The coronavirus brings about a lot of new challenges, not only in terms of our health and health care systems. Also, we have to break up familiar routines, find new ways of working and need to adapt to new social and economic structures. Next to all these adjustments we have to make, we are experiencing a rather rapid but still subtle change: The current crisis is speeding up digitisation in almost all aspects of our information and communication environment.
In this context, the current situation will also push the digital shift which is currently happening in corporate reporting. For decades, corporate reporting was dominated by print media and a print-centric thinking. The turnaround, however, was already clearly evident in recent years: Within just 10 years the print runs of the biggest stock-listed companies have declined, for instance in Germany by 94 percent.
However, while the current crisis is not the trigger for digitalisation in corporate reporting, it definitely pushes in this direction and serves as an ideal stepping stone for further development. Companies should use the opportunity to re-think their corporate reporting strategy and evaluate, how they can benefit from digitalisation and make their reports more efficient and targeted to their audience.
Two questions are important for reporting professionals in this regard:
1) Product-related: How can I prepare, design and communicate my report to best meet the needs of today’s digital audience?
2) Process-related: How can I optimise my report creation process with the help of digitalisation & automation in the long term?
The product: Truly digital communication
With the digital shift comes the need for digital thinking. Today’s corporate reports are already predominantly received on screen. Online reports reach many thousands of visits per year. Yet, in most cases these reports are created from an A4 paper format point of view. This does not add up.
In a nutshell digital thinking means to exploit the potential of the internet as communication channel. On the one hand, online annual and sustainability reports can benefit in terms of concept, technology and communication, on the other hand they clearly differ from their printed counterparts – online follows other rules than print and PDF.
Here are a few key topics that need to be considered when it comes to digital thinking:
- Design: Companies need to break away from print-centric thinking and change their perspective. While annual report content is primarily created for paper format (company perspective), it is mainly received on screen later on (reader/user perspective). Furthermore, online reports follow different visualisation rules than printed works and offer significantly more possibilities for the presentation of information, such as interactive and multimedia content.
- Concept and user journey: From a conceptual point of view online reports offer a solution to a well-known problem: reducing the increasing complexity. Annual reports often consist of over 300 pages and a multitude of interrelated information on a wide range of topics. Online reports make it possible to present information in as much or as little detail as necessary without the need for large investments in resources. Through a well-structured navigation concept and the possibility for highly-selective usage, recipients are no longer overloaded with too much information. Moreover, online reports enable content to be interlinked and connected through simple crosslinking. While in previous hard copy reporting the individual sections are often disconnected from one another, digital reporting aims for linking such content, thus revealing interdependencies and allowing for more accessibility.
- Technology & features: From a technical point of view, online reports open up a wide range of possibilities, but currently only very few companies make full use of them. This applies, for instance, to the potential for tagging report content or presenting it in a filterable form. The possibilities of using XBRL in online reports are currently being discussed extensively. XBRL is a markup language that among other things essentially enables machine readability of annual reports. Thus, key figures in texts and tables (e.g. EBIT), but also specific blocks of text (e.g. Notes) can be clearly marked with XBRL tags and processed by analysis programs.
- Communication (Push Reporting): One of the paradoxes in corporate reporting is that companies usually invest large budgets and thousands of man-hours in the production of an annual report, from data collection to editing and layout, but completely neglect to communicate their reports after publication. Online reports in particular offer great potential for so-called push reporting – the active communication of report content in digital communication channels during the course of the year.
Examples for digital thinking
There are plenty of examples for digital thinking.
- Screen design: One example for online-specific report design is the Solvay Integrated Report 2019. The report concept was created with the goal of ensuring the best presentation and usability of all content on screen – from smartphone to full HD display. First of all this means that the standards of content preparation for the web need to be considered: clear text structures through hierarchical headings, lots of white space, easy-to-read font sizes with sufficient line spacing and the use of elements such as lists, charts and graphics to enable a quick comprehension of content. In terms of usability, a special focus was also placed on a well-conceived navigation for both desktop and mobile devices, the linking of related contents as well as a clear report structure.
- Interactive storytelling: Apart from providing regulatory information, online reports offer a lot of possibilities for storytelling. The digital reports from Covestro and Merck use this potential. Both connect informative content with animated and interactive infographics and illustrations that engage users.
- Customised reporting: Annual reports contain a lot of information on various different topics. How can users find the information they are searching for as fast and easy as possible? adidas answers this question is the topic filter, an additional navigation tool. The feature allows users to filter the report by specific tags (eg. “strategy” or “sustainability”). Another approach to customised reporting can be found in the Shell sustainability report.
- Interactive infographics: Interactive infographics and illustrations are often used to contrast with the predominant amount of text in online reports. They offer users a welcome change and increase the awareness for individual report topics. You will find various examples in digital reports. Clariant uses an interactive infographic to explain their business model. Novartis illustrates with an interactive graphic which pharmaceutical research is currently in progress. How carbon capture and storage works is explained in the Shell sustainability report.
- Push Reporting: Social media and other digital channels offer a variety of possibilities to attract the attention of stakeholders for reporting content. With Push Reporting you can make reporting content visible. See examples: CEO video (adidas), Financial key figures (adidas), Quiz questions (Covestro). Read more: https://push-reporting.com
- User statistics: Statistics are a big advantage of online reports: By means of statistics you can exactly track how often your online report was visited, how many pages were visited as well as which chapters and which pages were visited. adidas goes one step further in their online report. A stakeholder survey also shows, which stakeholder groups (e.g. “investors” or “journalists”) are using the digital report.
The process: Truly digital creation
The annual report as project is predestined for digitalisation and automation in terms of creation. There is huge potential in all aspects, ranging from data collection through to editorial processes and layout.
One example is the so-called multi-channel publishing. To date, many companies still create annual reports manually in Word documents, which are then sent to an agency for layout of the PDF/print report (and often to another service provider for the creation of the online report). Such manual, media-separated creation processes are admittedly inefficient in practice. Multi-channel publishing is therefore all about generating not only the online report from one data source (CMS), but also other formats such as printable PDFs, tables in XLS and XBRL format or an app automatically and at any time. Read more on our Online FirstTM approach.
The increasing use of disclosure management systems is also pushing the overall trend towards digitalisation in reporting. Modern systems are directly linked to the ERP (Enterprise Resource Planning) systems of companies, e.g. to the SAP system. In simple terms, the aim is to ensure that the contents of annual reports can be automatically read from the relevant databases and synchronised at any time. If a number in the database changes (e.g. the EBIT), it also changes in all text passages as well as in the tables in the report. DCM systems also offer numerous validation and quality checks along the reporting process.
Automation in reporting is also driven by the XBRL (eXtensible Business Reporting Language) reporting standard. XBRL is an open, platform-independent, international standard for the electronic storage, processing, and distribution of financial and reporting data. XBRL tags are used to structure data and text and make it machine-readable. This enables software-supported analysis and easy comparison of the report content of different companies now and in the future.
In the EU, from the 2020 reporting year onwards, all listed companies are required to first mark their financial statements with XBRL tags. XBRL, however, only becomes human-readable when it is prepared as inline XBRL (iXBRL), which in turn is embedded in an XHTML format. In other words: In the future, XBRL will de facto be part of an online annual report, which may also contain additional (non-tagged) information and features.
Artificial Intelligence (AI) will also play an increasing role in reporting in the coming years. AI technology is already being used in some sub-areas of reporting today. Some software solutions for XBRL tagging, for example, learn how certain figures in tables are tagged according to the XBRL taxonomy and automatically apply the learned rules for future reports.