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Annual and Sustainability Report - Importance, Myths, Tendencies and Truths
By Rodrigo Garufi - Investor Relations Consultant, MZ Group

Traditional annual reports are evolving from almost exclusively financial documents into much broader and more comprehensive publications for two main reasons. Firstly, there was the advent of the Internet, which made the distribution of printed reports obsolete, given that the information they contained was often out of date by the time they were published, so they were utterly unable to compete with IR websites and their powerful disclosure tools. The second major factor was the arrival of sustainability reports. The need to improve communications with stakeholders and disclose practices adopted by companies in the most varied sectors of the economy led to substantial changes in these documents, which now go well beyond the mere disclosure of financial information and corporate governance practices.

Supported by the guidelines of the Global Reporting Initiative (GRI), which compiled a set of global sustainability indicators, an increasing number of companies are currently publishing reports that include these indicators. As a result, the reports have become stronger and more comprehensive since they now include social, economic and environmental information. Consequently, stakeholdersare even more alert to and engaged with sustainability.

It is worth noting that this paradigm shift has also made companies more aware of their social and environmental responsibilities, leading them to adopt values and principles based on transparency and a commitment to sustainability.

  • Unnecessary headaches generated during the report preparation process:
    "Involving different suppliers in each step of the report’s preparation makes the whole process more difficult and bureaucratic." In fact, this would be true if there were no companies specialized and focused on the one-stop-shop model for preparing annual reports. The solution is to centralize the entire process in a single agency comprising writers, editors, revisers, translators, designers, video producers, layout artists and HTML programmers.
  • Only publicly-held companies can prepare these reports:
    Not at all. The current report model allows privately-held companies to increase their market visibility and communicate with their stakeholders in an integrated manner, in addition to representing an important management tool. There are also several financial market working groups, such as the PAC-PME, which amply disclose the benefits of this practice.
  • The report always has to be printed in its entirety:
    False. It is possible to print a summarized version of the report. In fact this is one of the current segment trends.

  • Online annual reports
    Also in regard to printing, the tendency is to use less paper and be more interactive through online reports, which are totally aligned with the principles of sustainability.
  • Partial printing
    However, some companies may still want to print some copies of their report. In order to make this process more sustainable, one viable solution is to include only the most important financial tables rather than the complete financial statements, while ensuring stakeholders’ access to the latter by including a link to the company’s IR website.

  • Access via tablets:
    As with IR websites, companies are creating apps that will shortly allow access to reports via tablets and mobile phones and the reports can already be prepared in this format.

  • Ideal disclosure period:
    Ideally, reports are published on the date of the Annual Shareholders’ Meeting or within 30 days of publication of the annual financial statements. The reason for this reference date is simple: annual reports were originally created to render accounts to the company’s shareholders. Nothing could be more appropriate, therefore, than delivering them on the day of the annual meeting. Few companies, however, succeed in doing this.
  • The sooner the better:
    The secret to disclosing your report as soon as possible is being organized and focused. In fact, it is advisable to begin in mid-November of the previous year, thereby ensuring sufficient time to comply with the detailed report production schedule, with deadlines that can be met by companies and agencies.
  • Report’s representativeness to stakeholders
    Nowadays, one can safely state without contradiction that transparent annual and sustainability reports constitute the fundamental communications channel between companies and their stakeholders. There is no going back: integrated reports are already a global reality and sooner or later, companies that have not adopted them will be asked by their stakeholders to do so. In order to avoid this, do it now!

Following on from the above discussion of tendencies, tablets, applications and other IR innovations, don’t miss the event "Innovations and Tendencies in Digital Communications for the Capital Market", which will talk about applications for annual reports, among other interesting topics.

Rodrigo Garufi
Investor Relations Consultant, MZ Group
rodrigo.garufi@mzgroup.com
+ 55 11 3529-3560
www.mzgroup.com/br

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