Annual Reporting in Europe
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:
- 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;
- 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;
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
- Basic Resources
- Construction & Materials
- Industrial Goods & Services
- Automobiles & Parts
- Food & Beverage
- Personal & Household Goods
- Health Care
- Travel & Leisure
- Real Estate
- Financial Services
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.
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.)
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.
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.
- 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
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.
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.
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.
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.
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.
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.
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.
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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