Clearer approach to corporate reporting key for better decision-making and reporting on risks

ACCA (the Association of Chartered Certified Accountants) says that non-financial reporting is essential for better decision-making by managers, investors and wider stakeholders.

A coherent non-financial reporting framework will support organisations in understanding and reporting on wider risks and opportunities, as well as the macroeconomic, socioeconomic and environmental trends that may impact upon their organisation. This will support stakeholders’ ability to understand how to create value in the short, medium and longer-term using a multi-capital approach. Reporting on these issues enables stakeholders to assess the resilience of an organisation in a changing landscape.

In a response to the Department for Business and Trade and the Financial Reporting Council call for evidence on Smarter regulation non-financial reporting review, ACCA says the current non-financial reporting landscape has grown up as a result of differing demands which are not connected. It says that the existing reporting framework does not provide companies, investors and stakeholders with the information required in seeking information to support more sophisticated decision-making that is not focused solely on financial return.

Smarter regulation is the answer. Changes in reporting are key in driving prosperity and maximising investment opportunities, ACCA said in its response.

Glenn Collins, head of technical and strategic engagement, ACCA UK, says:

“Good quality non-financial reporting is essential in demonstrating value drivers beyond financial performance. These include intangibles which are not recognised on balance sheets. Innovative processes, know-how and corporate culture are fundamental to economic success and decarbonising but are not currently represented within a comparable framework.”

Joe Fitzsimons, senior manager, policy & insights, ACCA UK & EEMA, said:

“Company reporting on this wide range of issues enables stakeholders to assess the resilience of an organisation in a changing landscape.

“Non-financial reporting is also key to achieving global sustainability goals, and UK ambitions such as those on decarbonisation and biodiversity. Developing a reporting framework which supports the provision of data and information to monitor progress ensures that targets can be monitored, and to ensure that appropriate interventions are made.”

ACCA calls on the government to align with international developments in this area. ACCA says that the global non-financial reporting landscape is changing rapidly. It is important to ensure that any revisions to the UK landscape are not at odds with wider global reporting developments such as the work of the International Sustainability Standards Board (ISSB).

Glenn Collins said:

“Developing a nuanced UK-specific reporting regime may reduce comparability of entities operating within the UK market and may deter investment and the ability to compare UK entities across a global and comparable baseline. In addition, diversions from wider reporting regimes, such as those appearing within the EU (for example the EU Taxonomy) may result in duplication and complexity.”

ACCA also called on the government to ensure that reporting obligations are proportionate to the size and complexity of an organisation, including the use of stepped-based reporting requirements.