Newsflash – FRC Lab report on making Section 172 statements more useful

October 2020

The FRC’s Financial Reporting Lab has issued a short publication setting out some reporting tips for Section 172 statements. These should be used by companies as they start to think about their year-end reporting and consider building on their year one disclosures.

The paper covers three areas: content, presentation and process.


  • Be specific and genuine, avoiding box-ticking – provide an authentic reflection of what happened and what is material to the company
  • Explain the “why” – why particular stakeholders are key and why chosen engagement activities are effective
  • Link to strategy – make clear how the stakeholders and other factors affect the development and implementation of strategy
  • Include difficulties, not just the positives – be clear where trade-offs and decisions have been made in the short-term to benefit the long-term, and to the benefit of one stakeholder group over another
  • Reflect the board’s oversight – how does the board challenge and oversee management’s engagement with stakeholders and the formulation of strategy
  • Include material KPIs on key stakeholders – provide information on the key performance indicators on key stakeholders which are monitored by the board
  • Address future consequences and planned actions – explain the implications of stakeholder feedback received and what actions have been taken or are planned as a result
  • Be consistent – the statement should be consistent with the rest of the annual report and considered in the context of the company’s story, as a whole


  • Think of the flow and context – consider how the statement fits within the context of stakeholder engagement and how the statement itself can provide context to other areas
  • Make it visible – clearly label the statement and refer to it in the contents page of the annual report
  • Use cross-referencing to enhance understanding – cross-referencing should not be used to make the statement a contents page or list of links, the statement should provide a coherent message by itself
  • Include case studies – explain how stakeholders and the other section 172 factors were taken into account in significant strategic decisions during the year


  • Start early – during the year highlight those key decisions and engagement activities which could be considered for inclusion in the statement as they happen
  • Include prompts on stakeholders and Section 172 responsibilities – develop templates for board agendas, papers and minutes to consider which stakeholders are relevant for decisions

The paper also includes some important reminders about the statement:

  • It is not about stating compliance with the Section 172 requirements but about reflecting the board’s consideration of the section 172 factors in pursuit of the success of the company
  • It is not just about stakeholder engagement, the statement should consider all the requirements of section 172
  • It needs to reflect what is relevant to the company even where decisions or engagement may have been carried out centrally by the group in the case of some subsidiaries
  • Section 172 should be embedded in the directors’ strategic decision-making and supported by the company’s culture

The paper is available here.

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