Should a Mexican company bother with an annual report? Is it worth the time and effort in this age of digital media and 2-minute attention spans? Well, we think it’s generally worth it, as in this age of instant gratification it’s the chance to leave something a little more permanent behind, and communicate to beyond the narrow investor base what is really important and positive about the company.
Why it’s important to create annual reports:
It’s one place in a point-in-time record of accomplishments, milestones and goals. It is a brand building and reputation enhancing tool. And, properly promoted, it drives traffic to your corporate website, Twitter, Facebook, Instagram accounts.
Sustainability and ESG content is on the rise and the annual report is a great place to showcase the company’s contribution to society. (In addition, we recommend a Sustainability report or an integrated report – financial/sustainability.)
It’s an ideal way to communicate with your stakeholders outside shareholders (customers, community, employees, regulators) and build trust and engagement. These people are mostly not reading your IR materials, and probably not checking you out on Twitter, nor browsing your website.
Given its long shelf life and high profile, it’s a good opportunity for the CEO to spell out his message and vision for the company. Jamie Dimon, Chairman and CEO of JPMorgan, does this especially well. This CEO letter can also be distributed separately to give it maximum effect.
Best practices for annual reports:
- Tell a story (or two) as that will keep people reading. People are captivated more by stories than by concepts.
- Be authentic. Ask yourself if this report and visuals are sufficiently specific to your company. Does the text actually describe the important achievements that were accomplished in the year? Or the challenges that were faced? Avoid ignoring the elephant in the room.
- Be useful. Set out the CEO’s future vision and strategy for the company. Make sure that the annual report contains the key numbers, people, facts, ESG impact, relevant audit notes if any, corporate governance committees and so on. Provide order and consistency throughout.
- Humanize your brand to establish a connection, using photos featuring people at the company. Use high quality graphics to stand out from the crowd.
- The content of the report needs to be consistent with the investor message. If you are trying to show investors that your company is asset light, avoid pictures of company-owned trucks and other heavy equipment. If you want to demonstrate your ESG credentials, ensure that rough gender balance is reflected in pictures (and if you cannot actually do this, maybe it’s time to change something in your company).
- Avoid corporate-speak, bureaucratic and technical language. The annual report should aim to communicate to a non-specialized audience in an easy, simple, light style. Be concise. Under 50 pages is ideal. If you are translating into English, make sure the English reads like it was written by a fully native English-writing person, and not by Sr. Juan Google Translate.
- For small companies or large companies where brand value not that relevant, a digital only version is fine, but most brand-conscious large companies will likely want to both print (for now) and digitalize. For the digital version, we recommend using videos as well. We suggest that a WhatsApp digital version with videos that can be ready on the phone should be prepared. Link to social media.
- Be involved. Do not outsource the report in its entirety to a communication company otherwise it will read like the report from any other company…
PWC study – key statistics on annual reports in the FTSE 350 (2018/2019):
- The average annual report has grown 7% in the last two years.
- Only 37% of companies explicitly set out plans for the year ahead.
- The average annual strategic report has a length of 56 pages.
Statistics of annual reports (study from 2016):
- It’s very hard to track how many printed reports are actually read.
- Nexxar analysed user statistics of 20 online annual reports from leading companies in the FT Europe 500 (10 of them are in the FT Europe 100). These reports cover a full-year period (365 days) since its publication. The smallest company had less than 5,000 employees; the largest with more than 500,000 employees.
- The key findings were:
- 37,376 visits per year.
- 165,198 page views per year.
- 0% were accessed through mobile devices.
- 2,590 PDF downloads per year.
- 1,425 XLS downloads per year.
- 3% referrers via search engines.
- 7% used the report in its English version.
- The most popular chapters among users were:
- Management’s Report, with 37.0%
- Financial Statements and Notes, with 30.1%
- Shareholder and Company Info, with 19.4%
- Corporate Governance, with 7.3%
- Other, with 6.2%
Annual report trends for 2020:
- Tell a story of the business
- How did the company start?
- What are your core values/principles?
- How did the company address consumer pain points?
- How did the company expand?
- What challenges did you face and how did you address them?
- Use digital reports
- In a digital world, it’s important to tend to smartphones and computers, printed reports are on their way out.
- Humanize the report
- Talk about success and failure in a human way.
- Share images of employees or the workplace.
- This leads to more authenticity.
- Mention CSR
- Shows the company is accountable to stakeholders and the community.
- Is becoming increasingly important for investors.
- Hire local experts for maximum impact
- Helps improve the company image, engaging the audience that reads it.
2019 trends in corporate reports
- 90% of the Fortune 200 had a Sustainability/CSR report
- Within this, 58% featured relative climate goals, 27% included absolute climate goals and 16% had no clear goals.
- 67% of the Fortune 200 had a digital experience
- 28% of those had a video
Reassessing value of annual reports:
- Carried out a survey to 500 report users in the UK and Canada.
- These users consisted of capital providers (large and small investors), credit providers (banks, credit management), and other stakeholders (such as suppliers, other company employees).
- Key findings:
- 50% of respondents confirmed that the annual report is their primary or only source of this information.
- The emergence of integrated reporting was also welcomed. 59% said that the inclusion of social and environmental data through an integrated report would add value.
- 71% of respondents think companies should be reporting more on potential risks that could affect their performance.
- 47% thought that reports are too long
- 35% felt reports are too backward facing.
- 40% said that reports are too general purpose to meet their needs.
- 26% felt that it was difficult to assess a company’s performance from the report.