Annual reports are critical for good stakeholder engagement—and the new world of ESG (environment, social and governance) reporting will be central to good reporting.
But experts are warning boards to strap in for a long journey as they come to terms with the demands of new reporting requirements.
Commenting for a new guide, Stakeholder Engagement: A Roadmap for UK Plc Boards, Anthony Carey, senior adviser on board practice and public policy at Mazars, says boards should aim for reporting that exceeds mere compliance if they are to improve engagement.
“Even for the more advanced companies, what is currently being reported on ESG is only the beginning of what promises to be a long journey; as such, boards should be willing to use annual reports to go beyond compliance with regulation and discuss achievements, challenges and plans, using high quality metrics and meaningful narrative.
“They should endeavour to build trust by implementing processes and controls for the production of ESG related information and consider the use of internal or external assurance using a similar approach to the one followed in the production of financial information.”
Seeking engagement
Several powerful forces have converged to place a premium on high quality stakeholder engagement, as boards face demands from many sources to explain and justify their decisions. Covid-19 and lockdown increased the focus on ESG; boards are working more and more through digital channels and employees increasingly want to work in companies that care about their values.
Shareholders too need an improved approach, with deeper relationships built over time, rather than courting investors only when trouble appears. Firms may have to consider how they reach out to more investors too, according to Sheryl Cuisia, founder of proxy adviser Boudicca and chair of ShareSoc, a group representing individual investors.
“Boards are going to have democratise the way that they approach engagement,” she argues.
“Our history of engagement in the UK is actually pretty good, but it has often been too focused only on the very largest shareholders.”
She adds: “It has never been more important to understand your shareholders and how they are.”
You can download the guide at Stakeholder Engagement: A Roadmap for UK Plc Boards.