FTSE 100 Ticking the boxes, but missing the point?
New Black Sun research finds companies need to work harder to communicate value creation story
Black Sun’s annual analysis of FTSE 100 annual reports shows that companies are ticking all of the right boxes and covering off all of the regulatory requirements. However, while companies are using the right words, what’s missing is a convincing story for shareholders and stakeholders.
Our research study, entitled ‘Ticking the boxes, but missing the point’ finds that when we read annual reports they technically score very well, but we are left without a clear sense of how companies differentiate themselves, what their investment case is and how they create long-term sustainable value, the key components of a strong value creation story.
Only one third of companies set out their purpose, leaving one wondering about the underlying belief structure or values that differentiate and define businesses today. At a time when Boards need to rebuild trust in their businesses, only 30% of CEOs and 26% of Chairmen explain their value proposition in their leadership statements, making it difficult for shareholders and other stakeholders to understand their long-term value proposition, let alone, how that might translate into something meaningful for the business not only today and tomorrow but into the long term.
Very early signs of change
This year 55% of companies use a value creation approach to explain their business model, a significant change from 25% three years ago, demonstrating the shift to a broader representation of non-financial value drivers and risks which have often been overlooked in favour of financials metrics and risks. Though only half of those explain the relationships with their stakeholder groups and fewer still - only 10% reporting any quantifiable data or explanation of the actual value created for each of their stakeholders.
Businesses can no longer ignore their stakeholders
It’s widely recognized that rebuilding trust and long-term value creation go hand in hand. Long-term value creation is only possible if organisations take into account the interests of all of its major stakeholders. So why is it that only 70% of companies explain who their stakeholders are and how they engage with them anywhere in their report? Even fewer, 49% discuss the feedback they receive from stakeholders and only 22% discuss how they are responding to feedback!
Some progress, but more to be done
- 93% discuss industry trends, only 65% use their market review to explain strategy
- 90% identify strategic priorities, only 37% set quantitative objectives and targets
- 72% explain what KPIs measure, only 34% explain the relevance to strategy
- 32% of Chairman or CEOs commit to good governance, but only 40% explain the Board’s ability to challenge management
Sallie Pilot, Black Sun’s Director of Research and Strategy, said, “The business case is clear. So let’s not just ’talk the talk’ but ‘walk the walk’ and redefine how businesses measure success. Let’s challenge ourselves and others to look hard at what companies say to their stakeholders and how they say it and not miss the opportunity of improving communication of long term strategy, value creation and drivers of business performance in a more meaningful and joined up way in annual reports and beyond.”
Request a copy of the research here.
For further information or to arrange to speak to Sallie Pilot, please contact:
Sarah Myles, Business Development Manager