Strategy & objectives Integral to the business model? A clear description of the company strategy is vital to ensure that stakeholders will be able to make an informed assessment of a company’s ability to create and sustain value. Strategic discussion should demonstrate the company vision and how it will be achieved through specific long-term and short-term objectives, which have considered material issues and impacts and identified the potential risks and opportunities. Setting targets and tracking performance through key indicators and linking to remuneration will provide a clear indication of what the company aims to do for the future. How value will be delivered through the company’s business model will challenge companies to think about and be more accountable for the long-term positioning of the business and the drivers of business success. The trust and confidence of shareholders and other stakeholders can be built through ensuring an understanding of company culture, management processes and goals. as being particularly strong in presenting their strategic plans. Mostly, the companies demonstrate a visible link and alignment between their objectives and performance which, in turn, allows for a comprehensive appraisal of progress against strategy. When looking at how companies are reporting on their business model, it appears as if there is often a discrepancy between what they describe their model as and what it actually is in practice. For example, although China and the United States seem to have performed well in this area, it is important to note that more often than not, the phrase ‘business model’ is used in passing and not discussed in detail. In fact, the reports which offer a genuine explanation of how the company generates value are few and far between with only 17% of those which report on their business model (in both China and the US) referencing non-financial elements within the model. In addition, it ought to be noted that the main source of strategic information and content in the Chinese reports is contained within the management statements. Although the statements often discuss the key challenges and priorities for the company, there is very little in the way of links throughout the narrative and most reports instead tend to be very financially focused. Disappointingly, there was a notable absence of strategic content in reports from India and the United States. Linking non-financial issues to their overall group strategy or vision Top countries: Brazil 64% South Africa 63% 57% Republic of Korea Outlining their long-term business objectives/priorities Top countries: South Africa 88% Europe Key findings South African companies certainly seem to be focusing on improving their strategic messaging in their reports, with the majority reporting strategically about their business and setting strategic priorities which are a mix of financial and non-financial objectives. In some cases sustainability is built into the investment case for the business and reflected in the business model. The majority of reports also provide good market information which helps to put the strategy into context as well as enabling the company to outline clear objectives and targets for the future. From within the European sample group, the UK reporters stood out 80% Republic of Korea 71% Mentioning their business model Top countries: South Africa 63% China 55% United States 50% www.blacksunplc.com © Black Sun Plc 2011 21