Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Hayley K - Corporate Governance November 2022 > Chapter 11 - Reporting on Non-Financial Issues, Including Corporate Resposibility > Flashcards

Chapter 11 - Reporting on Non-Financial Issues, Including Corporate Resposibility Flashcards

1
Q

What are the main problems with traditional corporate reporting (per King and Roberts)?

A
  • Too heavy for the postman (increasing reqs/reporting requirements, so long - indecipherable to average reader)
  • Yesterday’s news (historical reporting)
  • Report on financials only (can lead to short-termism as companies strive to meet the quarterly or six-monthly basis of the markets) - ommits other important information just because it is non-financial
  • Some intangibles excluded (ex. brand recognition, Corp Gorv, good reputation and sound risk management). Difficult to assign monetary values but so much of market value relies on such factors - meaning much a company’s worth/value sits outside the balance sheet.
  • Some costs excluded - ex. environmental cost of using up natural resources
  • Different reports for different users - (Ex. sust report/CG Report) - each tries to meet a certain groups needs - leads to ‘silos’ - each report showing a different stakeholder group a different aspect of the organisation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is Narrative Reporting?

A

Describes the additional non-financial information which is included in companies’ annual reports, providing a wider and more meaningful picture of the company’s business, its strategy and future prospects.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What major players are there demanding that organisations report on the economic, social and environmental impact of their business operations?

A
  • Shareholders/investors - assist in their investment decision making
  • Employees- want to work for companies based on good CSR practices/reputations
  • Businesses (suppliers) - may have to meet with org’s sustainability criteria/may impose their own on the businesses they engage with
  • Governments - dealing with social/environmental issues and seek economic development
  • Banks - look to lend money to organisations with good corporate practices
  • Consumers - looking to buy products from sustainable resources.
  • Stock market analysts - if company is listed
  • Social & environmental activists
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the requirements for a CG Report?

A
  • Required by UK LR (9.8)
  • How applied code principles (not boilerplate)
  • Context of co circumstances / how board set purpose and strategy
  • Compliance with code provisions and if not
    - Background
    - Rationale
    - Impact
    - If time restricted, when will comply
  • Consistent/complimentary to strategic report - and any other governance information provided
  • FRC GBE provides info on how to apply/further guidance on specific issues such as ACs/RM/IC
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are additional reporting requirements for listed companies re CG?

A
  • For listed companies, DTR
  • Ex. DTR 7.8.2A - diversity disclosures (description of policy, objectives, results, if no policy why not)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What is the purpose of the strategic report?

A

Introduced for all companies (other than those small co regime) by CA2006 (Strategic and Directors Reports) Regulations 2023 - the purpose of the strategic report is to provide (narrative) information for shareholders to help them assess how directors have performed their duty under s.172

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What information should be included in the Strategic Report?

A
  • Strategy, objectives and business model;
  • Trends and factors
  • Principle risks and uncertainties
  • Analysis of development/performance of business including KPIs
  • Info on environment, social, community, human rights, anti-corruption and anti-bribery matters, where material
  • Info on gender diversity
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the requirements (generally) for the strategic report?

A
  • Fair, balanced and understandable
  • Concise: information included only where material/does not obscure the report’s message
  • Include company-specific information
  • Link to related information elsewhere in the AR
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Describe the new safe-harbour relating to director liability introduced by s.463 CA2006?

A

S.463 CA 2006 - new safe harbour for directors’ liability for the directors’ report, strategic report and directors’ remuneration report. Response to director concern over their liability for negligeance - ex. when making forward-looking statements (particulary in the strategic report)

They will only be liable to compense company for loss where
* Result of an untrue/misleading statement made deliberately or recklessly
* Omission of statement/fact amounts to dishonest concealment of a material fact

Their liability will be restricted to the company rather than to third parties.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What parts of a company’s annual report and accounts are examples of narrative reporting?

A

Chair’s statement, Directors Report, Strategic report, CG Statement, directors’ remuneration report .

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Why might potential investors prefer to invest / look to invest in a company with good ESG activities?

A

Advocates argue that a company’s ability to manage ESG factors is a proxy for prudent risk management;

  • Investors seek to avoid companies that aggravate world issues and risk;
  • ESG investors organisations providing solutions, decreasing risk & driving long-term value
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Why has there been a rise in interest / focus on ESG reporting in recent years?

A
  • Many OECD countries (and EU) have put sustainability and ESG at the heart of their economic recovery effort.
  • Investor appetite for ESG funds and ESG-conscious companies is increasing
  • Seen as more resilient to economic downturns; and
  • More reliable in the longer term.
  • Investors views differ as to what they consider material in narrative reporting
  • This issue can be overcome by aligning ESG reports with a leading global framework such as Global Reporting Initiative or the UN Global Impact.
  • Connecting ESG issues/performance with strategy, business model, financial and operational performance will assist in ensuring investors are provided with information they require
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

List some common drivers for voluntary CSR Reporting.

A
  • Reputation of brand
  • Improve market position
  • Ethical reasonings
  • Growing understanding of impact of ESG over financial performance and corporate value
  • Changing attitudes to climate change (and its being a driver of corporate risk)
  • Close to being universally adopted: risks of being seen as out of step/misalignment
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Main introductions by COMPANIES ACT 2006 (STRATEGIC AND DIRECTORS’ REPORT) REGULATIONS 2013.

A

Listed companies must report on GHG emissions in directors’ report/strategic report if consider information tp be of a strategic nature

  • Actual quantity
  • From activities of company, including fuel use
  • From purchase of heat, electric and steam cooling
  • Disclose method of calculating - in future years, comparative information
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Main introductions by COMPANIES, PARTNERSHIPS AND GROUPS (ACCS & NON-FINANCIAL REPORTING) REGS 2016 - re STRATEGIC REPORT

A

Implemented EU Directive regarding disclosure and reporting of non-financial information into UK Law

Where a company has >500 employees and is
- Traded (inc. debt securities)
- Banking company
- Authorised insurance company
- Carry on insurance market activity

For financial years on/after 1 Jan 2018, must include the following disclosures of non-financial ionformation in their strategic report to extent required for shareholders to understand company’s performance/development/position and impact of its activites on the matters outlined:
* Environmental
* Employee
* Social
* Respect of human rights
* Anti-corruption
* Anti-bribery

And describe:
* Business model
* Policies pursued re the above
* DD on implementation of policies
* Outcome of policies
* Principal risks to matters arising out of company’s operations
* How principal risks managed
* Non-financial KPIs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Main introductions by COMPANIES, PARTNERSHIPS AND GROUPS (ACCS & NON-FINANCIAL REPORTING) REGS 2016 - re DTRs

A

Listed companies should disclose following diversity information in their CG Statements

  • Policy
  • Objectives of policy
  • How implemented policy
  • Progress achieved towards objectives in the financial year
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Main introduction by COMPANIES (MISC REPORTING) REGULATIONS 2018 ***

A

Large companies to report on the adoption of s. 172 requirements in strategic and directors’ reports

s.172 statement as part of Strategic Report that should include:

  • Issues, factors & stakeholders directors consider relevant to comply with s.172(1)(a)-(f);
  • Main methods used to engage & understand issues to which they must have regard;
  • PROV. 5 - info on the effect of that regard on the company’s decisions and strategy during the financial year; and
  • This statement must also be published on the company’s website;

Large companies (over 250 employees) to make a statement in directors’ report summarising how directors have engaged with employees and they have had regard to their interests/how this has impact decision making in the financial year,

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What does good sustainability reporting require?

A
  • Deep professional knowledge
  • Expertise
  • Being backed up with robust sustainability strategic and risk management processes
  • “The laggards soon will be left behind”
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Why could biodiversity become a key issue of the future.

A
  • Affects all
  • Will only be exacerbated by climate crisis
  • Will have pervasive impacts that affect all mankind
  • Will eventually/soon be asked by investors, lenders, customers, consumers etc
  • Likelihood will also a need to make public disclosures on topic by companies
20
Q

What is triple bottom line reporting?

A
  • Accounting framework
  • Information re social and environmental performance as well as traditional financial performance when evaluating overall performance.
  • As well as profit & loss - disclosure how socially/environmentally responsible they are.
  • ‘Profit, people, planet’ = only way to calculate the FULL COST of doing business
  • Organisations measuring these factors are more likely to succeed by paying attention to them.
  • Evidence = discovery through the requirement to collate information (ex. Nike child-labour issues with suppliers)
21
Q

What are the 3 main challenges of triple bottom line reporting?

A

Cannot add up the 3 separate disclosures
* DIFFICULT to quantify social/environmental initiatives & impacts in monetary terms
* End up presenting 3 separate reports - defeating the point of TBL

No widely accepted set of standards for reporting / measuring relevant impacts
* Difficult to compare performance of one company with another
* GRI Sustainability Reporting Standards claim to be 1st global standard

No requirements to independently audit social and environmental measures (some will, such as IKEA)
* Lack of trust in the image presented by companies through TBL reporting
* Window-dressing - many present the good news whilst withholding the bad news

22
Q

How does King IV define integrated reporting?

A

‘A process founded on integrated thinking that results in a periodic integrated report by an organisation about value creation over time’.

23
Q

What is integrated reporting and what should the integrated report record.

A

Integrated Reporting
* Recongition it is important for a company’s long-term sustainability for it to measure and report on social and environmental performance as well their financial performance
* Together with the greater desire for accountability by an organisation’s stakeholders has led to the development of the concept of integrated reporting.

–

Integrated Report : - should record:
* Positive and negative impacts it has had on on economic life of the community in which it operated during the financial year
* How it can improve positive & eradicate / reduce negative impacts.

24
Q

What are the 7 benefits of adopting integrated reporting (Eccles and Krzus 2010)?

A
  • Greater clarity about relationships and commitments.
  • Better decisions (integrating financial and non-financial info helps management develop better metrics)
  • Higher quality information (required transparency/reliability higher for external reporting = better internal reporting)
  • Deeper engagement with all stakeholders (more integrated views on how their interests relate to one another and to other factors contributing to performance)
  • Eliminate artifical distinction between shareholders and other stakeholders (more holistic view of companys ability to grow profits and suceed for shareholders / 1 report = 1 single consistent message to all, plaform for single convo all can participate in)
  • Companies become aware of interests of diff stakeholders + how those align/conflict (should encourage engagement among their stakeholders to reach a consensus on society’s expectations for the company.
  • Reduces risk (lower rep risk – integrated view, arguably, will help identify risk areas as makes clearer what areas reputation is based on overlapping performance outcomes. Helps monitor trends, social attitudes and the media and improve awareness how societal norms/values are changing = org more aware of early changes in expectations to come)q
25
Q

What factors could the economic value of a company include?

A
  • Balance Sheet
  • Profit and loss
  • Brand
  • Goodwill
  • Strategy
  • Reputation
  • Assessmen of future earnings
  • Quality of board/management
26
Q

Why are all elements of an integrated report so important?

A

Together they enable all stakeholders make informed assessment of the complete economic value of an organisation.

27
Q

Why is integrated thinking so important to integrated reporting?

A
  • Companies can understand relationships/interdependencies between its operating/functional units and the capitals it uses and affects.
  • Should take connectivity/interdependencies between all factors with a material impact on value creation/preservation into account in the short/medium and long-term.
28
Q

What are some of the factors companies should take into account for integrated thinking?

A
  • Capitals it uses and affects including their interdependencies
  • External context in which organisation operates
  • Activities, results and performance
  • Opportunities and risks - strategies to manage them
  • Financial and non-financial information
29
Q

What should integrated reporting do overall?

A
  • Enhance transparency and accountability
  • These are essential to build trust and resilience
  • By disclosing nature and quality of relationships with key stakeholders; and
  • How their issues are understood/take into account/responded to
30
Q

re Philips’ Annual Report 2008: Financial, Social and Environmental Performance’ - benefits of a single report (the integrated report)

A
  • Gets rid of SILOs
  • Key element of taking sustainability seriously – establish a truly sustainable strategy;
  • One report can give single consistent and simplified msg to all stakeholders (improves transparency in corporate reporting) - can all join one single conversation
31
Q

What is the difference between sustainability reports and integrated reports?

A

SR
* Describe organisation’s non-financial performance, positive and negative, in areas such as the environment, society & governance
* Usually targetted at different stakeholder groups*

IR
* Combines financial and non-finaNcial information
* Usually targetted at investors*.

32
Q

What was the purpose of establishing GRI?

A

Create an independent international organisation to ‘help businesses and governments worldwide understand and communicate their impact on critical sustainability issues such as climate change, human rights, governance etc.’

33
Q

What was / is the main aim of GRI sustainability framework?

A

Voluntary framework intended to introduce some standardisation into sustainability reporting.

34
Q

what are the two ways in which GRI standards can be adopted by companies?

A
  • Prepare sustainability report in accordance with GRI Standards; or
  • Report on specific sustainability information, where selected / parts of the standards are used to produce this information.
35
Q

What are the 3 main univeral standards of the GRI Standards?

A
  • GRI 101: Foundation
    o Reporting principles
    o Requirements for appliction/identifying and reporting on topic-specific standards
    o Ways standards can be used and specific claims/statements of use required for companies using the Standards
  • GRI 102: General Disclosures;
    o Provision of contextual infomation about org and its sustainability (profile, strategy, ethics and integrity, governance, stakeholder engagement process, reporting process)
  • GRI 103: Management Approach
    o Reporting requirements for org to explain how manages economic, environmental and social impacts related to a topic-specific standard.
36
Q

What are the 3 topic-specific GRI Standards?

A
  • Series 200 – Economic
  • Series 300 – Environmental
  • Series 400 – Social
37
Q

What are the GRI standards and why are they so important?

A

First of kind - most commonly adopted. Common reporting framework re CSR. For statements/info published on or after 1 July 2018. Create common lang for orgs & stkholders with which eco, enviro, soc impacts can be comm understood. Designed to enhance
global comparability/qual of such in- thus greater trans/account of orgs.

38
Q

What is IIRC Reporting framework?

A

International IR framework / guidance with the aim of consensus for future shape of corporate reporting.

39
Q

**What are the main aims of the IIRC <IR> framework?**</IR>

A
  • Improve quality of info available to providers of fin cap & enable efficient / productive alloc of cap
  • Promote more cohesive/efficient approach to corporate reporting (diff strands/full range of factors)
  • Enhance accountability & stewardship for the broad base of capitals
  • Support integrated thinking, decision-making and actions- create value over short, med & long term
  • Intent that <IR> Framework of principles based guidance will **accelerate individual corporate reporting initiatives** and provide **impetus for greater efficiency** of reporting process itself.</IR>
40
Q

What are the IIRC’s 7 guiding principles?

A
  1. Strategic focus / future orientation
  2. Connectivity of info
  3. Stakeholder relationships
  4. Materiality
  5. Conciseness
  6. Reliability/completeness
  7. Consistency / comparability
41
Q

Why was the Corporate Reporting Dialogue established?

A

June 2014 - convened by IIRC- create dialogue/alignment btwn key sustainability standard setters and framework developers.

Adopted statement of Common Principles of Materiality: a common map of reporting landscape / have taken common positionsupporting Financial Stability Board Task Force on Climate-related Financial Disclosure.

November 2018, announced a project aimed at:
* Aligning all current sust standards with TCFD recs (June 2017);
* Identifying sims & diffs btwn current stands/fworks to create greater alignment, taking into account diff requs each set of stands & fworks; and
* Continuing dialogue with fin reporting standard setters towards integrating fin and non-fin reporting.

42
Q

What is the main benefit of external assurance re CSR initiatives and sustainability reports?

A

Provide a measure of credibility as they are performed by 3rd parties.

43
Q

What did ISO establish in respect of sustainability & CSR reporting?

A

Standards against which organisations can receive certification.

Ex. ISO 14001 for Enviro Management Systems & ISO 26000 for soc responsibility.

44
Q

What is the Sustainability Accounting Standards Board?

A

SSAB is an independent organisation that develops and maintains global reporting standards for companies wishing ‘to identify, manage and communicate financially material sustainability information to their investors’.

45
Q

What is an environmental profit & loss account?

A

Allows company to measure environmental costs/benefits from company ops in euro value- making more sustainable business decisions.

46
Q

What is the Company Secretary/Governance Professional’s role in CSR Reporting?

A
  • ENSURE BOARD HAS OWNERSHIP OF REPORTING PROCESS
    Decide with board which framework to adopt and how non-financial info should be report/reporting can meet the differing needs of differing audiences.
  • MAKE PRESENTATION EXPLAINING DIRECTORS’ DUTY UNDER S. 172 CA 2006 - including how this will be reported within the company’s documents
  • ENSURE NON-FINANCIAL KPIs DEVELOPED AND APPROVED BY THE BOARD
  • DISCUSSION(S) AT BOARD LEVEL
     Types of future-orientated information to be included
     How to balance between information to disclose and maintaining confidentiality
  • INFORMATION FLOWS MAINTAINED BETWEEN BOARD & MANAGEMENT
     Value creation story
     Views/interests of key stakeholders / their perceptions of non-financial performance
     What peers/ other industries doing
     Regulator discussion regarding performance against approved non-financial KPIs
    o Ensure on agenda of board and/or relevant committee
    o Where not - circulate the/arrange board training
    o Ensure principle risks of CSR acts known/managed/report in appropriate docs
    o Be member of team (multi-departmental) for delivering CSR/Integrated Report
  • ADVISE BOARD ON TRACKING RANGE OF ENVIRO/SOC FACTORS AS PART OF EXEC REMUNERATION APPRAISAL SYSTEM
  • ADVISE BOARD ON CONTENTS OF STRATEGIC/DIRECTORS/ESG REPORTING REQS
  • FOLLOWING REPORTING CYCLE
     Ensure annual process review conducted
     Present to board gaps/improvement areas & any feedback from stakeholder groups.

Hayley K - Corporate Governance November 2022 (19 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions