STRATEGY CONTINUED This section analyses how companies express their strategy and objectives to provide a clear indication of what they aim to achieve in the future and how this will be delivered. More meaningful strategic discussions The significant improvements in strategy discussions of recent years reached something of a plateau last year, with only little noticeable improvement in the overall quality of disclosure. Those leading reporters who have historically been very good at describing their strategy and objectives, have strengthened their disclosure and linkages through to performance, risk and in some instances remuneration. In addition, there are a number of companies who appear to have focused more efforts on improving the level of detail around their strategy, actions and progress. An increasing number of companies seem to understand that clearly communicating their company strategy for delivering long-term value, particularly in uncertain times, will help to enhance the ability of investors to assess the quality and sustainability of a business, and ultimately maintain their confidence in their investment. This year in particular, we have seen a rise in the number of companies linking strategy with their KPIs, with the majority of those doing so linking directly to their strategic priorities, or at least to the overall strategy. This encouraging improvement indicates that companies are becoming more adept at showing the ‘big picture’ of their company; offering the reader an insight into how management gain an accurate picture of the extent to which the strategy in place is allowing the company to perform. It seems for many companies, in sectors such as technology, basic materials and consumer goods, that growth is back on the agenda, with more emphasis on growth-related objectives and less focus on financial stability, cost-cutting measures or efficiency savings efforts to strengthen the balance sheet. Financial services and utilities are the exception, with most continuing to focus on stability rather than future growth. However positive the overarching attitude change towards the integration of CR in the business strategy is, there has been little change from last year, with about a third of companies actually providing long-term non-financial, CR-related priorities. This seems to contradict the statements made by the vast majority of companies that their primary objective is to ‘deliver sustainable growth’. Greater integration of CR There has been a step change in companies’ attitudes to the integration of CR within the overall group strategy, with an increase to 56% of companies detailing CR in the group strategy, up from 36% in 2009. This perhaps is reflective of the increasing recognition by companies of the need to ‘build shareholder and stakeholder value side by side’ and an understanding that this is one way of aligning the interests of both parties to create long-term value. This focus on long-term value creation is reinforced as the number of companies discussing business objectives continues to follow the improvement trend of last year. The number of companies providing insight into future plans and goals has increased from 59% to 73%. There is also a very apparent drop in emphasis on short-term goals and strategies. This is a good indicator that we are coming out of the financial crisis as well as the increasing focus by companies on the long-term. Figure 5.2 Figure 5.3 How many companies reference CR within the group strategy discussion? 56% 36% ’09 ’10 Figure 5.1 What is the level of strategic discussion in the Annual Report? 32% 27% Detailed appraisal with linkage How many companies discuss business objectives? 86% 85% 82% 68% 25% 55% 92% 18% 73% Long-term and short-term Just long-term 38% 45% Detailed appraisal Mentioned 25% 5% ’09 23% 5% ’10 Not mentioned 40% 6% ’05 ’06 ’07 ’08 ’09 1% ’10 Just short-term 20 © Black Sun Plc 2011 www.blacksunplc.com
