There was much to showcase and celebrate. During the seminar, we highlighted the reports – the ‘Top Dogs’ – that did the best against our four criteria this year:
Fairness and balance: IHG, Rentokil Initial, Standard Chartered
Forward-looking information: Fresnillo, Next, Rio Tinto
Communication: Airtel Africa, Experian, Next
Transparency: Severn Trent, Taylor Wimpey, United Utilities
Congratulations to all of these leading reporters.
Three big takeaways from the event:
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1. Sustainability content in the annual report is nearing a huge transition
Our pre-webinar survey revealed that improving sustainability and ESG content is a key priority for reporters, which is unsurprising given that this is such a rapidly evolving area. Our attendees also said that alignment with the EU’s Corporate Sustainability Reporting Directive was at the top of their agenda for next year’s reporting cycle.
The complex requirements of the CSRD are on many reporters’ minds, but it’s still unclear exactly how many UK reporters will need to apply it. What we do know is that legal teams are heavily involved in the effort to work out which disclosures are needed, and that the time and money needed to comply with the regulation can be significant.
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2. Continued focus on printed or PDF annual reports is holding back real change
Since 2021, the mandatory format for annual reports has been xHTML (including XBRL tagging) – reports that are meant to be fully accessible to both human and machine readers.
Yet companies and their agencies continue to focus on the PDF and printed versions, attempting to meet their obligations to file the xHTML report by converting the PDF at the end of the process, treating it as a back-office compliance exercise akin to filing the Companies House version. This is a fudge that regulators have tolerated, but they are now actively urging companies to embrace digital-first reporting in readiness for further requirements.
Reports aligned with the CSRD will require further extensive XBRL tagging, which will involve significant planning from reporting teams.
Innovative, purpose-built software is becoming available, showcased in Oakley Capital Investments’ latest annual report.
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3. High-quality business model descriptions are rarer than they should be
Good business model descriptions are remarkably hard to find among the FTSE 100. Descriptions can often be highly formulaic – despite the wide variety of businesses present in the index – and offer little insight into how cash is generated. Fortunately, however, some reporters are loosening up on the traditional one or two page limit.
While elaborate two-page input/output graphics are the norm, the content that really matters – what a company does to create value and how it makes money – is too often given limited attention. In reality, the most insightful descriptions often prioritise text over graphics and circular diagrams.