Columnists

Maximise value of corporate reporting with these three tips

corp

Summary

  • Today, providing a concise and connected narrative has become increasingly difficult due to the elevated levels of uncertainty and the complex interactions between business and society.
  • Any form of corporate reporting should start with the end in mind, which includes a consideration of the stakeholders who will consume the content of that report.

Corporate reporting can be described as a form of communication an organisation has with society. It includes annual reports, corporate governance reports, ESG reports, financial reports, to name a few.

Today, providing a concise and connected narrative has become increasingly difficult due to the elevated levels of uncertainty and the complex interactions between business and society that impact an organisation’s fortunes.

However, organisations have an opportunity to stand out in the market through effective corporate reporting. To achieve this, I highlight three areas that will aid organisations to maximise the benefits of corporate reporting.

1. Stakeholder demands

Any form of corporate reporting should start with the end in mind, which includes a consideration of the stakeholders who will consume the content of that report.

An organisation ought to have clarity on who its stakeholders are in the context of the organisation’s strategic objective and the demands and expectations that the various stakeholders place on the organisation.

It enables an organisation to employ its limited resources efficiently by providing only pertinent information that stakeholders find relevant for their decision-making. It encourages transparency within such an organisation and builds trust between the organisation and its stakeholders in the long term.

To remain competitive in the long run, organisations must seek to communicate with stakeholders from the perspective of their purpose and role in society. It includes communicating outcomes that drive long-term thinking regarding the organisation’s goals.

Investors, for example, pay close attention to the long-term prospects of businesses today and not just the short-term returns.

2. Reporting framework

How an organisation applies the reporting framework that guides the preparation of a corporate report is essential to realising benefits.

These include frameworks such as the Companies Act, securities exchange reporting provisions, Capital Markets Authority reporting requirements, accounting standards such as International Financial Reporting Standards, Environmental, Social and Governance frameworks such as Task Force on Climate-Related Financial Disclosures, Integrated Reporting, among others, and corporate governance standards like King IV.

Too often, organisations apply these frameworks with a narrow compliance-only mindset, without providing a distinct narrative of the organisation’s specific circumstances, resulting in boilerplate disclosures that fail to provide relevant information about the organisation to users of such reports.

Too often, these disclosures are provided in a complicated manner, making it difficult to understand, navigate, and distil material information from non-material information.

Telling a complete story by providing linkages and references across the various reports an organisation prepares is also required today.

For instance, an organisation should begin to translate non-financial information into reliable and relevant financial information akin to the financial impacts linked to climate change.

3. Context

The context of the environment an organisation reports in should not be ignored. Organisations should consider how this context and environment play a vital role in ensuring that corporate reporting is bespoke to an organisation.

For instance, today, in addition to the standard financial reporting, investors are seeking insights on aspects such as an organisation’s balance sheet strength and quality, cash and liquidity position and going concern assumption to name a few.

4. Investor concerns

Therefore, preparers of financial reports today should aim to address these investor concerns within an organisation’s specific operational context.

Environmental, Social and Governance considerations and the global energy transition away from fossil fuel will impact various organisations at different magnitudes, and as a result, providing corporate reporting with such a context is valuable information and insight to users of such reports.

Furthermore, information on how an organisation’s values influence decisions on complex social issues is an important context to provide.

In addition, good corporate reporting requires balance, including information on achievements, challenges and targets not yet achieved.

Awodumila is an Associate Director at PwC Kenya. An author who writes and speaks widely on corporate reporting topics