New corporate disclosures are opportunities for business, and here’s why

Jodi Probst PwC Houston Office Managing Partner, PwC US March 11, 2021

Corporate reporting has long helped companies and investors make informed business and investment decisions, but the scope and nature of these requirements are quickly evolving. The US Securities and Exchange Commission (SEC), for instance, recently issued a new rule requiring companies to report details about the management of their workforce, which goes beyond what the agency has historically required regarding human capital.

These changes and others come as the COVID-19 crisis magnifies the world’s socioeconomic disparities. They also come as social causes — climate change, gender equality, racial justice — increasingly matter to customers, shareholders and other stakeholders. The wave of emerging reporting requirements will likely continue, and companies should respond strategically. We see a number of trends taking shape. 

  • A focus on stakeholders, not just shareholders. Companies should report a broader set of reliable information about their purpose, commitments and activities that’s also useful to decision-makers.
  • Attention to societal impacts, not just financials. Companies should disclose meaningful, comparable key performance metrics that go beyond the financial numbers. This may involve reporting social, environmental and other impacts of their business.
  • Demand for more forward-looking information, not just historical data. A corporation’s planning and preparation for business continuity in natural disasters, public health crises and other uncertainties can have wide-ranging impacts on the business and society at large. More tailored reporting can help both investors and public authorities understand risk, plans and resilience
  • Not just required but trusted and valued information. Information quality is vital. It needs to be investment grade — clear, consistent and accurate information — and in some cases audited.

I believe it’s more important than ever to have clear reporting standards so there’s consistency. This will take time, though, and I think reporting requirements around non-financial information will likely keep evolving as many of these data points aren’t subject to the same processes and controls. 

Yes, you could respond with simple compliance, but that could be a missed opportunity. Think about reporting as a communication strategy. Stakeholders want this information, and that’s especially important today. Take Edelman’s 2021 Trust Barometer, which reveals an epidemic of misinformation and mistrust of institutions and leaders. But survey respondents ranked business as the most trusted institution over government, non-governmental organizations and the media. In fact, they saw business as the only institution that’s both ethical and competent. 

Business leaders can build on that trust through clear, transparent, consistent and accurate disclosures. Consider how new disclosures tie to the overall purpose and strategy of your business. This will take time, and the process will evolve in the coming years as you identify and collect the right data to measure progress, but you can start by setting goals and disclosures that are more qualitative versus quantitative. 

The public expects business to address — and solve — today’s challenges, according to Edelman’s survey, and 86% expect CEOs to speak out on topics such as the pandemic and job automation and other social issues. Given these heightened expectations, it’s worth underscoring that the changes in reporting requirements mirror the social and economic challenges we all face. Your reporting can be a tool to get your message out about how your company’s contributing to society.

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