Article 3 of 6
Should your annual report be one comprehensive document or a suite of documents? It’s been a hot debate for years. But the argument for the single document is being sorely tested by the arrival of TCFD and Modern Slavery. Most companies are now treating these as separate, online-only disclosure pieces.
How far do you go? For larger corporates with more sustainability data to disclose, or for those in more sensitive industries, separation is making a lot more sense. It enables you to tailor information, style and tone of voice to different stakeholder needs. It keeps page count down and it enables the detailed sustainability report to be online only which increases integrity.
How many documents in an annual reporting suite is too many?
An annual or integrated report is a multi-stakeholder document. It needs to appeal to broad range of audiences: your employees, prospective employees, customers seeking to reassure themselves of your ethics, regulators, environmental guardians – as well as investors. It’s a lay person’s document - a broad corporate statement of your total story, what you stand for, what’s important to you, how you're facing today’s many challenges, how you’re creating value. Once your report consciously becomes that storytelling piece, your key messages can become lost if the vast majority of the page count is devoted to complex and arcane financial and sustainability tables. It’s easy for a reader to be put off.
Enough. Let’s separate.
Our advice to most clients who have strong brand and strategy stories to tell, is to split their financial statements into a separate document. Similarly, if you are of a scale or in a sector that requires great depth of environmental, social and governance content and data, we recommend a separate Sustainability/ESG Report.
Same applies to Governance detail, TCFD and Modern Slavery etc. If you believe financial statements should be included in the one document, then logic suggests that so too should all this other rapidly evolving content. And suddenly your page count has completely blown out. Better to separate this reference material out.
The effective communication trick is to surface the meaningful financial and non-financial drivers and impacts from all that data, and weave your story around that, identifying the interdependencies, and seeking to represent a balanced view comparable with your previous disclosures and the sector you work in. Tell that story clearly and concisely in your lead annual/integrated report. And present the reference data separately.
Be guided by key principles.
The aim of an integrated report is to explain the factors that affect your ability to create value over time for all your stakeholders. Sometimes less detailed information allows the core story to become more apparent. Less is more.
There is no right or wrong here. Make your own judgement. Every company's situation is different, with varying dynamics at play.
While a suite of documents makes sense in this multiple disclosure environment, beware of over-fragmentation, which can make things too difficult for audiences. Our recommendation is:
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an integrated mainstream report that broadly covers the key narrative in a carefully crafted and accessible format. Including your key sustainability thinking. Audience: Employees, prospective employees, customers, regulators, environmental guardians – as well as investors (retail and institutional);
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a separate Financial Report that includes all the transparency required for a financially-focused audience. Audience: Market analysts and commentators, financially literate investors;
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a third, ESG Report with detailed data on environmental sustainability, social and community impacts; employee statistics and initiatives; your TCFD report and climate disclosures; your TNFD disclosures; your modern slavery disclosures etc. A catchall data repository and reference document. Audience: specialist, analysts, regulators.
Tip: the more separate documents you have in your reporting suite, the greater visible effort you need to signal, and link to, the companion documents.
Like most reporting guidance, the needs of every company and its stakeholders vary enormously and so does the reporting solution. The above is designed to help you find the right configuration for your company’s needs. For example, many companies will elect to make the sustainability/ESG portion a chapter within the annual report.
To sum up: Establish a clear view on your audiences, their respective needs and what your document suite components look like, then move on to your content and the best ways to serve up your information to your audiences. We cover that topic in Article 4.
