‘Deluge’ of CSR chatter fills up annual reportsDecember 2009
Too much CSR information is cluttering up corporate annual reports, says the body that oversees reporting in the UK.
The Accounting Standards Board has become dismayed at the increasing amount of unnecessary information in annual reports on minor CSR projects irrelevant to overall corporate performance.
In a review of narrative reporting by UK listed companies, the board says CSR is now responsible for more superfluous information in annual reports than anything else.
‘Companies are feeling their way in developing their CSR reporting... but some have fallen into the trap of delivering unnecessary clutter such as “football coaching” by an insurance company and “donating chocolate gifts to the community at Easter” for a service company,’ it says.
‘These are worthwhile activities but in our view are not material to understanding a company’s performance and position. There is potential for more companies to say, “We have no material social issues” if they genuinely do not have material issues, instead of adding clutter to the annual report.’
The board says one reason for this ‘deluge’ of immaterial information is new requirements under revised UK company law for listed businesses to publish information in their annual reports ‘to the extent necessary’ on environmental matters, their employees, and social and community issues.
The board believes many companies are taking these requirements too far by including unimportant details.
‘It is a good thing that many companies are now using recyclable glass bottles in meetings, but this is not a decision-changing piece of information,’ it says. ‘During our review, we found immaterial clutter detracting from important information most frequently in the CSR and risk reporting sections of the narrative.’
Of the 50 UK-listed companies’ annual reports sampled, the board found nine had a CSR section longer than the financial review, ‘which cannot have been the intended regulatory outcome’.
Partly because of this clutter, it found 12 per cent of companies were not legally compliant with the new regulations on providing CSR information in narrative reporting, and a third were not complying with the spirit of the law even if they followed the letter.
Only three companies showed best practice, which amounted to explaining convincingly why corporate responsibility is important to the business, discussing policies and procedures that are ‘clearly important to understanding performance and position’, and listing CSR targets.
The companies in the sample were a mix of FTSE 100, FTSE 250 and small cap businesses.
The board is responsible for UK best practice narrative reporting guidance and is part of the Financial Reporting Council, Britain’s government-backed accounting watchdog.
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