The next chapter in corporate reporting

The Department for Business, Innovation, Science and Trade has launched its 12-week consultation on, Modernising Corporate Reporting to support long-term economic growth, with responses due by 30 November 2026. The consultation is examining how the UK's corporate reporting framework can be simplified, made more proportionate and better adapted to digital reporting.

The review considers a broad range of proposals covering corporate reporting, accounting frameworks, audit and assurance, dividend rules, company size thresholds and digital reporting. This article focuses on three themes that are likely to be particularly relevant for many organisations: narrative reporting, digital reporting and proportionality.

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Refocusing corporate reporting on investors and creditors

One of the central proposals is to reaffirm investors and creditors as the primary audience for annual reports and accounts. The government's view is that corporate reporting should focus on financially material and decision-useful information to support investment and lending decisions.

This reflects concerns that reporting requirements have expanded significantly over time as successive disclosure requirements have been introduced to address a wider range of stakeholder and policy objectives. While these developments have increased the volume of information available, the consultation questions whether the resulting complexity can make it harder for investors and creditors to identify the information most relevant to their decision-making.

For companies, the proposals could prompt a reassessment of whether reporting is focused on the information investors and lenders use most when making decisions, particularly around performance, strategy, risk and future prospects, and whether disclosures are presented in a way that supports decision-making. This may also encourage companies to think more critically about whether existing disclosures are helping investors and lenders understand the business or simply adding volume. As reporting requirements have expanded over time, there is a risk that information of greatest relevance to decision-making becomes harder to identify within increasingly lengthy reports. 

More broadly, business leaders, investors and policymakers are questioning whether existing reporting obligations continue to deliver benefits that justify their cost and complexity. The consultation reflects the government's view that an increasing volume of reporting requirements can dilute the usefulness of corporate reporting by obscuring the information most relevant to investors and creditors. At the same time, it acknowledges concerns that removing certain requirements could reduce transparency in some areas and invites respondents to consider those potential risks when assessing the proposals. 

A less prescriptive framework would also place greater reliance on directors' judgement when determining what information is material and should therefore be reported. The robustness of governance processes supporting those decisions is likely to become increasingly important if companies are given greater flexibility over the content of their reporting. 

Greater emphasis on financial materiality reporting 

A further theme throughout the proposed corporate reporting reforms is a more principles-based approach to reporting. The consultation suggests simplifying aspects of strategic reporting and placing greater reliance on directors' judgement when determining what information is material to understanding the business. Rather than prescribing a growing list of specific disclosures, the proposals focus on core areas such as business model, performance, strategy, resources and relationships, and principal risks.  

For boards and management teams, this could place further importance on the processes used to identify and assess material matters. Companies may need to demonstrate how reporting decisions have been reached and ensure there is a clear link between disclosures, business strategy and value creation. In practice, this may encourage more company-specific reporting that explains the factors driving performance and value creation. Strategic reporting is most effective when it provides context to the financial statements and explains the judgements management and the board are making about future prospects. 

The consultation applies a similar materiality-led approach to sustainability reporting, recognising the importance of sustainability-related information to investors and creditors while questioning whether existing reporting requirements have become overly prescriptive and duplicative. As part of that approach, it proposes removing the explicit company law requirements to report on environmental, employee, social, community, human rights and anti-bribery matters, while continuing to expect companies to report on these issues where they are financially material to understanding the business. The consultation does not propose changes to climate-related financial disclosure requirements at this stage. 

Many organisations currently report against multiple frameworks and disclosure requirements. If reforms progress as proposed, companies may need to consider how sustainability information is integrated within wider business reporting and how sustainability-related risks and opportunities are reflected within discussions of strategy, performance and the future prospects. 

The move towards digital corporate reporting 

The way investors and lenders access information has changed significantly, but many reporting requirements remain rooted in a framework designed for a different era. While the annual report remains an important accountability document, users increasingly expect information to be accessible, searchable and easier to compare across organisations. 

Against that backdrop, the consultation explores a range of measures intended to support a more digital approach to reporting, including electronic communications, enhanced data tagging and greater use of digital channels for corporate disclosures. The proposals also acknowledge the growing role that technology and AI are likely to play in both the preparation and use of corporate reporting. 

With this in mind, companies may need to consider whether existing reporting processes, systems and governance arrangements can support more digitally focused reporting requirements. The quality, accessibility and consistency of underlying data could become increasingly important as investors and lenders make greater use of technology when analysing corporate information.  

The review also considers whether certain disclosures are better delivered through websites, portals or other digital channels rather than through the annual report alone. While the detail remains subject to consultation, businesses should be considering not only what information they report, but how that information is accessed and used by their stakeholders.  

While the consultation focuses primarily on reducing complexity within annual reporting requirements, organisations may also need to consider how they communicate with stakeholders more broadly, particularly if greater use is made of websites and other digital channels alongside traditional annual reporting.  

As reporting becomes increasingly digital, the quality and consistency of underlying data may receive greater scrutiny. Investors and lenders are making increasing use of technology to analyse corporate information, creating a stronger incentive for organisations to ensure disclosures are structured, connected and accessible across different reporting channels.

Proportionality remains key

Proportionality is another recurring theme. The government is seeking to simplify a framework that currently relies on multiple thresholds, categories and exemptions to determine which reporting requirements apply to different organisations.

This matters because the costs and administrative burden associated with reporting are not equal in the market. For smaller and medium-sized businesses in particular, reporting complexity can divert time and resources away from growth and investment. The consultation therefore explores whether reporting requirements can be applied in a way that better reflects the size, complexity and economic significance of a business.

For organisations, the practical challenge will be understanding how any changes to thresholds, exemptions and reporting requirements might affect their future obligations, and whether existing reporting processes continue to meet business needs.

Looking ahead 

While the proposals are still subject to consultation, they provide an indication of the direction of travel. Rather than waiting for the final outcome, businesses can use this time to review how well their current reporting supports the needs of investors and lenders and where there may be opportunities to simplify or modernise their approach. 

In particular, companies may wish to: 

• Identify the information investors and lenders really need to better understand the prospects and performance: Review existing disclosures to understand which information is most useful for decision-making and where reporting could be clearer, more focused or more specific to the business.
• Review how materiality is assessed: Consider whether current processes effectively identify the issues that are financially material to performance, strategy, risk and future prospects, and whether those judgements are reflected consistently throughout reporting.
• Explore digital reporting and interoperability: Assess whether reporting systems, data and governance processes can support greater use of digital reporting, including the ability to use information consistently across different reporting requirements and channels.
• Consider a broader range of disclosure channels: Explore whether some information could be communicated more effectively through websites, portals or other digital channels, rather than relying on the annual report alone.
• Assess reporting processes and governance: Consider whether existing systems, controls and responsibilities are flexible enough to respond efficiently as the future corporate reporting framework develops.
• Organisations should use the consultation period to understand how the proposals could affect their reporting obligations and whether any changes to reporting processes, systems or governance arrangements may ultimately be required. 
• The consultation is particularly relevant for growth businesses, where reporting obligations can place significant demands on management teams with limited resources. A more proportionate framework could reduce administrative burdens and allow organisations to focus more time and investment on growth and innovation. 
• More broadly, the consultation seeks to improve the usefulness of corporate reporting for investors and creditors while ensuring reporting requirements remain proportionate and practical for preparers. Whether the proposals achieve that balance will be a key consideration for respondents as the review progresses. 

For more information on the modernisation of corporate reporting consultation, contact Claire Fargeot.