On 22 October 2019, the BEIS published a report exploring stakeholder perceptions of the non-financial reporting regime in the UK. The non-financial reporting section of these reports includes: a fair review of the company's business and the principal risks and uncertainties it faces; the company's corporate governance (e.g. diversity on boards); their environmental behaviours; and corporate social responsibility. The report analyses the effect of additional duties placed on public interest entities (e.g. listed companies or credit and insurance entities) under the EU Non-financial Reporting Directive by researching the impact of the regulations on businesses and wider stakeholders.
Stakeholders generally believed corporate reporting had improved since the Companies Act 2006 was enacted. There was also consensus that non-financial reporting is becoming more engaged with nonfinancial risks. While generally respondents believed corporate reporting and governance in the UK was strong, some suggested that companies may struggle to keep up with the pace of regulatory change. There was also a strong view that the quality of reporting varies greatly among companies and that compliance may be viewed as more of an exercise in compliance than a meaningful assessment of risks.
Feedback from companies showed regulations to have had a positive impact generally, given prior to the regulations only four in ten companies reported publishing non-financial information. Understanding the regulatory requirements and data collection were both key costs to companies during their first year of compliance. However, overall the regulations do not seem to have been a major burden on the companies sampled.
The report generally found stakeholders and businesses to be in favour of non-financial reporting. Both stakeholders and businesses were also generally very positive about the strength of the corporate governance regime in the UK. Stakeholders also agreed that the importance of non-financial reporting would only increase as influential investors push for greater transparency, and the recommendations of the Financial Stability Board (FSB)'s Task Force on Climate-related Financial Disclosures and the focus on the UN's Sustainable Development Goals become embedded in the regime. Several stakeholders highlighted a growing interest from wider society in non-financial reporting.
The full report can be found here.
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