3. The power of corporate reporting: how to create stakeholder trust and build brand loyalty

Part 3 – Authentic Engagement

Understanding stakeholder needs is central to a company’s brand purpose, values, culture, and strategy. And corporate reporting is a continuing dialogue that supports engagement.

So, it’s vital that we engage appropriately and inclusively. As noted in FRC: UK Corporate Governance Code Guidance 2024:

A company’s culture should promote integrity and openness, value diversity and be responsive to the views of shareholders and wider stakeholders.

Building trust in reports requires addressing diverse stakeholder needs. These range from investors focused on financial performance to employees prioritising wellbeing and consumers concerned with sustainability.

Providing ‘personalised’ sections in corporate reports that speak to each stakeholder’s needs shows inclusivity and accountability. It shines a light on an organisation taking positive responsibility for its actions and being a responsibly ethical business.

Corporate reporting and compliant engagement

Stakeholder engagement quite rightly forms a significant part of the regulatory corporate reporting landscape. It provides a source of best practice guidance and can also help to create a structure and content narrative that can be compared and evaluated qualitatively.

For example, all ‘large’ UK companies must disclose in line with the Section172 (1) compliance statement of the Companies Act 2006. This highlights directors’ duty to promote the company’s success while considering its long-term impact. It emphasises balancing the interests of all stakeholders, not just shareholders.

Companies typically report on how directors integrate these considerations into their strategy and governance, building positive stakeholder relationships and maintaining sustainable practices.

As noted in the FRC Code of Governance (Section 1):

In addition to formal general meetings, the chair should seek regular engagement with major shareholders in order to understand their views on governance and performance against the strategy. Committee chairs should seek engagement with shareholders on significant matters related to their areas of responsibility. The chair should ensure that the board has a clear understanding of the views of shareholders.

Ensuring that the corporate report discloses how the company follows the regulatory compliance and standards adds to its authenticity and legitimacy. It holds the organisation, particularly its board, responsible and accountable for its actions.

We always undertake best practice analysis and corporate reporting consultancy at the outset of any reporting process. This helps organisations to maintain a leading edge in their reporting while complying with the required standards and regulatory frameworks.

Responsive engagement

Creating formal channels for stakeholder feedback encourages a two-way dialogue, showing that the company values its stakeholders’ opinions. FRC Code of Governance (Section 1) states:

In order for the company to meet its responsibilities to shareholders and stakeholders, the board should ensure effective engagement with, and encourage participation from, these parties.

Mechanisms can include surveys, comment sections in digital reports, stakeholder forums and workshops, and online channels with response capabilities.

The key factor is to respond to feedback and incorporate it into the board’s activity and decision-making, as well as informing and inspiring developments in strategy and business practice.

Communicating feedback in reports illustrates how the company is listening and acting in response to investors, customers and employees.

Disclosing actions taken and evidencing their impacts demonstrates authenticity and accountability. This, in turn, builds stakeholder trust.

Stakeholder engagement reporting also continues to improve, and the FRC would like to see companies build on this by reflecting on the feedback received and its impact on board decisions. Engagement is important but only where it leads to high-quality outcomes.

– FRC Review of corporate governance reporting September 2024

Summary

Corporate reporting is a continuing dialogue that supports engagement. When that dialogue works both ways, it engages audiences, generates trust and builds brand loyalty.