Informing Government Thinking on Non-Financial Reporting

15th July 2020

While businesses use Financial Reporting Standards or Generally Accepted Accounting Principles standards for financial reporting, there are no equivalent standards for reporting on environmental, social and governance performance. However, legislative requirements for businesses to report this non-financial information has led to a proliferation of voluntary NFR frameworks.

The UK Government’s Department for Business, Energy, and Industrial Strategy (BEIS) wanted to know UK stakeholders’ preferences around non-financial reporting (NFR) standards, and so commissioned us to provide an initial evidence base. A primary goal of the work was to close data gaps regarding the preferences of previously underrepresented stakeholders, and our work was novel in considering the views of users of NFR, which we found to be previously understudied.

We used a robust, inductive research framework, comprising three methodological approaches:

  • A rapid evidence assessment (REA) literature review of existing reporting frameworks and current developments in both academic and grey literature (i.e. research produced by non-commercial publishers) on NFR.
  • Stakeholder workshops with both those preparing non-financial reports (i.e. businesses) and those using NFR, including NGOs and institutional investors.
  • A large scale online stakeholder survey of targeted groups, including preparers of NFR, retail investors, and current employees and potential employees of preparers of NFR (large businesses).

We identified 13 widely used frameworks (out of close to 400 that broadly address sustainability concerns), including the Global Reporting Initiative, Taskforce on Climate-Related Disclosures, and UN Sustainable Development Goals (SDGs). Through a focussed review of the literature around these frameworks, supplemented by primary research through the workshops and survey, we were able to help BEIS to navigate the complex NFR landscape.

We provided BEIS with a detailed report that included both qualitative discussions of the issues around NFR, based on the REA and stakeholder workshops, and quantitative, statistical analysis of the results of the stakeholder survey. Owing to the breadth of the methodologies used, the evidence gathered presented a comprehensive account of financial stakeholder opinions on the contents and processes NFR, including such aspects as materiality, reporting cycles, costs of reporting, and data and metrics. This allowed BEIS to see the areas of consensus and discord among different stakeholder groups.

The findings of the report will better enable BEIS to work towards the Government’s objective of ensuring that the UK is strategically placed “at the leading edge of international developments in sustainability reporting.”

Project Director Adrian Gibbs said:

This research provides key evidence on the preferences that different stakeholder groups have towards environmental, social and governance reporting. Covering a wide range of stakeholders, from businesses themselves, to their employees, and to investors, this work builds upon and broadens our knowledge in the fast-moving world of sustainability and social reporting. The research will help the UK to provide thought leadership in this area.

Image courtesy of Reva G via flickr CC BY 2.0.