The latest edition of Black Sun’s annual analysis of Annual Reports found that most companies provide good content in relation to their business description, strategy and financial KPIs but challenging areas of reporting remain:

• 93% of companies identify KPIs but over 40% fail to identify any non financial KPIs
• Only 36% of companies show CR as linked to the group strategy within the strategy section
• 58% of companies fail to provide a link between risks and strategy and only 23% of the FTSE 100 go into detail when discussing each risk factor and its impact on the business.
• 30% of companies only, mention governance in more detail than simply board changes within the management statements. Many still approach governance as a compliance exercise.

Although the leading reporters continue to evolve their narrative reporting, seizing the opportunity to develop their disclosure and provide real value to investors, there remains a significant number of less promising reports adopting more of a ‘box-ticking’ approach.

Reporting for many is seen as the first step towards engagement with investors so it is vital that, to address the current mismatch between investor needs and the current reporting framework, there is a fundamental rethink in how companies communicate and report to prepare them for the future.

Sallie Pilot, Director of Research and Strategy at Black Sun commented, “Although there has been a recent rethink of regulation, governance and disclosure, the needs and requirements of the market have continued to change drastically, yet the framework for reporting has not. A crossroads has been met and a choice needs to be made – incremental year on year improvements, as experienced this year to the quality of narrative reporting, are not enough for the future.”