Strategy, success and stakeholders – why your reporting matters

Peter AcloqueDuncan HunterRichard Haig

www.pwc.co.uk

The Royal Institution

14 June 2018

School of Mines

Session outline

Introduction

Discussion - Reporting to your stakeholders

Technical update

Closing remarks/Q&A

What do investors think about the Annual Report?

PwC’s Extracting value: What do investment professionals need from mining company reporting? – Investor survey results

74% of investors typically review the

annual report of the companies that they follow

88% of investors agree that the quality and

integrity of reporting impacts their perception of the quality and integrity of management

Annual reports provide useful insight into principal risks

36%The business model captures what's distinctive about a company

20%

Navigating stakeholders

What good stakeholder engagement looks like

Company

Stakeholders

There is stakeholder relevance at all stages of a company’s strategic story.

From a company’s point of view stakeholder relationships affect its risks and opportunities.

From a stakeholder side, companies primarily make a contribution to them or impact upon them.

Is your reporting relevant?

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What more can I say about our strategy? We dig it up, and we sell it.

That’s it…

What’s going on in the market, how is it changing, and how are you positioned to capitalise on this?

Are these really the principal risks that keep the directors up at night? Does the risk section reflect the true nature of the business?

Stakeholders are fundamental to the sustainable long-term success of the company. How do you engageand take account of their views?

How can strategy be measured? Do the disclosed KPIs align to remunerationand strategy? If not, then are these really the key measures?

Putting yourself in the position of the stakeholderGroup exercise (15 minutes)

• Consider the Annual report extracts from the perspective of a stakeholder group

- Group 1:Employees,

- Group 2: Government and society

- Group 3: Investors

• For each extract, how is the impact of the company’s activities on stakeholders factored

into the strategic disclosure?

• What are the highlights of each extract, and how could these be improved further?

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Technical update

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Technical update - Alternative Performance Measures (APM’s)ESMA Guidelines

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The Guidelines define APM’s and outline principles for their disclosure

Presentation Define APM’s in a clear and readable way and give meaningful labels.

Reconciliation Reconcile APM’s to most directly reconcilable GAAP line item explaining material reconciling items.

Explanation The use of APM’s should be explained so users understand relevance and reliability. Simply explaining these are ‘useful measures’ is not sufficient.

Prominence Do not display with more prominence, emphasis or authority than GAAP measures.

Comparatives APM’s should be presented with comparatives which also need to be reconciled.

Consistency APM’s should be defined consistently over time and any changes justified.

Technical update - Navigating the stakeholder agenda

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The stakeholder

agenda

BEIS secondary legislationNon-financial reporting regulations

FRC UK Corporate Governance Code 2018

FRC Guidance on the Strategic Report

GC 100 guidance on s172

Task Force on Climate-related Financial Disclosure

ICSA/IA guidance on stakeholder voice

Website disclosures eg Modern Slavery

Technical update – Non-financial reporting regulations

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Recognition of the regulations and

compliance

• No requirement for a separate statement (yet)

• But indicate acknowledgement or compliance of the regulations

• Explain - if no content - that the content area is immaterial

Policies, their outcomes and related due diligence

• Do more than just list policies –give a sense of their purpose

• Assess the outcome of the policy – what was achieved?

• Don’t forget due diligence. If processes aren’t in place, then should there be?

Discussing impact

• Provide an insightful disclosure that answers the question

• Don’t just present the positives. Discuss negative impacts and what the company is doing to combat these.

Companies must disclose their impact in the following areas – employees, environment, social matters, human rights, anti-corruption/bribery. This applies to EU-PIEs with over 500 employees.

Technical update - s172 Companies Act

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1. A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to –

a. The likely consequences of any decision in the long term,

b. The interests of the company’s employees,

c. The need to foster the company’s business relationships with suppliers, customers and others,

d. The impact of the company’s operations on the community and the environment,

e. The desirability of the company maintaining a reputation for high standards of business conduct, and

f. The need to act fairly as between members of the company.

Section 172 Duty to promote the success of the company

Any questions?

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This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this

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© 2018 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) which is a

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