Each year a sample of portfolio companies are review ed for compliance with the Guidelines, and over the last twelve years there has been a sizable shift in the underlying quality and transparency of reporting. There continues to be increased focus from stakeholders on sustainability issues such as climate change, modern slavery and ocean pollution, with these areas being an area of focus for society. This focus is continually challenging the existing reporting landscape and encouraging enhanced disclosure across all areas of corporate reporting.

This does not mean the requirements of reporting should be getting longer and more burdensome, rather stakeholders want to see greater transparency across a wider range of topics, rather than just financial performance. The Guidelines assist in meeting this expectation, but should not be considered in isolation for compliance, rather reflected on as a w hole and used to underpin a strategically focused, balanced and truly integrated narrative.

We have outlined here some key themes and recommendations that will assist those responsible for drafting the annual report.

• The reporting on the business model has been challenging in the current and previous years, but a good business model should focus on the critical elements of the business and there should be an inherent connection between a company’s purpose and its business model with both being explicit about the stakeholders that are key for the business. The business model in an annual report should:
  • Articulate a clear purpose and how the business model addresses this
  • Be clear about the role stakeholders play in the business;
  • Explain how value is created and what makes this unique;
  • Explore outcomes or impacts of the model; and − Challenge how the content of the business model can be integrated elsewhere in the strategic report.

• Content in annual reports can tend to be quite backward-looking by nature and fail to discuss plans and a direction of travel for the future, which are the bedrock of strategy. Without this strategic backbone flowing through and connecting disclosures, it is often hard to see how the strategic picture comes together, tying KPIs, risks and the wider agenda together.
• The gender diversity requirement continues to be an area of challenge, as portfolio companies do not take the opportunity to discuss the work, they are doing to address diversity in the work place, at either the gender level or in a wider context. There has been some increase in inclusion of gender pay gap reporting which is useful, but this should not be considered as a replacement for the gender diversity discussion which is central to the Guidelines requirement.

All the Guideline areas require careful consideration to ensure good practice can be achieved and this guide provides both an understanding of what good practice looks like and some actual examples from the most recent review. The examples set out elements of good practice for the specific criteria disclosed. The Group will review the disclosures in the annual report as a w hole when reviewing compliance.