How will your corporate reporting change to balance all stakeholders’ needs?

By

Hywel Ball

EY UK&I Assurance Managing Partner and UK Audit Head, EY UK&I Regional Managing Partner and UK Chair-elect

A member of EY UK LLP Board. FTSE 100 audit partner. Father of three and Welsh rugby fan.

4 minute read 17 Feb 2020

Our changing world is increasing demand on companies to deliver value for a broader stakeholder group – and corporate reporting needs to keep pace.

We are living at a time when business failure – be it financial, ethical or societal – is making news headlines.

Driven by a number of global megatrends, business is expected to recognise its broader societal contribution and its responsibility to a wide stakeholder group.

To do so – and rebuild trust – organisations must ensure alignment of their governance, stewardship and corporate reporting, balancing the needs of all their stakeholders.

Hywel Ball, EY UK&I Assurance Managing Partner and Head of UK Audit, recently delivered his thoughts at the Financial Reporting Outlook Conference about how better governance and a greater focus on long-term value can create a more stable business environment.

Click the video below for more.

Global megatrends

Over the past few years, the world has seen the emergence of four indisputable and enduring megatrends, touching every business, regardless of sector, size or jurisdiction:

  1. The rise in stakeholder capitalism
  2. Geopolitical shifts
  3. The fourth industrial revolution
  4. Enhanced governance and stewardship.

These megatrends collectively shape the environment in which businesses operate and in which disruption is occurring. They represent a business’s core risks and its greatest opportunities.

It is no longer enough for companies to simply report on their performance using financial measures alone. A wider group of stakeholders is expecting them to better demonstrate the consumer, human and societal (as well as financial) value they deliver, and detail how they identify and measure their non-financial assets which influence long-term sustainable value.

With this wider group of stakeholders also demanding greater transparency, the boundaries of reporting and disclosure are shifting. At the same time, regulators, recognising the need for companies to do more, are introducing new transparency requirements across both financial and (increasingly) non-financial performance indicators.

Hear Paul Druckman’s thoughts on corporate reporting going into 2020 in this podcast with Loree Gourley.

Businesses and their regulators are starting to respond to this demand for transparency in their corporate reporting – because it is key to telling their value-creation story to investors and providing the information they are increasingly asking for. Critically, it is also key to earning the trust of a wider group of other stakeholders, including society.

Yet despite this, many companies are yet to identify what they should be measuring, and lack the systems and processes to do so.

What does this mean for you?

Companies need to better identify, measure and report on intangibles such as culture, innovation and environmental impact, which form the foundation to rebuilding trust with this wider stakeholder group; only if reporting comes together in a cohesive story will trust be built and value fully recognised.

The challenge is that many businesses haven’t identified what non-financial aspects they need to track and report against. They are not measuring what needs to be measured: all the non-financial measures which help stakeholders get a good picture of the value they add.

The question business leaders should ask is: What can you do in your organisation to rebuild stakeholder trust?

Better governance and a focus on long-term value can create a more stable business environment. The future of corporate reporting means balancing the needs of a wider group of stakeholders than ever before.
Hywel Ball
EY UK&I Assurance Managing Partner and UK Audit Head, EY UK&I Regional Managing Partner and UK Chair-elect

Long Term Value Framework

Working with the Coalition for Inclusive Capitalism, EY has helped develop a new reporting framework for demonstrating long-term value creation for all stakeholders.

This framework provides an approach companies can take to identify and evaluate company-specific key value drivers and develop non-financial metrics which can help clarify value and value creation.

To rebuild stakeholder trust, business leaders need to transform their company’s reporting functions to ensure:

  • That they have the right people and capabilities to successfully integrate (and make sense of) financial and non-financial information.
  • That they have the right technology in place to measure what they want to report against – technology and data advances will enable many traditional finance processes to be automated, so CFOs can focus on making sense of non-financial data.
  • That the right governance and culture is in place, and that finance functions assess and report on it.

Get in touch to better understand how you can identify which stakeholder groups you want to address in your corporate reporting; how to put the systems, processes and mechanisms in place to measure what needs to be measured; and how to use your corporate reporting to really demonstrate the value your business generates.

Summary

CFOs are often the ones under pressure to help rebuild trust and ensure that corporate reporting is fit for the future. Organisational transformation includes investing in employees, dealing fairly and ethically with suppliers, and supporting the communities in which they work. We can help you measure aspects of innovation, trust, culture, sustainability, and more.

About this article

By

Hywel Ball

EY UK&I Assurance Managing Partner and UK Audit Head, EY UK&I Regional Managing Partner and UK Chair-elect

A member of EY UK LLP Board. FTSE 100 audit partner. Father of three and Welsh rugby fan.