26. A CFOs Guide to Writing Annual Reports That Your Investors Actually want to Read - with Claire Bodanis

26. A CFOs Guide to Writing Annual Reports That Your Investors Actually want to Read - with Claire Bodanis

Hannah Munro: 0:48 

Hello everybody and welcome to this episode of CFO 4.0. I'm your host Hannah Munro and with me today is Claire Bodanis. So, Claire is the UK's leading authority on corporate reporting and the founder and director of Falcon Windsor, a corporate communications and reporting agency. She's also the author of the book that we're going to talk about today, Trust Me I'm Listed, Why the Annual Report Matters and How to Do It Well. And she's also a contributing author to two other books on business communication and writing. So, Claire, so, tell us a little bit about your journey. How did you end up talking about corporate reporting? 

Claire Bodanis: 1:23 

Well, that's a great question, Hannah, because it's something a lot of people ask me and I never give them the answer they expect, which is usually something like communications training, media degree, journalist perhaps, or even maybe accounting background or auditing. Whereas in fact, I came to corporate reporting by way of reading medieval history and languages and doing an MPhil on the venerable bead, who was, for those who don't know much about medieval history and languages was a monk in the 8th century who wrote lots of fabulous works on scripture and history and all sorts of things. And actually, The Venerable Bee has a lot to teach us about corporate reporting, you'd be surprised to hear. And I actually did a whole talk about that, but that's perhaps not what your audience wants to hear today. 

Hannah Munro: 2:14 

so, you know medieval text and translating um yeah corporate jargon into something that's you know interesting and engaging is right up your alley then. 

Claire Bodanis: 2:26 

exactly and the other thing of course is being incredibly careful and checking everything because to read a medieval manuscript you have to have a very sharp eye indeed for the little dot there or the little bit of you know is that an ink blot or is that something that was actually written is that in the So, when it comes to checking and proofreading and really looking very closely at every single bit of the annual report, perfect training. Wonderful. 

Hannah Munro: 2:56 

So, tell us a little bit about the state of play in the world of annual reporting at the moment. What are the current challenges that companies that you're working with are facing at the moment? 

Claire Bodanis: 3:08 

I think one of the key challenges really for corporate reporting and annual reports is how to make sense of a mass of increasing regulation and to still create a report that both meets those regulations and actually tells a story. And the reason I talk about telling a story, it's something you hear us talk about a lot, is because actually that's what readers are looking for. And The regulations themselves don't help us because they come from many different places. A lot of people believe that there must be some list of annual report regulations somewhere that is the whole thing. And there isn't. There's lots of different things that feed into what you are required to put in an annual report. So, if you try to just write stuff to meet all of those things, you're never going to get a coherent piece of communication. And yet the purpose of the annual report is to engender trust with your investors and increasingly your wider stakeholders. So, a list of, you know, unconnected information is not going to do that. And it's interesting because the thing I talk about a lot when I talk about reporting is that it should be the source of truth about a business. And I was doing a webinar actually back in November with some lawyers about corporate reporting. And you'd be surprised at what they had to say about language and storytelling. And it was a brilliant quote, and I'm going to use it all the time now because it expresses it perfectly. He said, too many annual reports are a warehouse of information that is true. But that does not add up to the truth about your company. Because what actually the truth about the company is, or isn't, is the story that is written around those facts. So, an annual report needs to tell that story because it needs to give a company's picture of itself, which a list of facts just doesn't do. 

Hannah Munro: 5:12 

So, how do you balance out the need to meet all these requirements and yet add a bit of, like you say, a story to your annual report? How do you get there in the end? What's the process that you go through? Okay. 

Claire Bodanis: 5:28 

Well, the starting point, and this is really interesting, actually, because this again, when I was doing the research for the book, was echoed by people across the spectrum, auditors, lawyers, finance people, comms people, you'd expect the comms people to say it, but not necessarily the others, that you have to start with the story. So, if you think about the overriding of requirement in the UK is for the directors to determine what is material about their business and report on that, paying due consideration not only to their investors and shareholders, but to their wider stakeholders. So, if you think about it in that context and say, okay, what is it I want to tell people? What is that story, if you like, that I want to get across to people? And how are they going to receive it. If you start with that, then you get something that's really coherent. Because most people, if you talk to a CEO or a CFO about their business or a chairman, senior leadership, they'll tell you a coherent story if you sit there and just ask them to talk to you about it. So, it is there. It's not as if it's something that you're trying to create. It is there and the company knows it. But actually, expressing it through the annual report is difficult because often people start with the regulations instead of starting with the story. So, if you do that first, then you can go back and have a look at all the regulations and make sure that what you've actually covered hasn't left anything out. And then you need to work out where's the best place to put this bit or that bit that we haven't thought about. But that's essentially, that's the principle anyway. And that's in a sense, the only way to do it in my view. The other thing is, you always have to do when writing an annual report or producing an annual report, is people think about it from their own perspective. They think about, you know, me, the company, this is what I need to get across. This is what the regulations require me to talk about. What you need to do is put yourself in the shoes of the person on the receiving end, the reader, and think, okay, if I'm reading this, what are they going to take from it? So, you always have to think about it from the point of view of the reader. And again, it sounds obvious, but if you read sometimes your own annual report, you have to kind of get out of your mind everything that you know about it and think, if somebody was coming to this for the first time, would they understand what I'm talking about? Now, that's, again, very simplistic terms. And I know that, you know, particularly your financial audience will say, well, you know, the investors, they know our business. You know, they know what we're talking about. How can we, you know, we don't want to dumb it down for that audience. And this is the point. You don't need to dumb it down. But quite often, there's a lot you can do with language that actually opens up. And a lot of what people talk about is, oh, this is, you know, the right kind of language for this audience. You know, they're professionals. It's not. You don't need to write in a stiff language. formal uh you know boring way just because you think somebody's an expert in fact the more expert somebody is quite often the more engaging and the simpler, they can be about explaining their subject. 

Hannah Munro: 8:57 

I think there's an interesting point you made though, and I did just catch the uh yeah there's an interesting point you made there about the fact that um in fact you know There's a certain language that people try to use when they're putting together an annual report. And the fact that I think sometimes people forget there's a human on the other end of that annual report that's actually got to take that information. So, what if in terms of communicating well. Investors are people too. Can I just say that? Investors are people too. They have a sense of humour as well. 

Claire Bodanis: 9:29 

Well, some of them do. But in fact, there is a great quote in this book. book somewhere which I will try to find but it's precisely about this point and funnily enough it was made to me not again not by a communications person but an auditor and they said people are often nervous about this kind of human direct writing because they think it sounds less professional and therefore less credible than convoluted formal language does the answer is simple it doesn't. In fact, quite the opposite. Readers are more likely to believe it, by this I mean human and engaging language, because it sounds confident and honest. And as I said, that was a point made to me by an auditor, as well as the obvious communications people you'd expect. 

Hannah Munro: 10:23 

And that's interesting, isn't it? And I think there is something to be said about the connection that you make with somebody through the words that you use versus not necessarily what you think they want to hear. So, one of the big challenges, particularly at the moment, is obviously the challenge of communicating bad news or challenging news. Let's put it that way, challenging circumstances that we're all aware of. How do you suggest that clients address, clients that you work with address those kinds of issues? What tips can you give anyone that's in that situation? 

Claire Bodanis: 10:58 

I think the first and most fundamental one is honest. And you would be surprised, actually, people say, of course, I'm honest. Everything I've written is completely true. Well, it may be true for the letter if you read each word separately, but what it adds up to isn't necessarily. I think actually this year, there is a great opportunity to get that message across. Because The reason that companies often get away with not really being honest, frankly, or sort of skating over things, is because their audiences don't know as much about X, Y, or Z challenging situation as they do. Now, of course, the big challenge in the situation that we've all just lived through, well, are still living through, is COVID-19. Now, everybody is equally an expert on COVID-19. I don't mean obviously scientific expert. We've all lived through it. We've all experienced it. I mean, the tolerance for corporate rubbish is so, much lower this year because if companies say this, that or the other, which is just basically sounds like complete rubbish in the context of COVID, is you will be found out because everybody's an expert in it as well as you are. So, I think this year actually, for honesty and truth, is a fantastic year for companies to sort of almost reset what they mean by the truth and actually be brave. In a sense, you've got a free pass for having a really bad financial year this year because everybody knows about COVID and everybody knows that let's say, you're a hotel chain. Your hotels have been shut for months. I mean, what can you expect? I mean, your numbers are going to be off a cliff, right? So, it's so, be honest and sort of embrace that honesty I would say and I think the other thing that contributes to that is that you know obviously you know I’m not in your studio with you Hannah you know you're interviewing me I’m at home I’m in my sitting room right now we've all been seeing into each other's houses into each other's personal lives you know we've had the hilarious ones where kids run into a cabinet meeting or something or the dog barks or the doorbell rings or some even rather dodgy ones that we perhaps probably shouldn't mention on this one. But suddenly there's this awareness of people as human beings. And I think, again, that experience of the year, your annual report should reflect your year. And the year is so, much more personal this year. Everybody's experience is much more personal. And I think that's an opportunity, actually, for companies to grasp that and reflect that in their annual reports too. Because if you produce some kind of formal, stiff, closed, hidden annual report this year, it's simply not going to be true of your year. And I think that's the thing. But as you say, it's easier to communicate bad news this year than perhaps any other year, given the circumstances. So, Be brave. Tell the 

Hannah Munro: 14:11 

truth. Yeah, take the opportunity to do it. Better now than later, as they say. So,, and it's an interesting piece, isn't it, about you, if I just go back to some of your earlier comments about telling a story, because people, you know, when they hear the word story and reporting, you know, sometimes that could be taken in the wrong context. So, I think it's important that as part of we go forward, this conversation we're having, we clarify what we mean by a story. So, can you tell us what you mean by when we say we're going to need to tell a story with our annual report? Can you give us some? 

Claire Bodanis: 14:42 

examples? Sure. I mean, that's a great, that's an absolutely great question because we talk a lot about stories and as writers, we kind of know inherently what a story is. And there's also the other thing I think just to say before I explain how we look at it is that storytelling is actually a regulatory requirement. People forget that, right. The FRC requires companies to tell their story, to have a voice, right? It's in their guidance for the strategic report. But let's face it. I mean, you're never going to get an FRC nasty finger wagging letter because you didn't tell your story very well. You know, you're going to get a finger wagging letter because, you know, you've got an error in your accounts or something. You're not going to get one for bad storytelling. So, people sort of forget that it is actually a requirement. But I think that is absolutely fundamental to the concept of fair, balanced and understandable, right? Which directors have to sign off that their annual report is fair, balanced and understandable. Frankly, half the annual reports we read, whether they are FTSE 100 or anybody else, in fact, quite often smaller companies do it better. They're not balanced and understandable. So, if they're not understandable, how can they possibly be there? So, if you think about what is a story, right? And again, this is a mistake people make. People often think story is about just action, describing stuff. It's not. A story needs two things. It needs action and it needs context. So, it's an action set into context, which equals story. And which is why in the very beginning of the book in chapter one, the second part of chapter one is all about exactly how to do that. How do you actually write a story in the context of the annual report? Because it's quite easy to write a sort of linear story about you know, Mr. Tickle or something, but it's quite a lot harder to write it and bring in all the elements of the annual report. Because an annual report, of course, has to tell two stories, right? It has to tell your overall business story, and it has to tell your story of the year and be forward-looking as to where you're going. So, it's got to do these two things. And we like to think of that, we sort of describe it as a kind of think about your annual report story, your business as a sort of Netflix series, right? So, the overarching series narrative is your company story. And then each episode is your annual report and that's your year. So, the year, so, you have to, let's assume your audience hasn't looked up the entire plot on Google, right? You have to give them enough in each episode to understand what's going on. And that's the way to think about it. So, you've got to place, your year's narrative, your year's story into the context of the bigger picture, the bigger company story, which won't change enormously from year to year. 

Hannah Munro: 17:49 

Awesome. So, I think what we're saying there is to understand and communicate the overarching narrative of where the business has been and where it's going, but then also focus down on what's happened in the period that obviously that annual report is covering. 

Claire Bodanis: 18:03 

That's right. That's right. Awesome. 

Hannah Munro: 18:06 

So, where do you think people go wrong with managing that? Is it that they don't talk about the history or where the business is going or they focus too much on the numbers? What are some of the big mistakes that you see in these annual reports? 

Claire Bodanis: 18:25 

I think one of the biggest we see is the lack of context. Because what we've just said is action plus context equals story. And it's often the context that gets left out because, of course, and this comes back to the point about writing, just writing because the things you want to write rather than thinking about your reader, because it's the context you leave out when you're explaining something to somebody who you think already knows what you're talking about. So, I mean, so, just think about it in your own life, for example, if you said, you know, if I said to my husband, oh, Anna's coming to stay. Right. She'll know exactly that that is my best friend who is a professor of theology in Durham. Right. If I told somebody else Anna's coming to stay, they wouldn't have the faintest idea what I was talking about because they wouldn't know who she was. They wouldn't, you know, nothing. So, that's the point. You have to give the context to people that don't know about you. So, that's the first thing. And second, And that's not just at the kind of macro level for the whole annual report, but it's kind of every single statement within it. You have to have that mindset in every single statement as you go through. But I think in terms of, if I can sort of give you a bit of advice on process of how to do it, an awful lot can be sorted out if you go through at the beginning of the project a thorough briefing process, right? And what that is, is... you actually define in a brief, at the start, all of the things that, you know, at that sort of high story level, what is it you're actually trying to say? What are you trying to get across? Both from the point of view of the company story and from the point of view of the year, who are the audiences you're trying to get across to? What do you want them to believe about the business? And if you can define that before you start, and then you give that brief, that usually ends up being a couple of sides of A4, to everybody who contributes to the annual report. They then think about what their contribution is in the context of that overall picture. And doing a sort of thorough briefing process not only gives you that benefit, but if you involve people, then they feel like they're part of it. They own it. Because one of the massive problems that people have, and I know company secretaries face this, because they're often the sort of the project management doing end of it, even though quite often, obviously, the CFO often owns it at a sort of high level, is getting people to contribute and not say, oh, God, the annual report again. What a bloody chore. Boring. Loads of work. No benefit. Nothing good here. Just a chore. Actually, the annual report can be a really powerful project that brings people together and makes people feel really proud. Now, remember a few years ago, because actually an aim listed, but quite well-known company now, a company we worked with, they'd always done this very dry kind of regulatory annual report. And we had this absolutely fabulous transformational CFO, a woman actually, who said, this is boring. I want this to represent my brand. I want this to be the story of our business that people can be inspired by, which was a fabulous brief. So, we did all of that. And they had a relatively small shareholding base. So, they only used to print a few hundred copies of the annual report. They actually had to do a reprint that year because all the employees wanted one. Right. Because people were so, proud of their company. And they'd seen this story. Wow, that's us. And this is where we're going. And yeah, I want to be part of that. Because everybody wanted one. And that was, frankly, one of the biggest successes, really. And that was all because, and this is a say, totally hands down to the CFO, who just said, this is what it's about. And involved people. And people saw themselves in their own report. And they loved it. 

Hannah Munro: 22:35 

And I think that's an interesting point, isn't it? The focus, I think you mentioned this earlier, I'll put this for a lot of people, is what do I want investors to think about the business? Yeah, which is obviously key. But actually, it's more than just investors that are necessarily reading that report. 

Claire Bodanis: 22:51 

Completely. And I think that's, again, where the brief comes in. Because if you define in that brief, these are the people we want to be reading it, and this is what we want them to take away from it. It will really transform the way you think about it. You go, well, hang on a minute. Okay, we want investors to get this. Fine. But we also want employees to get this. And this is the other thing that people do forget is that particularly in a world of, frankly, very dodgy and doubtful information from many channels, the annual report really is the source of truth. or it should be the source of truth. And people know that if something is, the most likely information to be true is what they'll find in the annual report, right? Because they know that it's been gone through by the auditors, the lawyers, it's been signed off. It's got to be true. Arguably, everything a company puts out should be true. But the annual report has this special place as this document that's been through this vigorous process. And so, if they really want to know the truth, that’s where they're going to go. 

Hannah Munro: 24:26 

Yeah. And I think that's the piece, isn't it? That's the one piece that you can put forwards. And you talk about this, I think, in your book as well, about it being the core for your future communications as well and using it as a basis for how you communicate throughout the period as well. So, talk to us a little bit about that side of things, about using it as a core asset. 

Claire Bodanis: 24:49 

Yeah. I'm going to find a bit actually... in the chapter, the final chapter of this book, which I'm sure your financial audience will love, is called Sweat the Asset. Because, of course, the annual report is an asset, and it's had a huge amount of work go into it and time and money and everything else. So, if all that happens to it is that it gets read by a handful of people, I mean, what a waste, right? And I think this thing is that an annual report, if you see your annual report as an investment, then you expect to get a return, right? A cost is just something that's paid for, it's gone. If it's something you invest in, you expect to get a return on. And that's the way we see the annual report. And so, in terms of actually how you do that, I mean, this isn't about necessarily, you know, chopping up bits from the annual report because this happens all the time, right? People say, oh, the annual report, that's got this in it. Oh, I'll just, if I just take it out of there, I know it's true. You know, I don't have to worry about getting it checked. I can just lift it out of the annual report and pop it somewhere else. Now, a bit of information is, or a story that's written for the annual report, lifted out and plopped onto a social media channel, it's not necessarily going to work very well because it's not written for that purpose. It's written for the annual report. So, it's about making sure that actually the story of the annual report, it always comes back to this word, the story that's told in the annual report is the one that is consistently told throughout the rest of your communications. And the way to do that isn't, as I said, it's not about chopping up the annual report once you've finished, but it's actually more of a sort of process issue. We call it democratizing the process. Because what it's about, it's about involving people in the annual report process, the right people, all the different people who may be involved in communicating on behalf of your company. And in bigger companies, that might be local, regional comms managers. It might be marketing people. It might be global. It depends on the business. Some smaller businesses will have a small team. Wider businesses will be a bigger team. Involve them because then they have the briefs. It's a lot like the brief we were talking about for the annual report story. But particularly the company story becomes the sort of the high-level brief and messages that everybody is trying to communicate about the business. And that way you will get consistency. And the reason that the annual report is the heart of this, lots of people say, oh, well, surely the corporate website should be the heart of it. Like, well, no, even though that is the channel that most people go to find things, the annual report is where the story is required. It is the place where, so, when we do an annual report, we write an annual report for a company, write and produce it. We start off, we talk to the CEO, we talk to the CFO, we talk to the chairman. Quite often we talk to the entire senior team. We then talk to people in different departments around different areas of the business, whether that's finance or sustainability or HR or plant operations, depending on the business. You get all of that input. So, that is where the story, and the reason you do that It's because you have to, because it's required, right? So, if you take that requirement and turn it into, if you use it to the best, you use what it's requiring you to do in a wider way for your company, you can then basically get a communications plan out of the annual report project for free, right? You don't have to do it as some extra thing. It's part of the process, right? Sorry, I went on a bit there. 

Hannah Munro: 28:37 

No, no. Well, I think this is the interesting point is people see the communications plan almost done after they've produced the annual report. And actually, I think if I've understood what you're saying there is actually it's driving and creating it as you're going through and telling the story. So, that should flow into the rest of the organization as well. That's right. So, we have a little 

Claire Bodanis: 29:00 

diagram in the book. which shows, which basically has the communications brief and the corporate story in the middle. And then it has your sort of annual communications plan and calendar around it. And then all of the outputs are, the annual report is simply a channel which outputs that corporate story in a very specific way, of course. But, you know, the website's another one, social media channels, speeches, investor reports. or costs, what have you. I mean, the other thing to think about is, of course, and this is what I'm talking about, sort of an editorial calendar. You know, if you think about it from a financial point of view, right, the finance people don't do all of their reporting at the end of the year. You don't suddenly come to the end of the year and go, right, we're going to, you know, you've got this process, this month-end process that happens that collects all the figures that, you know, it's an ongoing process. At the end of the year, you effectively then have to just produce the last part of it. If you apply that kind of thinking, that kind of rigorous and analytical thinking that you do in finance to the way that you communicate, have an editorial plan, a monthly editorial plan. What's going on in the business? What are the things that you'd want to talk about in the annual report that are happening in the business during each month? So, if you sort of apply that rigor of analytical thought to that side, the editorial side, as well as the finance side, then you'll find the whole process of communication easier. You'll get to the end of the year, and you'll have all of the wonderful examples and stories that you were already waiting, almost waiting for you to put them in the annual report. And, you know, it'll fit into your communications brief because you've done that at the beginning. 

Hannah Munro: 30:49 

So, what you're saying is start to, you know, that rather than thinking about the annual report at the end when you actually have to do it, actually, you know, start to build it as you go through, I think is what we're saying here. 

Claire Bodanis: 31:02 

It's interesting, actually, because in the third chapter of this book is actually the sort of the project management chapter, if you like, that talks about how all the principles for a successful project. annual report and how to get people together and the planning and the process because frankly you know the annual report project is as much a process and a people relationship management job as it is a writing or design job right because you've got to get all of these people to work together to produce this thing on time on a particular day etc And in there, you know, a lot of company secretaries talk about, they basically start the annual report process for the next year as soon as the other one's out of the way, you know, because they're thinking about already about it as what's coming up. And I mean, you would normally, I mean, of course, you can't do your, you know, sort of messages of this financial year at the beginning of the financial year. You have to do it sort of three quarters of the way down the line. But the overall message story messages of the year you can do earlier and you at least have some sense you know at a certain point I mean so, for example to give you to give you an example normally with December year-end reports we'll be doing the brief mid-year you know for the year sort of maybe late September probably you know and that's for a report we'll publish March generally but And then obviously from March year end, you just add on another three months to it. So, yes, you have to think about it in this long-term kind of way. And of course, many things happen. And the thing about communication is it has to be reactive as well as proactive. So, things that happen will happen and you have to be able to communicate about them. But the thing again about this overall understanding of your story will help you know how to respond. Because you'll know that this is the kind of company we are. This is the overall story. These are the messages we're getting across. So, if X, Y, or Z happens, this is the way I, on behalf of my company, need to respond. 

Hannah Munro: 33:22 

And if we look at the future of what the future holds for annual reporting over the next few years? Because it's obviously changed over the last few years. It's been changing. 

Claire Bodanis: 33:33 

in the last few months, Hannah. I mean, it's all going in the reporting land at the moment. 

Hannah Munro: 33:39 

So, what do you see? as the sort of the shifts that you're seeing at the moment and that people need to be aware of? What should people start thinking about? Because like you say, you're predicting and you're starting these conversations well ahead of time. What should they be considering that they might need to start incorporating into their reporting? 

Claire Bodanis: 34:00 

Well, I think it'll come as no surprise to anyone on this call, I'm sure, because that's not on this call, sorry, listening to this podcast, that the big thing that's on its way is regulation around environmental, social and governance issues or ESG. And the thing about ESG, I mean, frankly, a few years ago, it was called sustainability. Before that, it was called corporate social responsibility. And even before that, it was called philanthropy. It's kind of evolved. But what it's really talking about, it's the non-financial issues. issues that affect the longer-term performance of the company. The reason it's such a big thing now is because investors really are interested. I mean, when I started out in reporting probably 20 years ago, it was only those companies that really believed in it themselves because they thought it was the right thing to do that pushed it. And when you think about Unilever from 10 years ago with Paul Coleman announcing the sustainable living plan, which I have to say, we wrote the website for that. I just like to put that in. We've been working on this stuff a long time because I've always thought it was important. It just makes sense to me, right? I mean, you can't... The problem with a lot of reporting and sort of thinking about reporting issues is they're very short term. It's like, what's going to affect performance tomorrow or in the next quarter or what have you? And actually... The longer-term issues are coming home to roost now. I mean, climate change, nobody, everybody's worried about climate change now. I mean, you've got the unheard of a few years ago idea of Shell and BP, for example, going out of oil. I mean, you would have thought of that a few years ago, right? But this is because these longer-term issues, which are non-financial, are now being recognised. They will have a material, a really material impact on the business. But of course, what everybody wants is a nice, easy set of list of disclosure requirements that are going to mean that everybody reports in the same way and therefore it's easy to do for reporters for companies and it's easy for investors because they can just compare one against the other right and that's what's really challenging is because of course you can't and in fact my chapter two of the book talks all about this subject um before the latest regulatory developments. Because the really interesting one that I think will have an impact on companies and will probably be the way it goes is the IFRS Foundation. Because of course, IFRS has determined that it's the International Financial Reporting Standards. And they're looking at developing a sustainability standards board within their group, essentially to create what I've called INFRS, which is International Non-Financial Reporting Standards, which is what we need. But the difficulty, of course, is that different companies, for different companies in different jurisdictions, in different industries, in every way, these non-financial requirement indicators are going to be different for different companies. You can't have one that fits all in the way that largely you can for finance because you're expressing a concept in the same way, which is pounds, trillions and pence, basically, or dollars or yen or whatever. So, that's coming. And I'm doing quite a lot of work and putting my two cents worth in there to try to make sure that any requirements that come out do not dilute the fundamental issues fundamentally important principle we have here, which is that the directors should determine what is material and report on that because that is so, important because that really tells you the truth about the business. But it's also worth companies knowing now that this stuff is coming. There will be a much more rigorous set of ESG reporting requirements coming. It's going to happen. So, you need to start thinking about now, what are the ones that are really relevant to you, if you haven't already thought about it? How are you going to measure them? How are you going to report on them? And what do you think, this is because this is what people really want to know, what do you think the relationship is between those issues and your financial report, your financial performance? Because ultimately, financial performance is the expression of the success of your business in monetary terms. And that's the connection that people are really trying to find. And that's behind things like the Task Force on Climate-Related Financial Disclosure. Because the word in there, it's financial, right? Financial disclosure. So, that's, I think, really the key thing. The other sort of big development on the horizon in reporting is, of course, reforms of audit. So, we don't know yet quite what form that's going to take. And that's not necessarily, you know, for companies themselves, they're going to have to do anything about that. But it will affect the relationship with their auditor and what the auditor does and doesn't do. So, the practical reality of what it means for companies, obviously, is when we know what the changes are, we'll be able to start working that one out. But I think companies should be aware that that's probably on the horizon too. 

Hannah Munro: 39:25 

No, and there's some great shout outs. And I must admit, ESG has been coming up a lot in conversations generally about how people measure and report and track because they're seeing it more, yeah, as part of 

Claire Bodanis: 39:35 

their general reporting rather than something. Sorry, I think you saw it. I did a blog on it back in August. So, this is, and this just speaks to one of the challenges with it, right, is that ESG, It was around, do you remember last summer, Boohoo got into a whole load of trouble because it turned out they were basically running sweatshops in Leicester, right? And what I found interesting about that, which is why I wrote a blog about it, was that they're listed in a whole bunch of ESG funds, right? I mean, how can a company that's running a sweatshop be included in an ESG fund? And if you go and look at their reporting, Frankly, if you've anyone with half a brain who read their report about and read what they said about supply chain, you could spot that it was rubbish a mile off because there was no evidence supporting the assertions. All these statements about we are committed to this, and we're focused on that, and we believe in human rights, blah, blah, blah. No evidence, no audit program that was reporting, we've audited X percent of our factories and found issues of this. There was no evidence. And this is the thing, is that you've got to go behind the requirement and actually see what people are doing. And no list of disclosure requirements is ever going to fully do that on its own and that's where the narrative of reporting is so, important and that was again the point I was making in the blog was that you've got to have this combination it's what I started out right at the beginning the combination of the facts and then the story around the facts and I think in the ESG area we need a lot more facts to start with and evidence and But then we need to understand the story around them. Because I have, you know, I know other companies who frankly are really good companies that get excluded from an ESG fund for some sort of technical reason that's really nonsensical. Just because the requirement of the fund has, you know, basically not set it up right. 

Hannah Munro: 41:36 

Yeah, so, that's an interesting piece, isn't it? About, like you say, balancing stories, which sounds like Boohoo was spending more time on, and the evidence. And also, you know, how do you back up the story that you're telling? You can do it, like you say, quite easily with the financial side, but the SG side is a 

Claire Bodanis: 41:55 

bit different. Particularly for your audience, a Putsy 100 CFO I work with, He said when he became a CFO, he thought it was just, you know, the annual report is just about the numbers and don't really worry about the front end. And he said he realised that actually, you know, he could be sitting in front of an investor, and they could pick up any bit of the annual report and go, what about that? You've said this here. What do you mean? How can you prove it? So, he goes through the annual report with the internal audit team and makes sure that everything, it doesn't matter whether it's about financials or whether it's about training programs of staff or whatever, to make sure that everything in that report has evidence to support it. That doesn't necessarily mean that you have to put all of that evidence in the annual report, otherwise you'd end up with 2,000 pages of reporting, which would be totally impenetrable. But he needs to know There's got to be enough in there to support the assertion in the first place that it's believable to the reader, but that behind that, he can substantiate it with real evidence from the company. 

Hannah Munro: 43:02 

And this has been fascinating. And I think a lot of our CFOs that are in this space will find this conversation. And to be fair, guys, I can honestly say that I've read this book, and it is a really good read. It's easily digestible. So, I can personally say that it's one you should pick up if you're doing an annual report. But for those that are just perhaps on the verge of getting to a point where they need to produce an annual report and not quite there yet, what can they take away from the concepts that you talk about in the book? And how can they apply that to their reporting, maybe at a board level or to the wider organisation? 

Claire Bodanis: 43:41 

Boiling it down to a few key points, let me think about that. I'd say probably three things. First of all, remember why you're doing it. What is the why? And the title of the book, Why the Annual Report Matters and How to Do It Well, the main title is Trust Me, I'm Listed. It's about trust. So, you need to tell the truth. Find the right way to tell your truth, even though that's difficult. So, that's the first thing. The second thing in terms of actually doing it is what we were talking about quite a lot about briefing. Make sure you've defined what it is you want to communicate, all the things that have to go in it in your brief before you start, so, that everybody who's involved in it knows what you're trying to do and can therefore contribute in a meaningful way. I think thirdly, as you say, involve the right people at the right time and have a really well understood, well-structured, well-organized process for involving all of those people. And if you do that, as I said before, you will then get the benefit of people working collaboratively on a project together. that might not otherwise ever work together. And then they'll have something they can be proud of. I think those three things are really at the heart of what we want to talk, what I would advise anyone. I mean, the other thing is, if you're a newly listed company, we've actually worked with a couple of newly listed companies. It's a fabulous opportunity. Or say, if you've gone from a sort of aim listing up into a footsie listing and so, you've got to look at your report in a new way it's an opportunity it's a fabulous opportunity to do it well the first time because if you lay the foundations really well in your first year not just for the writing and the doing but the process of getting it done as well and how you're going to work with people you'll have a wonderful foundation for future years and so, instead of people going oh god the annual report is such a chore like oh great you know the annual report That's a great project to be part of. We don't hear that often enough, I would say. 

Hannah Munro: 46:06 

I was going to say, I'd be interested to hear of our listeners. And guys, feel free to reach out and tell us how many of those look forward to the annual report rather than seeing something that has to be done. Maybe that's one of the votes that we should do on our social. So, thank you so, much, Claire. We've run out of time, and it's just gone so, quick. I could probably ask a few more questions, but I will resolve myself. And I have to say for anybody that wants to learn more, definitely pick up a copy of the book. But if people want to find out about you and what you guys do, Claire, what's the best way to sort of reach out and how to find you? 

Claire Bodanis: 46:44 

Well, my company, Falcon Windsor, you can find out all about us on our website, which is Falcon Windsor, Falcon as in the bird, Windsor as in Windsor Castle, falconwindsor.com. And I actually do a monthly reporting blog that comes out on FW, Falcon Windsor First Wednesday. So, you can tell we're communicating people. So, obviously, we've got one going out tomorrow, which in fact is a report on the International Financial Summit in the US a couple of weeks ago on climate reporting with some really interesting stuff, contributions from the Investor Forum and the FRC in the US. people which is great um the other place is the book itself has its own website which is very easy it's trustmeimlisted.com and we do actually do a monthly webinar for reporting people so, we have it's completely free it's the first Thursday of the month lunchtime it's 45 minutes so, the next one actually is uh coming up and that's on we take a different reporting perspective and ask a question about it so, I think the next one coming up after this podcast will probably be the April one which is actually on governance so, it's actually how do you make the governance report meaningful and not just the poor relation of the strategic report And then actually, particularly for your audience, Hannah, they might be interested in the one I've got in May, which is on ESG standard setting. And I'm delighted because we have Robert Eccles, who is the founding chairman of the Sustainability Accounting Standards Board as one of my panellists. And we do a Q&A. So, it's, you know, an audience just write in, have your question answered. So, it's really, and it'll be really interesting. And particularly then, because we're expecting the IFRS to make some announcements in April around whether or not they're going to set up a new board to look at non-financial standards. So, there'll be a lot to talk about in that session. So, that's first Thursday of the month. You can just sign up on the trustmeimlisted.com website. 

Hannah Munro: 48:52 

Brilliant. And for those that are listening, as usual, we'll pop those links and a link to Claire's, both Falcon Windsor and the book into the show notes so, that you can access it nice and easily. Well, thank you so, much, Claire. It's been fabulous to talk and thank you for sharing your knowledge on everything to do with annual reports. It's been my pleasure.