Reforms to simplify and strengthen companies’ non-financial reports have today been confirmed after the regulations were laid before Parliament, Business Minister Jo Swinson announced.
Annual reports are a shareholders’ key tool to hold quoted companies to account over the course of the financial year. From October 1 this year the reports will include additional information on human rights issues, gender representation across the company and disclosures on greenhouse gas emissions.
The reforms address concerns that over time many of these reports have become bogged down in corporate jargon, confusing in many parts for readers and lacking the clarity that they should have in order for them to be effective and fulfil their purpose.
Business Minister Jo Swinson said:
In order for shareholders to fully hold a company to account they need to have the right information to hand. Annual reports are a key tool for shareholders to get a good understanding as to how a company is performing, but they need to be produced in an open and transparent way.
This helps build the trust and confidence that shareholders, and the wider public, need to have in our top companies. By including additional information on human rights, gender representation and greenhouse gases, these changes can only strengthen that level of trust.
The main changes to the regulations include:
Introduction of a ‘Strategic Report’. This will apply to all companies and replace the previous ‘Business Review’. The aim is to allow the company to tell its story, starting with the strategy and business model and the principle risks and challenges the company has faced.
A breakdown of the number of men and women on their board, in senior management positions and in the company as a whole. This follows on from the recommendations made by Lord Davies of Abersoch in 2011 in his review of women on boards.
New disclosures on their greenhouse gas emissions. This will encourage the companies to think about ways in which these can be reduced.
Information on human rights issues. This would include information on the position, performance and future direction of a business.
To ensure that this is a balanced package, some reporting requirements removed some so that there is no overall increase in the burden on business. The narrative reporting changes will affect all reports produced in relation to financial years ending on or after 30 September 2013.
Notes to editors:
The regulations can be found at: http://www.legislation.gov.uk/ukdsi/2013/9780111540169/contents
The Coalition Agreement included a commitment to change the narrative reporting framework. Two government consultations and a programme of engagement with stakeholders subsequently revealed a consensus among companies and investors that reporting standards could be improved.
In 2012, government announced that it would introduce regulations requiring quoted companies to report on their greenhouse gas emissions (GHG) in accordance with the Climate Change Act 2008.
The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set four ambitions in the ‘Plan for Growth’ (PDF 1.7MB), published at Budget 2011:
- to create the most competitive tax system in the G20
- to make the UK the best place in Europe to start, finance and grow a business
- to encourage investment and exports as a route to a more balanced economy
- to create a more educated workforce that is the most flexible in Europe.
Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.