At an event hosted by Black Sun this month, the regulator outlined details of its new reporting model, published in March. This comes in anticipation of new government legislation and as the ripples of Carillion continue to be felt.

Black Sun and the Financial Reporting Council’s (FRC) event ‘All you need to know about Corporate Governance and Reporting this season’ opened with an in-depth analysis of the regulator’s reformed reporting model, originally published in its annual report in March this year. The changes were introduced in light of planned government legislation set to pave the FRC’S transition to becoming the Auditing, Reporting and Governance Authority (ARGA).

In anticipation of the government legislation being released later this year, and in the wake of the Carillion crisis in 2018, the FRC has adopted a new model designed to build an ‘ecosystem of trust’ in stakeholders. The new approach also hopes to demonstrate the regulator’s commitment to being an effective and transparent regulator. Kate O’Neill, director of stakeholder engagement at the FRC, outlined the following four ‘faces’ of the new model:

• System partner: Educating, collaborating and supporting continuous improvement
• Facilitator: Encouraging good practice through structured engagement
• Supervisor: Supervision and monitoring of requirements, culture and behaviours
• Enforcer: Investigating conduct and applying proportionate sanctions and directions

The government’s reforms are designed to cement Britain’s place as a global, competitive economy with world-leading standards while properly protecting stakeholders. In support of the legislation, the FRC is making further revisions and additions to the Stewardship Code (published March 2022), which regulates institutional investors. The new revisions to the Stewardship Code are as follows:

• Providing additional support in the existing code provisions
• Revising the parts of the code which deal with the need for a framework of effective controls to provide a stronger basis for the reporting process
• Making necessary revisions to reflect the wider responsibilities of the Board and Audit Committee for expanded sustainability and ESG reporting
• Including a provision for boards to consider how audit tendering is undertaken by the company
• Updating the code to ensure that it covers proposed changes to legal and regulatory requirements as set out in the government response

The event also explored the current debate around the importance of sustainability information for investors and other stakeholders. Sarah Jayne-Dominic, head of policy, programmes and strategy at the FRC, led a talk on ESG and sustainability, and the importance of embedding these issues into day-to-day operations. “There needs to be more specificity around climate reporting,” Jayne-Dominic said. “We need to focus on directly addressing what is actually material to the business.”