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Telling a good story or losing the plot? Clarity in corporate reporting, part 1

Every good story needs a strong and compelling narrative. Be it a novel, newspaper article or film, clarity of plot and content is what keeps an audience interested and engaged. The same is also true of annual reports, where clear communication is vital to connecting with investors and stakeholders.

Unfortunately, many companies have yet to master the art of corporate storytelling. According to research conducted by Black Sun Plc, corporate reports are often weighed down by technical information, disconnected data and impersonal, boilerplate copy that serves only to confuse and alienate readers. In 2010, 40% of companies surveyed failed to identify any non-financial KPIs in their reports, and only 7% of those FTSE 100 companies that referred to business models provided any accompanying commentary or insight.

Failure to make connections between content and provide clarity around key issues means companies are missing the opportunity to tell a good story about their performance, strategy and beliefs. Meanwhile, the tick-box approach to corporate disclosure, which persists at many levels, means that rather than offering an engaging narrative, some companies are ‘losing the plot’ altogether.

At Stratton Craig, we know all about storytelling. As written communications specialists, we excel in telling concise and compelling corporate stories as part of our annual reporting services. We place great value on clear communication in all media, but particularly in annual reports, where it is vital that stakeholders are able to access relevant material and meaningful accounts of companies’ activities. For this reason, we welcome recent moves by the UK Government to make corporate reporting “simpler, clearer and more focused”.

In September, the Department for Business, Innovation and Skills (BIS) issued a consultation paper on a new framework for narrative reporting. The document signals wide-ranging reforms intended to make corporate reports more accessible, and could have implications for all but the smallest of UK companies. The aim of these measures is to make the reporting framework “clearer for companies and easier for investors to locate the information they need.”

Looking to make annual reports more streamlined and engaging, the BIS also wants to overhaul the reporting of executive remuneration to present a clearer picture to readers. Such clarity, we believe, is vital for transparency and will help companies to demonstrate strong leadership through open and honest communication.

But that’s not all. Last year, the Financial Reporting Council’s review of the UK Corporate Governance Code also ushered in a number of changes designed to “promote greater clarity and understanding” in annual reports and to make “communication with shareholders…more effective”. The International Integrated Reporting Committee (IIRC), meanwhile, is currently pushing for a global framework on combined financial and non-financial reporting with a view to helping companies produce more joined-up and cohesive annual reports. In fact, from a number of reporting authorities, revisions and innovations are being proposed in the pursuit of clearer and more compelling corporate reports.

Here at Stratton Craig, we applaud these developments and hope they begin to shift opinions and approaches to corporate reporting. Because rather than a compulsory chore, we believe annual reports should be seen as an opportunity to communicate with stakeholders; an opportunity to tell a strong, coherent company story that not only satisfies investors’ demands for information, but makes for a good read as well.