Is this the future of annual reports?

From longer reports to online only releases, companies are responding to demands for greater corporate disclosure in annual reports.

With the decline of print, there have long been forecasts of the demise of the annual report. However, they’re a little off the mark. In the tussle between the “everything digital” lobbyists and demands for greater corporate disclosure, the winners are larger, more comprehensive annual reports.

Strategy advisor BWD surveyed corporate reporting by ASX 100 companies for 2017–18. The study reveals corporate reporting spread across a diverse range of print and digital media, communicating finely tuned messages to a broader range of stakeholders. BWD design director Robert O’Farrell identifies the key trends.

All in

Sixty per cent of annual reports returned to being all-inclusive books covering all aspects of the company’s business in the one volume; 28 per cent continued with the trend of the past decade to split reports into a suite of smaller targeted documents, or also summarised results in a smaller review.

Size does matter

The bigger the company, the larger the report. CBA comes in at a whopping 308 pages and BHP, Rio Tinto and Westpac produced reports of more than 200 pages. There are convincing reasons to provide stakeholders with the complete picture at one read. Boards, which are being held more accountable, are leaning towards full disclosure and reporting on governance in all areas of the business. Also, the push to integrate sustainability and non-financial performance with financial results means it makes strategic sense to issue a combined report.

Print lives

Even though many companies publish their annual report as a pdf, only 25 per cent of companies surveyed used online reporting. Annual report content is reformatted into web-friendly bites to ensure the message reaches all stakeholders, no matter their preferred reading format. These reports are often accompanied by a printed summary report.

“We are seeing specialist reporting, such as sustainability, being presented online, with 10 per cent of companies including separate online sustainability reports,” O’Farrell writes. “Ten years or so ago there was a massive push to uptake technology and publish annual reports solely online, cutting the cost of print and catering, supposedly, to a younger, tech-friendly shareholder base.”

According to O’Farrell, the number of companies doing this appears to have fallen over recent years. “There’s no doubt some companies will continue to have an online reporting presence, particularly in larger corporations with big shareholder numbers, but the trends we’re seeing indicate the return to dominance of print-formatted reports.”

Content is king

The current corporate operating environment has seen a major trend towards the need to report on a raft of non-financial subjects, including all areas of sustainability, climate change, corruption, risk analysis, governance and materiality. These issues are now recognised as having a major impact on the financial prospects of a company and identify the need to develop a strategy to address them.

Of the companies surveyed, approximately 30 per cent used their reports to convey strategic messaging; 73 per cent included detailed reports on sustainability within their annual report; 27 per cent provided separate sustainability reports; and 43 per cent discussed the material issues or risks affecting the company.

So what does all this tell us about the future of reporting? If we project current trends we can draw a few conclusions.

Reports will be repurposed to provide a means for a company to gain the trust of stakeholders by demonstrating an understanding of the operating environment and willingness to be transparent in disclosure. Companies will tailor messages to meet their specific needs and concerns.

Higher priority will be placed on reporting on the future prospects of business and not just past performance, by identifying material issues and risks that can affect future earnings. Companies at the forefront of reporting will identify and report on how they create value for stakeholders by turning risks into opportunities to build a sustainable business.

The effort to report on sustainability will continue to dominate the content of many annual reports. More companies will find ways to fully integrate sustainability into their strategy for growth, which will be reflected in the restructuring of their reports.