The annual report has been a cornerstone of corporate communications for more than 200 years, but while the past two centuries have seen sustained evolution in communications technology, the annual report remains at its core a paper document (even if that paper is a PDF on a screen). Corporate reporting requires a leap forward if it is to meet stakeholders’ needs for the next 200 years. Thankfully a leap for reporting is just over the horizon.
The Financial Reporting Council (FRC), the UK accounting and reporting regulator, recently created a bold vision for a new corporate reporting model that embeds a framework of reporting connected and defined by technology. The FRC has consulted on the model and is awaiting feedback. In the meantime, what should companies and boards do to make the most of the digital opportunity?
To answer this question, the Financial Reporting Lab (part of the FRC) has been considering what cutting-edge reporting looks like through deep-dives into technologies from AI to blockchain, XBRL and video. Most recently, the FRC have looked at virtual and augmented reality (VR and AR). The analysis highlighted that VR and AR represent a significant opportunity for companies to build a more engaging corporate report that connects and communicates to a wider group of stakeholders.
VR and AR’s time has come
When the Lab first decided to look at VR and AR in corporate communications, the research showed that use of the technology was niche and that it was likely to take some time before it became mainstream. To explore this theme further, the Lab included VR and AR in its Digital Future series. The research’s conclusion still seemed current at the end of 2019 when the Lab started the project’s interview phase. However, 2020 changed that.
The Covid-19 pandemic has accelerated the adoption of technology across business and communications. These changes have led some to conclude that communications will permanently switch from physical to digital. Whilst the ultimate answer to this is currently unclear, now is a good time to consider how VR and AR might improve corporate reporting.
While the current limitations on physical interactions (caused by the need for social distance) may soon disappear, a reduction in physical interaction plays into several wider trends accelerated by the pandemic, including:
- reduction in office-based working;
- further internationalisation of shareholder bases; and
- reduced business travel to meet economic and climate targets.
VR and AR is designed to bridge the physical and digital world by augmenting it or completely recreating and replacing it (virtual). This blending of physical and digital has value in a world where physical interaction and communication are reducing.
Three use cases for VR and AR in corporate reporting
Event-based VR and AR
Company reporting is often driven by scheduled events such as annual/interim results, Annual Reports, or shareholder meetings. Whilst it is increasingly common for companies to support such events with video and other media, VR and AR use has not been widespread. However, some companies have experimented with delivering innovative annual reports (see LVMH and Zalando) and annual general meetings (See Reliance) using VR and AR technology.
Insight VR and AR
Investors gain much of their insight into a company’s operations, business model and products, through meetings with management and site visits. However, the need for physical presence limits those that can benefit from such information. VR and AR provide one alternative to physical meetings and have been used by companies to provide product insight and operational insight, which is especially valuable where the product is inaccessible (see Ørsted) or is not yet developed. (See ANA/mbronyic)
Aspirational and narrative VR and AR
Corporate communications and reporting are fundamentally about creating a narrative. Our report on video use in corporate reporting found that many companies were already using video to communicate an aspirational narrative. However, the video’s 2D format limits the level of engagement it can offer. VR and AR moves beyond watching to experiencing and puts the viewer within the narrative. This makes VR and AR ideal for communicating emotive subjects such as sustainability (see UN) and corporate purpose (see Burberry), and history.
VR and AR in corporate reporting: the potential
The current use of VR and AR in corporate reporting is limited and experimental. However, the examples we considered within this project suggest that VR and AR does have a place in corporate reporting (albeit over the longer term).
The ability for VR and AR to bridge between the physical and the digital gives it a useful role in supporting and building understanding about a company, its business model and its operations.
The FRC has seen several companies already experimenting with the technology and encourages others to do so to enhance communication. Innovative ways of reporting such as VR and AR provide the potential to improve corporate communications, particularly in a world that has had to rapidly adapt to new ways of communicating during the Covid-19 pandemic.
The full report is available on the FRC’s website. It provides more examples and ideas as to how VR and AR could transform reporting.
Thomas Toomse-Smith is head of innovation and digital at the FRC’s Financial Reporting Lab.