The Accounting Standards Board (ASB) recently published ‘A Review of Narrative Reporting by UK Listed Companies in 2008/2009′. The ASB is an operating body of the Financial Reporting Council (FRC). The FRC is the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance.
Of the eight Companies Act requirements reviewed, one pertains specifically to CSR and one relates to non-financial KPIs, which includes environmental and employee matters. The review focused on content, communication, and clutter, scoring performance on a five point scale.
Rather unsurprisingly, the review found that in both of these areas, most companies still haven’t quite grasped how to communicate this aspect of their activities in a robust and easy to understand manner. Since our inception, we have always maintained that quality reporting is about providing the relevant information for the right audience in a concise and imaginative way. Therefore, it was difficult not to launch into spontaneous applause when we read that the ASB found that the CSR information presented in annual reports largely contained unnecessary padding, and that a significant proportion of companies were failing to provide linkage between the CSR information provided and the business reasons for doing it in the first place. Within the ASB report, only 20% of the companies sampled provided a convincing explanation of why CSR is important to their business. If a robust business argument cannot be presented as to why information should be included, then its place is not in the annual report.
There are other mechanisms for communicating a company’s CSR credentials, including a standalone CSR or sustainable development report, and online. There is a growing need for companies to apply internet technology imaginatively and creatively to present their approach to CSR. We agree that many annual reports contain significant extraneous information that could be put to better use elsewhere, purely because insufficient thought seems to have been given to the question of whether the annual report is the appropriate forum for these disclosures.
