FTSE 100 strengthens reporting on company values

Greater responsiveness to shareholder concerns and climate change worries, along with the impact of Brexit, featured strongly in FTSE 100 annual reports this year, according to analysis from Deloitte

The firm’s research shows almost half the FTSE 100 (46%) set out values beyond making profit for shareholders, up from 32% in 2018. These companies describe their purpose as going beyond financial drivers to incorporate other factors, such as their environmental and societal impact.

Over half (57%) of the companies surveyed referred explicitly to ‘climate change’, despite only seven naming it within their principal risks.

Veronica Poole, global IFRS leader at Deloitte UK, said: ‘Businesses are facing increased scrutiny of their impact on people and the planet. The expectation of business is changing, and the licence to operate can no longer be taken for granted.

‘Climate change is likely to have a profound impact on business and on us as individuals; it will lead to significant market corrections and changes in the coming years. Failure by business to respond to the risks has significant implications, such as disruption to supply chains, loss of asset values and market dislocation.’

Deloitte said one of the biggest changes to requirements this reporting period was the introduction of the section 172 statement in Companies Act 2006.

As of 1 January 2019, all large UK companies must set out how directors have promoted the long-term success of the company whilst having regard to the impact on a broad group of stakeholders such as employees, customers, suppliers, the environment and community.

The report found that 31% of companies were already referring to s172, while 97% identified stakeholders other than investors.

Brexit featured heavily in risk concerns, with 86% of companies discussing it in their risk reporting. The most common concern was the broader macroeconomic impact of the UK leaving the EU (mentioned by 62%), although 29% of those discussing it concluded that Brexit was not a principal risk.

Despite Brexit, the most commonly identified principal risk was cybercrime (71%).

Of those surveyed, 39% disclosed gender diversity in the executive committee and their direct reports, in line with the Hampton-Alexander review’s expectations. This has more than doubled from last year (15%), and half of FTSE 350 companies surveyed now meet the requirement.

Poole said: ‘Looking ahead, next year should see a substantially higher number of companies disclosing these gender diversity figures as this becomes a requirement of the UK corporate governance code.

‘In addition, IFRS 16 Leases will become effective for most of the companies surveyed in the next reporting season. Last year, only three companies had adopted the standard early.’

Deloitte said the research showed 67% had now quantified its expected impact – a significant improvement on 8% the previous year. IFRS came into effect from 1 January 2019.

Annual report insights 2019

 

 

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