Reports should unpack the mindset of the business

Across the calendar year companies publish information on a number of business aspects in their interim, financial and annual reports. These reports are now mostly read in a digital format rather than as printed copies, as communicated by 93% of analysts and investors in Comprend's Capital Market survey 2020.

In recent years there has been a gradual shift in the format used for digital reports, from the more traditional PDF towards an online summary or full online report. This is particularly evident in the way companies tackle the annual report. How do stakeholders want to read their reports, though, and what do they expect to see within them? Since corporate reporting offers a window into a company, and can therefore impact reputation, it's essential that companies take heed of stakeholder preferences for current reporting methods.

Breaking down the mindset of a company

A company’s annual report is second only to their corporate website as the most used and most trusted source of information, and it should therefore be viewed as a powerful tool to inform stakeholders. Analysts and investors want to understand how your company is planning for the future to gain a better idea of how you may respond to events and challenges, and what this might mean for a potential investment. This explains why, when it comes to an online annual report, two of the most highly-sought pieces of information are a strategy presentation and a business model.

The most important elements in an online annual report

Graph showing the most important elements in an online annual report in a stacked bar chart, with the values ranging from Not important to Very important in %. The most important element is 'Sustainability: a section, data, or a link to a report'. Next is 'A strategy presentation'. Next is 'The option to print or download parts of the report'. Below that 'A business model'. Next is 'Financial statements in HTML', followed by 'Financial statements in HTML marked up with XBRL tags'. And finally the least important is 'Interactive financial tables/charts'.

There are a few other areas across an online annual report that companies should focus on communicating better in the next reporting period. Our research shows that stakeholders place great importance on a sustainability section, and ideally one which includes a presentation of the sustainability strategy.

ReportWatch by Comprend rates annual reports (both online and PDF) and identifies their best-performing areas but also, and more importantly, the areas that can be improved upon to deliver the best experience to your stakeholders. This culminates in The Annual Report on Annual Reports, which lists how your company's annual report is holding up in relation to other companies. The 2019 findings showed that an engaging theme and detailed business overview were the best reporting practices.

ESEF still being established in Corporate Reporting

"ESEF standardises the Annual Reports of listed companies, making them more easy to compare." 
- Buy-side analyst covering global markets

The European Single Electronic Format (ESEF) came into effect this year. We raised this topic in our Web Management Survey 2019, but it is still not widely understood throughout the industry. 75% of respondents to this year’s Capital Market survey did not know about the new regulation, despite the fact that annual reports in PDF for the fiscal year starting on January 1st 2020 will need to abide by its rules. It's essential for companies to adjust to the ESEF as it was rolled out to make it easier to compare one annual report to another.

“XBRL is sufficient” 
- Buy-side analyst covering North America and Western Europe

Other respondents, like the analyst quoted above, have deemed that XBRL (eXtensible Business Reporting Language) is already an adequate method for report comparison as it is a standards-based method to convey business information between systems. The European Securities and Markets Authority (ESMA) recommend XBRL as the building block for ESEF reporting, so it is clearly a solution approved by the highest authority. It's a complex topic with many variables, but the effective use of XBRL in isolation in certain locations may at least in part explain why ESEF has not gained significant traction over the past year, as some analysts may not be aware of how embracing it would further benefit them.

Increasing trend to read reports online

This year has seen a steep incline in stakeholder preference for reading reports online. The gap between PDF and online reporting has been steadily narrowing since 2017, but 2020's results have seen a more dramatic swing, with 42% now favouring online methods. Some companies are more in tune with this change than others. For example, global appliance manufacturer Electrolux have embraced the challenge of becoming truly digital by designing their annual report online before converting it to PDF. It's particularly important to keep ahead of the game given the high degree of trust placed in reports. A company who can effectively convey their mindset through an online annual report could benefit from an increase in trust and stakeholder engagement when it comes to the rest of their web estate.

Preferred methods to read reports since 2017

Column chart showing the preferred methods to read reports since 2017. The X axis goes from 0% to 100%. The Y axis goes from 2017 to 2020. For each year there are two columns. Purple = Online (HTML) reports, Blue = PDF reports. In 2017 and 2018 PDF reports were above 80% and Online reports under 20%. By 2019 Online reports were nearly at 20%, but PDF reports were still preferred by upwards of 80% of the capital market professionals surveyed. However in 2020 Online reports have seen a great increase to 42% - more than doubling in preference - with PDF reports shrinking back to 58% as a result, still preferred but far from as emphatically as was the case in previous years.

We've been looking into preferred reporting methods for many years now, and the rise in support for a full online annual report offers several benefits for both companies and their stakeholders. Online annual reports are more accessible on mobile, it's easier to share individual pages of the report - meaning wider reach - and there are greater possibilities for interactive content such as tables, charts, and videos. An online annual summary which contains a few highlights before linking off to the PDF version is another way to bring your report online. This is a less resource-consuming method, although the scope is fairly limited compared to what a full version offers.

In corporate communications you need to know which way the winds of our digital world are blowing. To reach a larger audience, it's good to be aware that the winds are firmly blowing in the direction of an online annual report.

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