In an ever changing world… What are we reporting and why…?
Simplifying matters within a dynamic environment there are three communications considerations.
Firstly; What we have to say, which is fundamentally about performance, defined by its many tangible and intangible metrics.
Secondly; The metrics themselves and understanding the benchmarks against which we measure performance.
Finally; The backdrop in which we operate considering the social, economic, environmental and political drivers.
From our starting point of measuring performance; historically, this was a statutory chore performed by the company secretary as a matter of compliance. Simple metrics including turnover, cost of sales, fixed costs and profit were accounted for to explain the profit and loss account and balance sheet. Further analysis could explain earning per share, dividend yield and price earning ratios. As listed companies shares became the bedrock of institutional investors portfolios these investments became valued at increasing multiples to their net asset values. Beyond simple business drivers and cycles, investors and their stakeholders have demanded a greater insight into the more intangible measurements. After a series of well publicised corporate scandals (Maxwell – Enron etc) regulatory bodies and legislation have become established to ensure companies report transparently. From the Cadbury Report in 1993 to Greenbury, Higgs and Smith, Sarbanes Oxley through to the present day where we are seeing a consolidation of reporting guidelines and legislation. Investors and stakeholders now demand insight into companies’ DNA from an understanding of employee engagement, customer journey and the social environment in which they operate, as well as the virtues and quality of governance of the teams running these companies. Insight and transparency are fundamental to best in class reporting.
Historically reporting legislation was minimal, over time became more complex and challenging to navigate but now seems to have come full circle with consolidation of drivers. There are three pillars to Environmental, Social and Governance reporting ESG which we outline in the ESG matrix in our ESG blog separately.
Multinationals need to consider recommendations from the Task Force on Climate-Related Financial Disclosures (TCFD). The Value Reporting Foundation provides investors with consistent, comparable and reliable ESG data. This consolidation of bodies and drivers provides a consultative framework for delivering clear and consistent reporting solutions that enable all stakeholders to understand companies performance moving forward.
Finally we need to consider reporting in this strange new world where in the UK we have to adapt to the impacts of Brexit, the challenges of working from home more following the effects of Covid on the traditional workplace and more recently the disruptions caused by conflicts in the Ukraine and a more unstable world order.
Only by examining the impacts of our performance, people, customers, environment and macro socio economic drivers can management provide audiences with a clear understanding of companies performance in this strange new world.