FRIDAY 21 JUN 2013 10:16 AM


The annual review into the Annual Reports of the FTSE 100 companies by Black Sun has been released and it yields some interesting data. A trend has emerged showing that organisations are demonstrating increased transparency and accountability through candid reporting of their performances against strategic objectives and key performance indicators. Coinciding with this trend is evidence that companies are evolving their Annual Reporting to alter the traditional perception of value through communication of their business models.

Up from 40% in 2005, 90% of companies now report on their strategic objectives and 43% are directly linking KPIs to strategic priorities. Perhaps not entirely unrelated is the number of companies outlining long-term targets in the strategic discussion is also up to 43% from 19% last year. As a result there are increased levels of target setting and greater accountability is being shown by the FTSE companies who are now more willing to enter into an honest dialogue about their performance for both successful and unsuccessful targets.

Possibly the most interesting aspect of the review outlined the changing approach to business modelling. 30% of companies, from 8% last year, now demonstrate how they use their business model to add value throughout all of their operations. This corresponds with 53% of companies now giving detailed or very detailed explanations of their business model, with is up from 19% in 2009. However, those who use their business model to explain how they make financial gain are down from 19% to 11%. These statistics indicate a more holistic approach being taken by the companies who see value in a manner that is now no longer just financial but also represented in social, intellectual and human facets of their organisation.

Other significant information contained in the review showed that, up from 41%, 61% of companies demonstrate a link between remuneration and KPIs, 25% of companies linked remuneration to financial and non-financial performance indicators and 59% were fully complicit with the UK corporate governance code. Meanwhile 85% of companies now report on the potential impact of risks undertaken, up from 67% five years ago and 61% of management statements discussed the importance of sustainability issues and how the affected the direction that the company goes strategically.

The director of research and strategy at Black Sun, Sallie Pilot, summarized that most of the areas of reporting showed stable signs of progress, particularly with regards to how businesses expressed, generated and maintained value, and that this was, in part, down to the clarity and definite nature of certain regulatory changes. She said, “Increasingly we have seen companies demonstrate a shift in the definition of ‘value’ to a broader discussion beyond pure financials. Instead, the discussion looks at value in the sense of how it is created and shared between companies, investors and society, providing stakeholders with a greater understanding of how a business will achieve sustainable growth in the long term.”