Companies still disappoint on key reporting issues
Despite an ‘encouraging’ improvement in corporate reporting, with many companies embracing changes ahead of upcoming reforms, a significant number have yet to act and could struggle when the time comes, according to research from business advisory firm Deloitte. Two areas of concern highlighted by Deloitte’s ‘Joined up writing’ survey, which studies annual reports, are gender issues and carbon emissions. Just one company surveyed publishes details of its gender pay gap, while only seven talk about gender diversity policies and targets.
A number of gender disclosures are set to become mandatory in the near future. The research also finds that just 15 percent of companies have a female executive director board member – down from 17 percent last year – although the number of non-executive directors on the board had increased by one percentage point to 41 percent.
Deloitte’s research takes a sample of 130 listed companies, made up of 30 investment trusts and 100 other companies. Carbon emissions disclosure is another area of concern, notes Deloitte. While 63 percent of companies make an effort to voluntarily divulge their emissions, just 3 percent make clear how this falls in line with corporate reporting guidance from the Department for Environment, Food and Rural Affairs. Veronica Poole, Deloitte’s national head of accounting and corporate reporting, says: ‘This is a potentially game-changing time for companies. A whole raft of initiatives, some voluntary, some mandatory, have come into force or are about to do so shortly.
‘There have been changes in the Corporate Governance Code, new regulations from the Department for Business, Innovation and Skills that introduce a concise, stand-alone report on the strategy and business model, and recommendations from several other bodies. The overall thrust is to encourage companies to provide more consistent and connected reporting with an emphasis on narrative and their business model.’ The research further finds a lack of ‘insightful, company-specific analysis of significant issues’, as required by an impending Corporate Governance Code update, with just 16 percent providing this, according to Deloitte.
Instead of the ‘clear and meaningful explanations’ advocated by the code, boilerplate disclosure ‘still lurks in many annual reports’. ‘Companies need to be better at connected reporting,’ Poole concludes. ‘The proposals and rules companies now face require a serious level of content, cohesion, connected thought and information. The regulatory bar is set higher every year and users’ demands are rising steeply. ‘The best companies, as the survey shows, create a platform that effortlessly explains the business model, its performance and future strategic hopes to its shareholders, stakeholders and other users. They tell a consistent story, marrying narrative with the figures, and they do it well, setting a great example for others to follow.’