Revised guidance has been issued by the financial reporting watchdog on the strategic report, in a bid to encourage companies to “consider wider stakeholders and broader matters” impacting performance over the long term.
The near-100-page guidance from the Financial Reporting Council (FRC) makes improvements to detail concerning non-financial reporting—without ditching the key principles of existing guidance.
“The FRC believes that the integration of non-financial information into the strategic report is a key part of telling a company’s story,” it said.
A key part of the new guidance is the inclusion of information about meeting the demands of new legislation, which requires directors to have regard to broader issues when fulfilling their duties. This includes employees, suppliers and customers, along with the community and environment. The update is applicable to large companies for the financial year beginning on or after 1 January 2019.
The guidance also implements changes related to section 172 of the Companies Act, the legislation that places a focus on directors’ duty to promote the success of the company.
Paul George (pictured), executive director of corporate governance and reporting at the FRC, said: “The revised guidance underpinned by legislation will improve the effectiveness of section 172 and stimulate board discussions on how companies are considering various factors to ensure their business is sustainable over the long term, including the impacts on the company’s key stakeholders.”
The report states: “An entity’s purpose is why it exists. It could encompass generating benefits for members through its economic success whilst having regard to the matters identified in section 172 and, in the broader social context, contributing to inclusive and sustainable growth.”