Societal impact and the cyber threat emerge as top concerns for FTSE companies
21 October 2016
A third of FTSE companies are disclosing in their annual report how they are creating financial value for stakeholders other than shareholders, according to new research from Deloitte, the business advisory firm.
Annual reports insights 2016, a yearly sample of 100 UK listed companies, found that many are making greater efforts to disclose how their work is benefitting employees, governments and local communities in their annual reports. Examples include total amounts paid to employees, total taxes contributed to governments and details of payments to suppliers that demonstrate fair pricing values.
As companies increasingly engage in the debate around social licence to operate and broader value creation, more are explaining their wider contribution to society and the impact they are having. In total, around half (49%) of annual reports this year also included a cross reference to where further corporate responsibility information could be found outside the report, compared to the 34% who did so in 2015.
Veronica Poole, Deloitte’s UK head of corporate reporting, said: “It is encouraging to see companies adopting the principles of integrated reporting in an effort to communicate better and highlight the impact they are having for stakeholder groups, beyond shareholders. The best reports are authentic: they don’t just tell a story, but explain how that company lives its story. Their integrated thinking shines through as a result.”
This year also sees many annual reports discuss the cyber threat. More than half of all companies surveyed identified cyber as a ‘principal risk to the business’. The number disclosing board involvement in cyber-related risks was greatest for the FTSE 100 companies sampled, at 79%. This fell to 59% in FTSE 250 companies and just 12% outside the FTSE 350.
Recent high profile breaches and the reputational damage such events can bring is perhaps driving this trend, though board interaction in these discussions was varied. Looking ahead, Brexit and climate change are expected to join the list of ‘principal risks’ for many in FY16, bearing in mind the recommendations of the FRC and the work of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures
Regulators, including the FRC and ESMA, are also keen to see progressively more entity-specific qualitative and quantitative information on the anticipated impact of new IFRSs that are not yet effective. This includes IFRS 9 on financial instruments, IFRS 15 on revenue and IFRS 16 on leasing. The Deloitte survey found that only 3% gave detailed explanations of significant impacts foreseen on adoption of IFRS 15. These findings and those of Deloitte’s global IFRS banking survey suggest that companies may struggle to provide quality disclosures expected by the regulators.
Notes to editors
About the survey
The annual reports of 100 UK listed companies were surveyed to determine current practice. This sample excluded investment trusts due to their specialised nature. The overall sample is, as far as possible, consistent with that used in last year’s survey. As a result of takeovers, mergers, de-listings and changes in the market capitalisations over the last 12 months and late publication of reports, the sample could not be identical. Replacements and additional reports were selected to ensure the composition of our sample remains consistent with the market.
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.
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