Fundamental questions are being asked about how the boards of UK businesses are taking into account their stakeholders, including employees, customers, suppliers and the wider community.
The guide below is designed to help companies and boards show through their reporting how they are tackling the issues that are being examined. We are putting forward a framework that looks at when and how to engage and, following on from that, how the stakeholder agenda should be reflected in the annual report.
Our guide also includes illustrations of how this kind of reporting looks, and draws on published annual reports that reflect some of the ideas that we are putting forward.
Fundamental questions are being asked about how the boards of UK businesses are taking into account their stakeholders, including employees, customers, suppliers and the wider community.Companies and boards must make judgements about the extent to which they need to (or are practically able to) identify individual stakeholders or groups to engage with. Getting this wrong is likely to lead to an ineffective and inefficient engagement process. What’s important is to focus on those with whom the company has a genuine ‘business relationship’.
The focus on stakeholder interests has emphasised the relatively short time horizons that are covered in many annual reports. Most strategic reports do not specify timelines: the reality is that most are focused on the company’s position today and up to the next annual report, whereas stakeholders often have long-term interests in the companies they work for, or rely on as customers or suppliers. In our guide we suggest that it’s hard to see how directors can really show that they have carried out their duties under section 172 without looking further out than most annual reports do today.
For us it's very important for stakeholder reporting to be integrated with the discussion of the company's strategy. Above all, companies need to show that their engagement with stakeholders can shape the decisions that the board makes.
"To address the stakeholder agenda meaningfully, many companies and boards will need to adopt a new mindset in their reporting, a mindset that recognises that society’s expectations have changed."