Numbers are important, but telling the story behind them is what really connects with your stakeholders. Narrative reporting has the potential to give you a competitive advantage, especially in the wake of new ESG regulations around climate-related non-financial disclosures. So, how do you make the most of your narrative statements? And what do you need to put in place to ensure they are hitting the mark?

The challenges of narrative reporting

Narrative reporting is a complicated business, involving multiple kinds of information—including forward-looking statements, statements of opinion, and climate-related disclosures—with varying levels of regulation. The challenge for companies is to ensure all of these statements are accurate, balanced, and transparent. Annual reports have evolved from having a focus on financial performance to overall business performance. Preparers need to develop new skills and knowledge when it comes to gathering and verifying material statements.

While most companies now recognise the importance of fact-checking narrative claims, the level of rigour varies. Manual processes are prone to error and depend on who is involved in verifying disclosures. Reporting teams often rely on individuals to give broad sign-off without requiring evidence to back up each narrative statement. This approach leaves the organisation—and sometimes the individual director—exposed to the risk of making misleading claims.

Why embrace narrative reporting

Despite these challenges, it’s valuable to include narrative statements in your reporting. It helps to tell the story of your company, paint a picture of the future, and flesh out financial statements—particularly for non-technical audiences and consumer shareholders. The problem comes when companies tell this story using unsubstantiated claims, which has the potential to throw into question the accuracy of narrative statements and the decisions made off the back of them. 

How to review narrative statements

There are a few things to look out for when it comes to non-financial disclosures to ensure each statement is accurate and not misleading. 

Review your claims

Pay close attention to forward-looking statements to ensure discussions about future prospects are balanced, including reference to significant areas of risk, uncertainty, or exposure. In particular, keep an eye out for greenwashing in your reporting and ensure that ESG narrative statements can be backed up by appropriate data. It’s also important to note the difference between aspirational statements and forward-looking projections. Aspirational goals should be clearly defined as ambition rather than a forecast.

Improve your processes

Establishing internal controls—such as using verification software—creates a culture of evidence and accountability around all statements, financial and narrative. Atticus enables organisations to create a fully hyperlinked report that links narrative statements to evidence that supports each claim. This ensures your reporting is materially correct and not deceptive. 

Focus on the big picture 

While robust narrative reporting is critical to ensure compliance, consider how relevant the information is to investors. Keeping your narrative reporting targeted to your audience ensures it tells an engaging, useful story about your company that helps inform decision-making.

Make verification of narrative statements easy.

As the level of required governance increases across industries, consider getting started with simple ways to enhance accountability for verifying statements. While it can be daunting to overhaul internal processes, software can help make the transition easy. With a small uptick in effort, you will see both a gradual increase in the quality of your reporting and overall efficiency gains. Hundres of listed companies across the ASX100, LSE, and US markets are already using Atticus—get in touch to find out more.