At Design Portfolio, we don’t believe in “best practice”.
Instead, we focus on tailoring communication strategies to what matters most to your company and bringing these elements to life in the annual report or any other communication channel. That’s why we’ve launched the “Beyond best practice” campaign to showcase trends in the reporting landscape and provide valuable insights on how to integrate these into your unique equity story.
To kick off the campaign, we’ve explored the evolving landscape of culture reporting. The recent updates to both the UK Corporate Governance Code and QCA code have brought culture reporting into the spotlight. For Main Market and AIM listed companies alike, reporters will now need to adopt a new approach to culture reporting to align with these new requirements. As a result, we’ve seen significant changes in the culture reporting landscape. Consequently, we've witnessed significant shifts in how culture is reported across the board.
Regulation-driven changes
While the new QCA Code places greater emphasis on corporate culture and purpose, the UK Corporate Governance Code has been extended to require companies to assess how culture has been embedded across the business, in addition to explaining how it has been assessed and monitored throughout the year.
This shift signals that corporate culture is not just a checkbox exercise but a tangible aspect of a company's operational and strategic framework. Companies are now expected to provide a more comprehensive and measurable analysis of their cultural initiatives and demonstrate their impact on overall corporate governance and performance.
Trends in culture reporting
Beyond compliance-led reporting, there has been a noticeable trend of companies striving for meaningful disclosures about their culture. With the rise of AI-generated content, it has become even more crucial for companies to avoid boilerplate reporting and ensure their reports convey bespoke and authentic messages. This approach ensures that culture disclosures are specific to the company's unique strategy, goals, and operations. Moreover, it helps avoid a common pitfall amongst reporters: the duplication of culture-related disclosures in both strategic and governance reports, or the mere repetition of wording from the Code.
To achieve this level of authenticity, companies are detailing the behaviours that exemplify their culture and providing concrete examples of these behaviours in action. For example, Ocado has effectively demonstrated how its culture informs and contributes to its strategic execution, illustrating the direct impact of cultural values on business outcomes.
Making culture disclosures impactful involves clearly explaining how the company's culture shapes its strategy and aids in the execution of its goals. By tailoring the content to reflect the company's unique context and strategic objectives, organizations can create more meaningful and effective culture reports that resonate with stakeholders.
Leading culture reporting focuses on both the practice and policy, along with objectives and progress towards goals. An effective way to demonstrate progress towards cultural goals is through assigning KPIs to cultural indicators. In 2023, we have seen more companies do this than ever before. Not only does this demonstrate a commitment to monitoring culture, but it equally highlights a level of accountability by clearly tracking the company’s progress towards its cultural indicators.
The recent update to the UK Corporate Governance Code now requires companies to explain how they embed culture in their company. Despite being a new requirement, leading reporters have already adopted various innovative approaches:
- Q&A with a director: This is an engaging way to explain the board's approach to embedding culture within the company. For instance, Clarkson AR22 page 97 uses this method effectively by asking the Employee Engagement Director questions on the engagement activities used, the topics discussed and plans to evolve the Group’s employee voice initiative. This provides an opportunity to explain the Group’s existing Employee Voice Forum and plans to engage more with employees through in-person sessions in an engaging and accessible manner.
- Infographics: These can visually describe the board's process for embedding culture. For example, Balfour Beatty AR23 page124 uses a framework to illustrate the Board’s activities and explain how these link to culture.
- Cultural metrics dashboard: SSE AR22 page 138 uses a dashboard to showcase the effectiveness of the company's culture embedding efforts. These metrics include employee turnover percentage, number of leaders that have completed leadership training, and number of board-led employee engagement initiatives.
- Case studies: These bring examples to life, demonstrating how culture is embedded within the company.
- Culture champions and training: Companies are increasingly highlighting the role of culture and values champions and the importance of training middle managers to empower the workforce and drive cultural change.
- Linking culture to remuneration: United Utilities AR23 page175, for example, demonstrates that culture is embedded in board compensation by aligning incentives, such as the annual bonus deferral and LTP holding periods, to performance measures which are consistent with the company’s purpose, values and strategy, such as the percentage of Better Rivers commitments delivered.
A key development in culture reporting is the shift in focus towards the impact and outcomes of culture. Increasingly, we have seen companies going beyond explaining how culture is assessed by detailing the conclusions that were drawn. ITV AR22 page 115 exemplifies this well, detailing each of the Board’s monitoring activities in terms of the cultural insights gained and the outcomes achieved.
Emerging approaches to reporting on the impact of culture-related strategy on performance include:
- Recognising the importance of culture strategy when reviewing succession planning for senior management and other recruitment
- Embedding sustainability policies and practices into company culture and desired behaviours
- Reflecting organisational culture and values in the board’s and group’s diversity, equity and inclusion policy; and
- giving more prominence to ethics and recognising the importance of psychological safety.
By adopting these practices, companies can provide a more comprehensive and impactful narrative about their cultural initiatives and their tangible benefits.
How Design Portfolio can help
Navigating the evolving landscape of reporting trends and adhering to new regulations can be challenging. Additionally, tailoring culture disclosures to authentically represent your company’s unique culture adds another layer of complexity.
For expert guidance on creating compelling and impactful culture disclosures that meet regulatory standards and truly reflect your organisation’s values and strategic objectives, get in touch with one of our specialists.