The Department for Business, Energy and Industrial Strategy ("BEIS") has published its Final Report: Frameworks for standards for non-financial reporting ("NFR") (the "Report") which sets out the preferences of key U.K. stakeholders around NFR standards. Whilst established reporting standards and accounting principles for financial reporting are available to businesses, the Report notes there is no equivalent for NFR despite there being a number of key drivers for the publication of this information (set out below) and so, although the purpose of this research is not to endorse a specific framework, BEIS hopes that it may support future studies exploring potential changes to policy in this area.
There were three aspects to the research (i) "Rapid Evidence Assessment" focussing on 20 studies concerning stakeholder views on NFR published over the past five years, (ii) small workshops held in September and October 2019 with user, preparer and institutional investor stakeholders and (iii) three surveys of each of reporting companies, retail investors and employees and potential employees.
This report is an important step in identifying stakeholder expectations and the challenges faced by companies in non-financial reporting.
Key drivers of non-financial reporting
- The role that businesses and others have to play in addressing climate change and wider environmental concerns, with a particular interest in their part in the transition to a low carbon economy.
- Consumer interest in sustainable investment and businesses with a "do no harm" strategy.
- The need to rebuild a perceived mistrust that business has no wider purpose beyond profit and that it does not consider ESG (environmental, social and governance) issues.
- Individuals and non-governmental organisations taking a more pro-active approach to holding businesses responsible for their actions through litigation.