Debating the length of annual reports isn’t new. For years a certain international bank was infamous in reporting circles for the weight of the document as it was posted through shareholders’ doors. Far fewer reports are mailed to shareholders these days, and that particular report isn’t as long as it once was. But on the whole - and despite ongoing debate - reports continue to grow in size.
Now there’s increasing pressure on reporters to reduce length. This pressure comes from both internal and external stakeholders, and reasons vary from reducing cost and workload to improving clarity. Among the many questions we’re asked about reporting content and communication, we find ourselves increasingly talking about page counts.
So why are so many reports going in the opposite direction? Growth in page counts has been largely driven by new reporting disclosures. Over the past decade additional reporting requirements have included the Viability statement, Section 172 reporting and TCFD content. Meanwhile, companies have continued to develop existing disclosures within the strategic and corporate governance reports.
Unfortunately for those looking to shorten their reports, the introduction of new reporting requirements shows little sign of abating. The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022 require certain public companies and large private companies to incorporate TCFD-aligned climate disclosures in their annual reports. We’re already seeing companies that have previously produced standalone TCFD reports integrating this content into their 2022 annual reports.
On top of this, the Corporate Sustainability Reporting Directive (CSRD) will require in-scope companies to integrate detailed sustainability disclosures aligned with the European Sustainability Reporting Standards within the annual report. And, while we don’t yet know how the ISSB’s IFRS Sustainability Disclosure Standards will be implemented at a national level, at this stage it seems likely that it will lead to more disclosures.
A questionable aim?
Reducing the page count of an annual report clearly isn’t easy, particularly during this period of reporting uncertainty and transition. But it’s still a worthwhile aim. Or is it?
We agree companies should aim for conciseness, and we’re not alone. The Financial Reporting Council’s (FRC) Guidance on the Strategic Report identifies conciseness as a key communication principle. That said, we’re not convinced focusing rigidly on page counts intrinsically aligns with conciseness or communication.
If reporters focus solely on page count without consideration for communication, the result could be a dense document that fails to engage or inform. Diagrams bring content to life in an accessible way, case studies provide evidence, and summary box-outs are a helpful tool - but these devices require space and are often among the first to be cut when there’s a page-cutting agenda.
So what should companies do?
Take a fresh look at last year’s report
When working out how to tell your story, start with a blank sheet of paper. Assess last year’s report, identifying content that’s legally required, content that isn’t required, and content that could be more concise. In doing so, companies should bear in mind the concept of fair, balanced and understandable, and refer to the FRC’s guidance that the strategic report should be "clear and concise yet comprehensive”. This will provide a solid foundation for considering content and developing this year’s annual report.
Focus on decision-useful information
The FRC has acknowledged the competing demands of reporting ever more information while resisting adding multiple pages to your report. It has also noted that high-quality annual reports provide ‘decision-useful’ information. In other words, the information in the annual report should make sure investors – and other stakeholders – are able to make fully-informed decisions.
The way in which annual reports are compiled and overlapping regulatory requirements mean repetition is common. Discussion of stakeholder engagement, for example, often features in both the strategic and corporate governance reports. But this doesn’t have to result in duplication. Planning and reviewing the report as a complete document (rather than in discrete sections), and strategic use of cross-referencing, will make sure content isn’t repeated.
Even with a reduction in content, cutting too many pages risks creating a report that is dense and inaccessible. Yet, given the growing list of required disclosures, it’s never been more important that annual reports are easy to navigate. The document should be easy to read and effectively communicate key information while conveying a company’s story and messaging.
In an ideal world, we’d recommend companies embrace ‘white space’ in the report. It’s worth a look at Roche’s annual report: the Swiss biotech company’s use of space gives diagrams an opportunity to stand out and makes sure text-based pages are easy to digest, elsewhere full-page photography highlights Roche’s focus on partnership and collaboration.
We know Roche’s approach isn’t possible or practical for some reporters. But there’s always room for communication tools that aid readability and navigational devices that make information easy to find.
Think reporting, not report
As reporting requirements increase, the role of the annual report as a compliance document is being brought into sharper focus. But companies competing for investment shouldn’t assume that investors will be satisfied with a dry, compliance-based document. And many companies use the annual report in ways that go beyond compliance, with audiences beyond the investment community. The report may be used to communicate with employees, for example, or as a tool for prospective customers. Meeting the regulatory requirements alongside page-cutting could leave little opportunity to meet these objectives.
Here's where the wider reporting ecosystem can play a vital role. The corporate website could be used to house – and bring to life – content that isn’t required in the annual report but offers clear value. Sustainability, thematic and summary reports as well as indices can also all be used to target specific audiences. The key is to consider the whole ecosystem from the outset of the reporting project, mapping out audiences and associated objectives and establishing how these will be met.
Wrapping up: negotiating a compliance-driven future
It’s clear that pressure to reduce the length of the annual report while meeting increasing disclosure requirements will continue to perplex reporters. Many reports will grow over the next few years as companies get to grips with the new reporting landscape. There’s a risk that focusing on page counts alongside increasing disclosures could lead to difficult to read, compliance-driven documents.
As reporters face this challenge, it’s critical they don’t lose focus on conciseness, readability, and accessibility of information and continue to look beyond disclosure. Once the dust settles, there will be an opportunity to review and revise but, in the meantime, this will make sure the annual report remains an effective communication tool.