With escalating reporting demands and multiple regulatory changes to keep track of, companies are feeling the weight it brings.
A survey conducted by the Chartered Governance Institute at the beginning of this month revealed that 80% of FTSE 350 company boards face “a reduced focus on strategic matters due to increased corporate reporting requirements”. This highlights a big concern that non-financial reporting demands are consuming a disproportionate amount of board time, possibly hindering future-oriented decision-making.
Of course, the goal of sustainability frameworks like the CSRD and ISSB is that they will provide information that is decision-useful for investors and reduce the reporting preparation burden. Although there is a strong focus on investors, they are not the only audience who need sustainability information about a company.
What about everyone else?
Employees, customers, suppliers, and local communities alike base their decisions on a company’s sustainability disclosures. For example, prospective employees check out what the company culture is actually like, suppliers might want to see evidence of how they address climate change, and local communities might investigate how a company positively contributes to social impact on the local area.
The annual report, while a necessary and important source of information, is a moment in time. Companies ignore other stakeholders at their peril. Luckily, with the specificity of ESG disclosures in the annual report, companies can begin by leveraging other channels for sustainability information.
For example, companies can use a sustainability or issue-specific report to go much further than the annual report and report on strategic information related to sustainability matters within the company, particularly of their most material impacts. They can tell their story through digital, social, or other sharable resources to meet the needs of the wider audiences that have an impact the business.
Whether you are a first-time reporter or have been producing a sustainability report for years, new ESG frameworks and regulations are changing the way companies need to think about and report on sustainability. If you need help thinking about how you can prepare, please get in touch with sarah.roper@luminous.co.uk.
