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Find out how narrative reporting can evolve from discussing intent to demonstrating action and positive outcomes from EY’s seventh annual review of FTSE 350 annual reports and accounts.
In brief
- EY’s latest review of narrative reporting - Annual reporting in 2019/20: From intent to action – highlights how FTSE 350 companies complied with the first cycle of the UK Corporate Governance Code and the Companies (Miscellaneous Reporting) Regulations 2018. It also discusses how companies can move their reporting to demonstrating the actions taken and the outcomes delivered for their stakeholders.
- This is the seventh edition of EY’s annual review of over 100 FTSE 350 annual reports and accounts (ARAs). In our report we explore a number of key aspects of narrative reporting including meaningful reporting; purpose and culture; managing risk and viability; UN Sustainable Development Goals and climate change; stakeholder engagement and s172; and workforce engagement and diversity.
- Watch the replay of the webcast discussing EY’s latest analysis of FTSE 350 narrative reporting ‘From intent to action’ and download the slide deck (PDF, 5MB).
Annual reporting in 2019/20: From intent to action
In our latest review of FTSE 350 narrative reporting- Annual reporting in 2019/20: From intent to action - we look at how companies have implemented the first full cycle of changes arising from the 2018 UK Corporate Governance Code and the Companies (Miscellaneous Reporting) Regulations 2018. The key findings emphasise that reporting should not be solely focused on the processes a company has in place or its good intentions: it needs to give real insight into the actions taken, as evidenced by the outcomes that have been achieved.
With illustrative examples of best practice from a variety of organisations, the report covers seven key areas of narrative reporting:
- Meaningful reporting
- Purpose
- Culture
- Managing risk and viability
- UN Sustainable Development Goals and climate change
- Stakeholder engagement and s172
- Workforce engagement and diversity
EY FTSE 350 narrative reporting analysis 2020
We call on companies to make a step change from articulating intent to demonstrating action to drive positive stakeholder outcomes. As well as investors, other stakeholders are seeking such increased corporate accountability. For example, the tragic events leading up to the Black Lives Matter movement have shaken up the social and business landscape. Employees want their companies to be candid about their current diversity status and to take concrete actions to improve it – yet we found only 12% of companies report on the ethnic diversity of their boards. Measuring progress is key to achieving change, as demonstrated by the substantial strides made in improving gender diversity on boards for example. Reporting is a key enabler to measuring progress as it allows stakeholders to hold companies to account.
We also cover how companies have communicated during the early stages of the COVID-19 pandemic. The crisis has tested, for example, how boards have been discharging their duties under Section 172 (of the Companies Act 2006) at a time when many have faced difficult decisions involving trade-offs between competing interests - the impact on their stakeholders, long-term success and reputation. Yet we found that 45% of companies did not provide examples or case studies to illustrate how stakeholder considerations had affected the decisions made by their boards.
In each area we identify leading practice examples and provide practical insights to develop governance and reporting practices to help companies enhance their narrative reporting such that it demonstrates their actions and the outcomes they have achieved for their stakeholders.
Ethnic diversity of boards
of companies report on the ethnic diversity of their boards
Considering stakeholders in decision making
of companies did not provide examples or case studies to illustrate how stakeholder considerations had affected the decisions made by their boards.
Annual Reporting in 2019/20: From intent to action webcast
On 1 October 2020, EY’s Corporate Governance team hosted a webcast to discuss the content of their report and to provide preparers with practical ideas for how to improve their next ARA. The webcast was attended by over 170 participants from FTSE 350 companies as well as a number of other significant UK and international listed and private entities, investors and regulators.
We ran two live opinion polls to gain an understanding of participant views and priorities. Here are some highlights:
Summary
Our review of FTSE 350 companies’ annual report and accounts this year shows that they have made a good start at implementing the changes arising from the 2018 UK Corporate Governance Code and the new Companies (Miscellaneous Reporting) Regulations 2018.
But more is needed to turn the dial from intent to action. EY’s latest review of corporate reporting – Annual reporting in 2019/20: From intent to action – highlights how companies can demonstrate this via their narrative reporting. The review also covers reporting considerations under COVID-19.
Download our report (PDF, 7MB) to learn more.