Annual Reporting in Europe

Annual Reporting in Europe

Research - 2016

 

Foreword

The annual reporting landscape is constantly evolving.

The 2016 edition of the research, our third one, tells us a lot about how the top 800 listed companies in Europe are rapidly adjusting themselves to an on-the-move social, technological and regulatory environment.

The analysis of content structures and presentation formats of more than 1.000 annual reports gives evidence of two major reporting trends:

  1. the return to the production of just ONE REPORT (companies making this choice increased by 27%). After years of proliferation of Corporate Social Responsibility Reports, Governance Reports and Environmental Reports as complementary to the Financial Report, companies are going back to a “stand-alone” publication though completely transformed in comparison to 15 years ago; 1.the return to the production of just ONE REPORT (companies making this choice increased by 27%). After years of proliferation of Corporate Social Responsibility Reports, Governance Reports and Environmental Reports as complementary to the Financial Report, companies are going back to a “stand-alone” publication though completely transformed in comparison to 15 years ago; 
  2. the growth of shortened, condensed and, let’s use this word, “marketing” versions of the original 300-page document. These summaries take the form of captivating scrolling web pages concentrating on company purpose, crucial events, strategic assets and vision. Companies adding an ANNUAL REVIEW to their Annual Report went from 110 in 2014 to 195 in 2016.

As the release of annual results is a key event in corporate life and involves the direct responsibility of CEOs and top management as well as full commitment by CFOs, IROs and Communication officers, the road that these two main directions (one report + one digital summary) are indicating goes beyond reporting:

  • the one-report solution reflects a need for a stronger integration of social and environmental matters with economic and financial performance. “One long-term vision, one report” could be a good motto behind this choice. This push comes from civil society well before governmental or supranational EU institution directives. In this respect, many companies were faster than political and legislative bodies in conceiving their own organizations as social movements constantly interacting with citizens, communities, employees and partners;
  • the rise in concise digital Annual Reviews reflects changing corporate communication strategies corresponding to a radical transformation in the ways in which new generations access and absorb information. Concise, to-the-point and visual are the main features of a brand new digital language more suitable to establish relationships based on transparency, trust and authenticity with stakeholders;

A first look at the following numbers would lead us into thinking that exactly the opposite of what we have just described is happening:

  • In 2016 (FY2015), both CSR reports and Integrated reports dropped by approximately 24% compared to 2015 (FY2014).
  • In 2016 interactive reports dropped by 22% compared to 2015.

However, the analysis of the editorial structure and the topics covered, the combinations between the various types of reports and the formats of publication highlights that the content integration process is going forward and that the implementation of digital annual report projects is alive and kicking. 

Annual Reports can be Integrated even if the word “integrated” is not part of their name. Where to draw the line between Annual Reports and Integrated reports remains an open issue. Naming the stand-alone report either Annual Report or Integrated Report is the free choice of individual listed companies.  Neither the European Directive 2013/34/EU on disclosure of non-financial and diversity information nor existing guidelines such as those produced by the International Integrating Reporting Council (IIRC) and the GRI have yet established what the minimum level of information allowing an annual report to be defined as Integrated should be. 

On the other hand, although the presentation of non-financial data and content is central when communicating results, content is now migrating from CSR reports to Annual Reports, Annual Reviews and Sustainability sections of corporate websites.

Having to make space for social and environmental policies and strategies, Annual Reports are becoming increasingly more complex documents striving to simultaneously comply with national and international regulations and follow multiple non-financial reporting frameworks and principles. It is also due to this complexity that an ever-increasing number of companies are adopting clearer and more concise forms of performance presentations such as Annual Reviews.

With regard to the format of publication, the decreased number of companies investing in some kind of interactive digital solution is clearly due to the drop in interactive PDFs, a form of interaction that, though more effective than the simple PDF, is still too related to the sequential reading of printed documents. On the other hand, the research confirms that the presentation of annual performance in HTML has become common practice in corporate communication. The implementation of reports as websites, no matter whether including full content or a summary, is having interesting impacts across all managerial levels because it is:

  • forcing CEOs and executives to improve their communication and presentation skills as videos have become a fundamental feature of online reporting;
  • pushing content owners (Investor Relations, CSR and Marketing departments) to formulate more visual and dynamic representations of complex strategic issues such as business models, risk management or governance systems;
  • making the traditional “comply or explain” approach of technical functions such as Finance or Governance live alongside story-telling formats and techniques of content promotion that are typical of marketing;
Austria 10 Belgium 22 Czech Republic 2 Denmark 24 Finland 20 France 94 Germany 84 Greece 6 Hungary 3 Ireland 9 Italy 45 Luxembourg 4 Netherlands 30 Norway 13 Poland 12 Portugal 7 Romania 2 Russia 16 Slovenia 1 Spain 37 Sweden 58 Switzerland 60 Turkey 15 United Kingdom 226

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: 235 companies
  • Germany, Switzerland, Austria: 154 companies
  • Scandinavia: 115 companies
  • France & Benelux: 150 companies
  • Southern Europe: 95 companies
  • Eastern Europe: 51 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
  • Chemicals
  • Basic Resources
  • Construction & Materials
  • Industrial Goods & Services
  • Automobiles & Parts
  • Food & Beverage
  • Personal & Household Goods
  • Health Care
  • Retail
  • Media
  • Travel & Leisure
  • Telecommunications
  • Utilities
  • Banks
  • Insurance
  • Real Estate
  • Financial Services
  • Technology
DOES CSR STILL NEED A SEPARATE REPORT?
In 2016 (FY2015), both CSR reports and Integrated reports drop by approximately 24% compared to 2015 (FY2014).
Does this mean that companies are taking a step backwards with regard to reporting and integrating environmental, social and governance matters?
The answer is certainly «no»: the presentation of non-financial data and content is central when communicating results, but content is now migrating from CSR reports to Annual Reports, Annual Reviews and Sustainability sections of corporate websites.
Having to make some space for social and environmental policies and strategies means that Annual Reports have become increasingly more complex documents striving both to comply with national and international regulations and simultaneously to follow multiple non-financial reporting frameworks and principles.
This complexity is then re-balanced by clear and concise forms of performance presentations such as Annual Reviews (summaries of full reports) which in 3 years have almost doubled.
BACK TO ONE STAND-ALONE REPORT?
In 2016 there is a clear return to the one-report formula (+27%)
Companies publishing just one report, either an Annual Report or an Integrated Report, have increased by 27% which is consistent with the decrease of the number of companies doing two reports (-16%).
Where to draw the line between Annual Reports and Integrated reports still remains an open question.
Naming the stand-alone report either Annual Report or Integrated Report is a free choice of individual listed companies. Neither the European Directive 2013/34/EU on disclosure of non-financial and diversity information nor existing guidelines such as those produced by the International Integrating Reporting Council (IIRC) and the GRI have yet established what the minimum level of information that would allow an annual report to be defined as Integrated should be.
The Johannesburg Stock Exchange remains at this stage the only institution requiring the adoption of Integrated Reporting on an ‘apply or explain’ basis (for years commencing on or after 1 March 2010.)
DIGITAL REPORTING: THE FALL OF INTERACTIVE PDF
Annual Reports in HTML format are stable
Although in 2016 fewer companies have been investing in some form of interactive report (447 companies vs 573), a more detailed analysis shows that this decrease is due to a redistribution of the communication efforts and a change in digital strategies of the 97 companies who abandoned the iPDF rather than to a penalization of annual reports as specific websites.
While companies seem to be much less confident in adopting interactive PDFs (-37%), the number of organizations amongst the top 800 listed companies in Europe who decided to build an HTML release of the annual report has only slightly decreased in 2016 (-5%).
The analysis of the three year period shows that html reports have become an acquired practice for approximately 40% of the undertakings.
MANY REPORTS BUT ONLY ONE DIGITAL SUMMARY
From full HTML Integrated reports to Annual Reviews
Whereas in 2015 companies were inclined to publish a full Integrated Report in HTML where the content of the pdf version was poured completely into a dedicated website, in 2016 the predominant choice has been to do a more condensed version of annual results, either through one scrolling web page or through hybrid versions combining html pages and downloadable PDFs.
Out of the 324 companies doing an HTML report, in 2016 120 companies (37%) chose to publish an Annual Review as a stand-alone digital solution for performance communication. Within these extremely summarized reports, creative design, interactive animations and video communication serve as a content marketing platform enhancing Ceo statements, strategic directions, business models, economic, social and environmental objectives and achievements.

COMMUNICATING PERFORMANCE THROUGH SUPER-SUMMARY DIGITAL REPORTS
In 2016 digital Annual Reviews has taken the lead
The trend towards merging Annual Reports and CSR Reports into one report, together with the objective of achieving higher levels of integrated representation of financial and non-financial aspects, is pushing companies into giving a holistic vision of their achievements and strategies through one concise, interactive and visually appealing website. Compared to 2015, summarized versions of annual reports in digital version have quadrupled. In terms of communication, videos, infographics and animations seem to attract the audience more than a technical and compliant full html report. This rapid growth of Annual Reviews reflects some of the ongoing changes in business communication such as:
  • Convergence of marketing and corporate communication: corporate content must be as engaging and attractive as product information
  • Communication departments are broadening their sphere of influence while Investor Relations functions are focusing on protecting their niche
HTML REPORTS BY COUNTRY
The rise of HTML reports in Southern Europe
In 2016, though less represented in the database when compared to UK & Ireland, the percentage (46%) of Southern Europe companies doing at least one HTML report was higher than the other macro-regions. In particular, Spain rose from 55% to 68%.
HTML REPORTS BY INDUSTRY
Telcos are more active
In 2016, the Telecommunication sector shows a high percentage (75%) of trasformation of annual reports into HTML projects followed by companies belonging to the Basic Resources sector (Forestry, Paper, Industrial metals and Mining)
HTML REPORTS BY MARKET CAP
Most capitalised companies: more budget, wider audience, more digital
In 2016, the most capitalized companies confirm a stronger inclination to develop their annual results communication via digital platforms (56% of companies doing a HTML report)
CASE STUDIES
Content integration
Integrated reporting turns the classic siloed structure (financial, social, and environmental performance) over to tell the company’s story in a more comprehensive and dynamic way.
The report by PGE, the largest power utility group in Poland, integrates a navigation path that combines the content pillars of IIRC framework (Organization, Business model, Strategy, Outlook,,Risks, Performance) with Capitals.
Content integration
A forerunner in clean energy, as the company defines itself, Fortum is very straight-forward in their creation of value. In a concise and visual mode, value springs from every info-graphic and chart of this scrolling sequence.
This digital summary is a perfect example of how companies can integrate business, stakeholder expectations, industry trends, performance and vision in one web page. The review is also effectively connected to the corporate website.
Effective navigation
For both the Annual and Sustainability reports, DHL used various entry points to directly guide visitors to the most valuable internal information.
In its CSR Report, DHL designed two itineraries: the standard, operational and re-assuring drop-down menu at the top and the more purpose-driven one taking the audience inside the website through 7 key words.
Effective navigation
Renault’s Annual Review is just one of the numerous examples of how digital reports can be creative and innovative without having to disorient visitors.
The content is structured around the big 4 sections of the report. Users can go from one section to another by means of the horizontal scrolling feature in the home-page or by opening the hamburger menu.
The 4 sections are very well connected one to another by a consistent content plan always starting with an interview, bridging the content elements with effective transitions while scrolling and ending with an invitation to enter the next page of the journey.
Video and visual design
An Annual Report to be flown - not to be read. An invitation to enter a virtual cockpit for a true flying experience through Innovation, Disruption, Operations and Engagement.
A “flying-ahead” journey that stops over the strategic aspects of the company. Even when accessing the most “traditional” sections of the report such as Business, Governance and Figures, visitors are not disappointed because videos, animations and emotional pictures are fully integrated with content.
Video and visual design
Clear, transparent, essential and vital: water as a key natural resource is the protagonist as well as the creative connecting thread of the report.
From the big pictures in the homepage introducing the topics of environment, responsibility and trust to the simple, white and neat background of the “What we do”, “Our performance” and “Our strategy” pages, the British utility manages to merge its business purpose and social mission with its digital identity.
Story-telling
There cannot be a better way to underline the central position of the human factor at KPN than that of engaging visitors with one of the largest uses of videos in a report.
100 1-minute stories of people of different ages, sex, professions, experience and aspirations, all connected by the Dutch telecommunication group. The stories are not just a bright idea to introduce the report but are also integrated in the internal pages.
Story-telling
An annual report is not the story of the past year. It is just a step, a transition between yesterday and tomorrow.That is why Wienerberger opens its annual report with success stories and projects showing “next generation” material and technologies in the construction industry.
The parallax effect in the home-page is undoubtedly a well-chosen technique which takes visitors by the hand and smoothly accompanies them through stories and an engaging content experience..

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