The Bruce Column — From reporting to thinking: what the annual survey shows

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07 Oct, 2015

The evidence is in from the latest Deloitte survey of annual reports. The cultural change which stems from strategic reports, more incisive narrative reporting, and the integrated thinking brought about through integrated reporting, is accelerating. Our regular, resident columnist, Robert Bruce, reports.

Reports are undergoing a cultural change. The need for strategic reports, more incisive narrative reporting and the advent of integrated reporting, are all pointing one way. The greater information required, both financial and non-financial, means that if it is all to make sense as a whole the connections between its constituent parts have to be plain to the user and to be clearly understood.

The latest Deloitte survey of annual reports provides the picture. Accounts are now much more informative and contain much more disclosure. It is clear that they are there to communicate and to tell the company’s story. The old bugbear, the burgeoning length of the average report, a plague of the last few decades, is only marginally up on last year. But offsetting that minimal rise are the signs that companies are making a real effort to follow the advice and encouragement of the Financial Reporting Council and are producing clearer and more concise reporting and curbing the amount of overload in their reports. Companies are putting their effort into strategic reports and so improving communications and increasing a company’s ability to tell a comprehensive, consistent, and connected story. The cultural changes within company reporting are evolving fast. And at the heart of that, and at the heart of good narrative and story-telling, is linkage, the ability to connect.

This is particularly important with integrated reporting. Integrated reporting and strategic reporting sound very similar but what differentiates them is that integrated reporting is an outcome of integrated behaviours, processes and governance across the business which result in integrated thinking.

The survey shows that only seven of the companies in the survey sample made an explicit reference to integrated reporting. But there is already a significant crossover between what is needed to provide the effective reporting which will sit well within the framework of integrated reporting, and the reporting which is required for the content of a strategic report. The survey shows that many companies are already on their way to integrated reporting without necessarily acknowledging it formally in their reports. All this suggests that the route along the paths of integrated reporting which will in turn provide the benefits of integrated thinking across a company is being followed extensively.

Linkage is the most important issue at this stage in the evolution of the report into a much more comprehensive and useful document. This year's Deloitte survey shows that linkage is still, as it were, the weak link. Only 10% of companies demonstrated comprehensively how all the various elements of the report linked together, not just through the obvious way of providing cross references between them, but also by showing clear evidence of the coherent thought process by which the information has been pulled together: the linking together of the company’s objectives, business model, strategy, key performance indicators and risks.

Overall the survey shows that quality has improved and that companies are striving to tell their story and tell it better. And that can only be a positive sign.

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