressure around the climate crisis and the need for a purpose beyond profit continues to grow and the COVID-19 pandemic is having a profound impact on everyday life around the world.
In analysing the reports, we identified six key trends.
1. Reflecting the impact of COVID-19
While these reports are focused on the previous financial year, several demonstrated a speedy response in acknowledging COVID-19 as a risk. 80% addressed COVID-19 somewhere within the report, whether in the emerging risks, directors’ statements, financial reviews or market overview.
2. Purpose gains greater prominence
Lots of companies have been grappling with defining their purpose and what an effective culture means. 72% of companies now include a clearly identifiable purpose statement within their annual report. 68% cover culture in a meaningful way by demonstrating how culture and values help drive performance and long-term success.
3. Responsibility goes mainstream
With the widespread impact of the climate crisis becoming clearer, 64% now incorporate sustainability within their core corporate strategy. We are also seeing greater alignment with the TCFD framework (64% of reports reference it), while there are some concerns that discussion of the UN’s Sustainable Development Goals (SDGs) remains lightweight.
4. A multitude of approaches to engagement
With companies addressing the new reporting requirements around stakeholder engagement in a number of different ways, we examine three differing approaches to the Section 172(1) statement. Alongside this, designated non-executives have emerged as the preferred way to engage with employees, with nearly half (48%) opting for this method.
5. A more authentic governance story
There is greater linkage between the different elements in the governance section, with more detailed discussion of board activities and skill sets, diversity and succession planning. On executive remuneration, 72% explain how it aligns with wider workforce pay and 56% now specify how it aligns to non-financial metrics.
6. Increase in cross-channel reporting
We are seeing more companies embrace the potential of digital, with 48% now embedding key annual report content within the website. The best examples consider the annual report as part of a wider set of sources that stakeholders use when trying to understand your business, and encompass the overall user journey.
If you would like to discuss our findings in more detail or discover how Emperor can help you achieve your communications ambitions, please get in touch with Claire Fraser at [email protected].