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Feb 17, 2021

How should companies report on Covid-19 in the annual report?

Companies should consider both text and images, say reporting experts

The reporting year 2020 will be long remembered by IROs. In addition to the introduction of iXBRL, the Covid-19 pandemic will have great influence on soon-to-be published 2020 annual reports. 

The pandemic and its impact on the economic development of companies is currently the dominant reporting topic. Recent research on the half-yearly reports of German DAX 30 companies shows that key terms such as ‘corona’, ‘Covid’, ‘pandemic’ and ‘lockdown’ are mentioned 1.7 times on each page, on average.

In the upcoming annual reports, the effects of the pandemic in the 2020 financial year will be described for the first time in detail. How should the discussion of the pandemic be structured? The management discussion and analysis can be organized along four key lines: management (business model, capital market), financials (discussion of results, financial statements), non-financials (ESG), and prospectives (strategy, forecast).

The sweet spot is where content and concept meet – throughout the annual report, reporting firms have to describe, illustrate and explain their answers to the most-pressing questions: what impact did Covid have on the workforce? Have investments been postponed? What are the risks of another lockdown? What are the economic scenarios for the future? Almost all topics within an annual report are under the influence of the global pandemic.

Covid also has an influence on the reporting concept, the CEO message and even the selection of photos. In this post we present some examples in this regard.

Reporting concept

Coronavirus has massively changed the business of many companies in 2020. Beyond the fulfillment of transparency obligations, companies can actively bring the ‘new normal’ conditions into focus in the annual report.

The German wholesale group METRO (a nexxar client) has done just that. The title of the online annual report published in December 2020 is ‘#NEWGETHER – Time for a new togetherness’. METRO is addressing the paradigm shifts caused by the pandemic – for example, in co-operation with partners. In magazine stories the company expresses how employees, suppliers and partners experience the ‘#NEWGETHER’.

Instead of a CEO video in an elaborate studio production, the board presents itself in the contemporary look and feel of a Microsoft Teams meeting. The CEO video from the online report is also actively communicated on social media.

CEO message 

Traditionally, important corporate developments are outlined in the CEO letter. Here, the management should talk about not only the Covid-related cuts, but also about what has been accomplished and signal confidence for the future. A good example can be found in WPP’s 2019 annual report, where CEO Mark Read emphasizes the ‘people-first approach’:

– ‘The coronavirus pandemic has touched all our lives. At WPP our first priority is the well-being of our people and doing what we can to limit the impact of the virus on society. Our second is continuity of service for our clients. We have thrown ourselves into achieving both objectives...’ WPP online annual report 2019

Such a list of priorities is an element of crisis communication and can therefore currently be found in several annual reports. CEO and chairman David Taylor also uses this element in the current online annual report of Procter & Gamble:

– ‘Before I go into more detail on our fiscal year 2020 results, I want to briefly outline the immediate priorities we established to carry us through the pandemic: 1) Protect the health and well-being of P&G people; 2) Maximize the availability of our products that help people and their families with their health, hygiene and cleaning needs, which have never been greater; 3) Support the communities, relief agencies and people on the front lines of this global pandemic.’ P&G online annual report 2020

This balancing act is also achieved by Hans-Joachim Watzke and his board colleagues at the listed football club BVB (another nexxar client):

– ‘Within a span of just a few weeks, the novel coronavirus has fundamentally changed the world we live in and life as we know it. Passion and camaraderie have given way to separation and isolation, and instead of eliciting enthusiasm and emotion, football without spectators has lost some of its luster. Thus despite, or perhaps precisely because of, the new situation we find ourselves in, we are proud of what we have achieved.’ BVB online annual report 2020

Visual message

Annual reports show an authentic picture of the year 2020 only if the ‘new normal’ is also reflected in the visual message. The first impressions of some annual reports do not fit the times of social distancing. For example, they may have a front cover showing a crowd of people in a social setting. The 2020 annual report of Commonwealth Bank is a positive example in this regard. Here the report motto ‘We can. Together.’ is visually connected to a virtual work situation of the ‘new normal’.

Procter & Gamble’s report was also visually adjusted to the new situation. Taylor, for example, presents himself appropriately with a facemask in the board letter. 

Excellent corporate reports are always the result of two ingredients: excellent content and excellent design. Particularly in times of uncertainty, the role of the annual report is highly important. That’s why IROs should do their best when preparing the 2020 annual report and position it as a central communications channel.

Eloy Barrantes is CEO of nexxar and Henning Zülch is a professor at Leipzig Graduate School of Management