It is clear that AI is increasingly being highlighted by companies as a key focus area. This shift is driven by both the rapid advancements in AI technology and the growing expectations of stakeholders who seek transparency and accountability in how companies integrate and manage AI.
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In a previous blog post, we explored the benefits and drawbacks of AI in the corporate reporting space. Since then, DP’s consultancy team has been closely monitoring how companies are reporting on AI in their most recent accounts.
Our review of the latest annual reports reveals a growing emphasis on AI across various sections, from leadership statements to risk management and sustainability. Companies are increasingly recognising the importance of AI and incorporating it into their narratives, although the extent and depth of reporting vary significantly. Some companies are showcasing their AI initiatives and highlighting the benefits, while others are more focused on the risks and governance aspects.
In this blog, we will examine how companies have been reporting on AI, providing an overview of the current landscape and offering insights into the current emerging reporting practices by companies.
The leadership statements are one of the most read areas of the strategic report, and capturing the current market interests is essential for delivering this in a more meaningful way. It was therefore encouraging to find companies that chose to bring out AI more prominently in their latest annual reports.
Our review identified several companies whose narratives often focused on the opportunities AI presented, with some companies providing case studies of how AI has benefited their business (Ocado, page 15).
We particularly liked Informa on page 16, which highlighted its use of generative AI and the establishment of a central project team in 2023 and an “AI centre of excellence” for the year ahead. This is an example of a company that has long integrated AI into its business while continuing to provide relevant and current reporting that aligns with investor expectations.
While AI presents opportunities across various industries, we recognise that integrating AI into the business model may not be suitable or beneficial for every company. Factors like the nature of the business, industry dynamics and strategic objectives should be carefully evaluated.
It was encouraging to find companies that did specifically reference AI in the business model (BT, page 13). These companies referenced AI in the context of data and insights, with one company highlighting that AI solutions were enabled by its culture of Innovation (Sage, pages 16 and 17).
With this being said, we were surprised to find some companies that prominently presented the benefits of AI for its business but failed to reference AI specifically in their business model. This demonstrates a lack of consistent messaging as these companies tended to fail to explain how technology (in AI’s broader form) enables their core operations and value creation.
It is no surprise that the most common area of AI reporting was the risk management section. In line with investor expectations, we expect more companies to address the potential risks associated with AI.
We observed many companies reporting on AI as an emerging risk, focusing on increased regulatory scrutiny, security threats, greater competition and data privacy issues. Notably, companies with more mature AI implementations were more specific about the types of AI posing risks, such as generative AI (Ocado, page 105).
One area of limited disclosure we identified was detail on how companies are addressing AI-related risks. Coca Cola HBC’s disclosures on page 106 demonstrate leading practice. The company outlines where policies, guidelines and enhanced training on appropriate use of AI are highlighted as ways it is managing AI-related risks.
Companies should ensure that their disclosures about emerging risks are useful for stakeholders by including details such as the anticipated time horizon of these risks. While there are many risks associated with AI that will impact businesses, we remind companies to explain how these risks impact group strategy to help contextualise the risk and to avoid boilerplate disclosures (National Grid, page 30).
Beyond the risk management section, but relevant to risk mitigation, stronger reports tended to highlight policies and guidelines in place, and it was encouraging to see QR codes and links utilised for more detailed access to their policies (Sage, pages 16 and 17). This approach offers greater transparency and accessibility for stakeholders seeking more information. Likewise, we were pleased to find one company which identified the risk owner and linked the emerging risk to its material issues, demonstrating effective oversight and accountability (Coca Cola HBC, page 106).
During our review we found four companies that particularly stood out in their reporting of AI in the sustainability section. As sustainability reporting should focus on addressing material issues it was great to see companies focus on the responsible management of AI more prominently in their latest reports.
Ocado identified the ethics of AI as part of its materiality matrix, reflecting the long-established integration of AI in its business (Ocado, page 67). It included a comprehensive section on data governance and detailed the company's commitment to the responsible use of AI for its employees (Ocado, pages 78 and 79).
Similarly, BT on pages 36-37 emphasised the importance of responsible use of emerging technologies. It disclosed how it applies its responsible technology principles across its value chain and develops its data ethics and responsible AI standards, to help mitigate risks.
Britvic highlighted the potential use of AI to predict the effects of climate change on the business (Britvic, page 11). Similarly, easyJet highlighted AI’s capability to analyse data to help it identify fuel saving opportunities (easyJet, page 34). It is clear that AI offers significant benefits in addressing climate challenges and it will be exciting to learn how companies report these advancements in their net zero transition plans.
Several companies identified board members with relevant experience in AI with one noting how this expertise was considered in the succession planning process (BT, page 98). Additionally, many companies emphasised the training and development of the board, ensuring that members stay informed and up to date on emerging topics (Balfour Beatty, page 122 and page 136).
We also observed an increase in the number of companies reporting on the board’s consideration of AI within their board activities disclosure (Informa, page 101). One company highlighted its consideration of AI in the context of its strategy. It outlined how the board was looking to maximise the use of AI in achieving one of its strategic pillars. The outcome of this discussion was its partnership with Microsoft to build an in-house generative AI tool (Coca Cola HBC, page 136). Case studies like this provide readers greater insights and understanding of the board's ability to strategically evaluate and leverage emerging technologies like AI.
We were particularly impressed when we found an example of one company highlighting how AI was used as part of its employee engagement approach, allowing it to obtain feedback from employees based on factors like gender, job type and location (Weir, page 81). This allowed it to identify trends across different employee groups, offering readers insights into how AI can strengthen the board’s capabilities and processes.
Conclusion
In conclusion, our review reveals a mixed landscape of how listed companies report on AI. It is clear that AI is increasingly being highlighted by companies as a key focus area. This shift is driven by both the rapid advancements in AI technology and the growing expectations of stakeholders who seek transparency and accountability in how companies integrate and manage AI.
As companies continue to navigate the AI landscape, it will be essential to provide more comprehensive and transparent disclosures that address both the opportunities and risks associated with AI. This will not only meet stakeholder expectations but also position companies to leverage AI effectively in their strategic and operational activities.
How Design Portfolio can help
At DP, we are at the forefront of guiding the conversation of AI through collaborations with the IR society, ongoing engagement with expert third parties and running research programmes with leading universities.
For expert guidance on enhancing your AI reporting to meet stakeholder expectations and leverage AI effectively, feel free to get in touch.