Annual Reporting in Europe
Among the community of corporate communicators, investor relators and financial officers, annual reporting remains ahead of the curve.
The times when this fundamental communication tool was an annual ritual ending with a publication being sent to few institutions seem to belong to a prehistoric era. In recent years, a steady increase of social awareness, the acceleration of technological transformations as well as new guidelines and regulations channelling these changes, have transformed annual reports from a duty whose ownership was confined to financial departments to a cross-function project, from a statement of past performance to a strategic document and from a cryptic book on the shelf of a restricted community of followers to a masterpiece of digital design.
The fourth edition of our research amongst the top 800 European listed companies is telling us that two major forces are driving innovation in annual reporting, integration and conciseness.
The first one, integration, is a profound transformation of content structures seeking to explain the interdependencies of economic, social and environmental aspects. As a natural consequence, even before the transposing of European Union directives into national legislations, many companies have included non-financial information in their annual report or have decided to move from publishing two separate reports (financial and sustainability report) into one single integrated report. As shown by our analysis, from 2015 the number of companies publishing one report has increased by 34% while the number of companies publishing two reports has decreased by 30%.
The second trend of this evolution is conciseness.
Conciseness means focusing on what really matters as well as adopting new types of language, styles and forms of communication.
“An integrated report is a concise communication...In achieving conciseness, an integrated report applies the materiality determination process, expresses concepts clearly and in as few words as possible, favours plain language over the use of jargon or highly technical terminology, follows a logical structure and includes internal cross-references, may link to more detailed information or external sources…” (International Integrated Reporting Council – IIRC). Conciseness is becoming the main ingredient in the presentation and communication of annual reports. We could even say that the more integrated a report, the more digital its nature.
The presentation of annual reports as micro-websites focusing on what is really material to companies and stakeholders shows that organizations are taking all the advantages offered by digital platforms: connecting business models to strategies and linking the value creation process to policies and performance by means of visual techniques, animated infographics, interactive tools and concentrated video clips. In the last four years, Annual Reviews have grown by 52% and, as a digital summary in html, account for 64% of all interactive reports amongst the European organizations included in the 800 STOXX® index.
To better visualize these trends, compared to previous editions of the research, we have introduced more examples and case studies. We hope that the analysis helps you not only to keep up-to-date with ongoing changes in how annual reports are communicated but also acts as a source of inspiration and ideas for your next annual report project.
- Increase of social awareness, acceleration of technological transformations and new regulations are changing the annual reporting landscape;
- Integration and conciseness seem to be the main driving forces;
- Annual reports communicated through micro-websites have experienced an exponential growth;
Database of companies analysed
The research covers the companies belonging to STOXX® All Europe 800 Index representing the largest 800 companies in 25 countries
In order to have less fragmented statistics, 6 macro regions were created on the basis of similar culture, language and geographical proximity between countries:
- UK & Ireland: 224 companies
- Germany, Switzerland, Austria: 158 companies
- Scandinavia: 124 companies
- France & Benelux: 149 companies
- Southern Europe: 94 companies
- Eastern Europe: 53 companies
Companies have been classified by industry and by market capitalisation.
With regard to the industry, the research follows the ICB (Industry Classification Benchmark) standard and includes each company in 19 super-sectors:
- Oil & Gas
- Basic Resources
- Construction & Materials
- Industrial Goods & Services
- Automobiles & Parts
- Food & Beverage
- Personal & Household Goods
- Health Care
- Travel & Leisure
- Real Estate
Overall, Annual Reviews have shown a 52% growth over the last 4 years.
There is a significant drop of CSR reports, showing a 24% decrease: companies are integrating large amounts of their ESG (Environmental, Social and Governance) results into one single report. The same trend towards integration of sustainability aspects into the overall strategy and business model can be observed in the online estates of large organisations, both within corporate websites and in the digital versions of annual reports.
The decline of CSR Reporting and the rise of Annual Reviews have been the two main ongoing trends for the past 4 years, while Integrated reports are slowly gaining momentum.
During the 2016-2017 biennium, the trend has been completely overturned when compared to the 2014-2015 biennium: the number of companies publishing one report has increased by 34% from 2015 while the number of companies publishing two reports has decreased by 30%.
This return to the one report format is consistent with one of the aspects highlighted in Trend 1: integration of financial and non-financial information. The push coming from the market for having a broader picture of the company on one side and the adoption of the European directive 2014/95 /EU on the other are bringing significant changes both in company organization and in the reporting process.
- The majority of companies have moved from publishing both CSR and Annual Reports to focusing on one report – the Annual Report, including ESG aspects in one single report, but still reluctant to call it integrated.
- The Annual Report and CSR combination, although less frequent, still has a major presence in the database. Possible reasons for companies choosing to produce 2 reports are:
- They still have to start the integration process.
- Companies prefer to differentiate reporting by having a specific focus on certain stakeholders – Financial stakeholders (Annual Report) and Institutional stakeholders (CSR report).
Thus, the reducing number of companies (from 573 in 2015 to 423 in 2017) producing some kind of interactive format for their annual report is explained by two main trends:
- the declining popularity of the interactive PDF
- the integration of more reports into one: companies which used to publish two or more interactive reports now publish just one interactive report, which is consistent with Trend 2 of our research
What these numbers don’t say is that the quality of digital reporting has been growing and growing. Through infographics, video, animations and interactive tools, companies are explaining and communicating business models, value creation models, governance models and sustainability plans in a more transparent and understandable way to all stakeholders.
The brief, visually outstanding, almost marketing-like Annual Review in HTML is becoming the favourite way to present company dynamics and performance in the digital space. In parallel with the decline of full reports in html, online Annual Reviews have boomed from 40 to 208 companies adopting this format, accounting for 64% of all interactive reports amongst the 800 European organizations of the 800 STOXX index.
In the Telecom sector, 18 out of 26 companies have published a digital report. Not only is the percentage (69%) of conversion from static to digital the highest among all industries, but the quality in terms of design, content organization and use of innovative features is also at the top of digital corporate communication initiatives. Deutsche Telekom, Orange, Telecom Italia and KPN have published some of the most remarkable annual report websites in Europe.
As for the other sectors, compared to last year, companies belonging to the Basic Resources industry have lost the second position to the Automotive & Parts industry companies: 61% of the companies in the vehicle sector produced one or more interactive reports.
Dutch companies, such as ING, Philips, Delta Lloyd, Akzo Nobel and Unilever have a long-standing tradition of digital reporting, and are dragging other companies in the country towards giving annual reports a digital format.
Despite the low representation in the STOXX 800 index in terms of number of companies, Poland, in the second place of the ranking, is showing an increasing effort towards digital reporting. On the other hand, the UK and Ireland as a region have the highest rate of companies producing an interactive report (47% of companies, followed by Germany, Austria and Switzerland with 44%.)
Clariant, a world leader in the chemical industry, has used clear navigation paths to effectively present the integrated reporting content pillars and has designed one of the most complete infographics to explain its value creation model.
A third option to access the most relevant topics is given by the horizontal scrolling page which explains “How we create value”: the various steps of value creation (Input – Capitals – Business model – Output – Performance – Impact) becomes an additional gate to the internal pages of the report.
In addition, visitors who like numbers can choose to start their journey from the “Highlights” section where each key performance indicator becomes the 4th door to get inside the most important content areas.
- From the home-page, it is transparent that both reports are a summarised online publication. Those who prefer the full pdf can download it as soon as they land in the report
- The 2 micro-sites offer a very consistent navigation experience: the content is distributed along a scroll page, where the content layers merge with effective transitions, while all topics are always accessible via a side menu
- Although visitors can open many “sub-sessions” and dig into more details, they never get lost.
Key performance (Interactive KPI), Key topics (Materiality matrix), key documents (Download centre) and connections with GRI indicators (Search by GRI) are some of the features always available at the bottom of every page of the report.
Icon, charts, very short texts and videos are the main ingredients of PZU corporate digital narrative and the same essential approach is consistently kept throughout the internal pages of the report.
The main pages such as Prospects, Mission and Strategy, Cosmetics market and Brands make a wide use of parallax scrolling, close-ups, bold visuals and hero imagery. By combining the use of video, story-telling and visual effects in a harmonious and effective way, L’Oréal manages to balance content and multimedia features admirably.
Santander has put its stakeholders at the very centre of the scene. Stories of how people joined and developed their professional career within the organization, as well as new businesses that now prosper thanks to the relationship and the support of the banking group, become the “human” introduction to more technical topics such as business model, value creation, governance and key results.
Telefonica DE has created an entirely new experience for visitors of its Annual Report – an everyday life situation giving voice to “people on the street”, showing the digital transformation process through the lives and thoughts of its stakeholders and customers.
The topics of the report and the people introducing them become one entity while results and performance become a consequence of relationships and dialogues.
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