Understanding key stakeholder perspectives in non-financial reporting

by Xinwu He

Financial reporting has long been the major topic in Corporate Reporting courses. Traditionally, students who are trained as accountants are taught to do correct accounting treatments, produce financial statements, calculate financial ratios and analyze financial information. Over the last few years, the importance of non-financial reporting has increased through sustainability/corporate social responsibility (CSR)/environmental, social and governance (ESG) reporting or integrated reporting (<IR>). Nowadays, accounting students are expected to have a broader understanding of value and Corporate Reporting.

Durham University Business School

Around 250 MSc Finance and MSc Accounting students at Durham University Business School were asked to review non-financial reports issued in 2017 by HSBC, The Royal Bank of Scotland (RBS) and Standard Bank Group respectively. Based on the non-financial information disclosed, they were asked to decide which bank they would prefer to work for or would invest in for retirement. By doing this exercise, students gained an understanding of the contents of contemporary reports and honed their skills in identifying essential non-financial information and critical thinking. Their perspectives reveal how non-financial reporting could/should evolve and improve in the future. They also reflect the importance of integrated thinking for modern enterprises.

Preparation and Questions

Before a seminar, students were required to familiarize themselves with HSBC’s Strategic Report 2017, RBS’s Strategic Report 2017 and the Standard Bank Group’s Annual Integrated Report 2017. Apart from the three reports, they were given the following general background information for the seminar work set by Professor Carol Adams:


HSBC (the 5th largest bank in the world, after four Chinese banks[1]) was an early supporter of integrated reporting[2] but has never produced a report referred to as an integrated report. For its year ended 31st December 2012, HSBC Holdings Plc produced only separate annual and sustainability reports. In these reports, HSBC (arguably) failed to demonstrate integrated thinking and were (arguably) a long way from what was considered best practice in integrated reporting[3].

For the year ended 31st December 2014, HSBC changed its reporting package and produced a separate Strategic Report[4] and an Annual Report and Accounts. It stopped preparing a separate sustainability report, instead placing some sustainability information placed on its website[5]. In 2017 and 2018 HSBC also published an Environmental, Social and Governance (ESG) report[6]. HSBC publishes reports in both English and Chinese.


The RBS Group includes the Nat West Bank and the Royal Bank of Scotland amongst others. RBS also produces a Strategic Report under the UK Companies Act. It has published a separate Sustainability Report from 2009 to 2015 and previously a Corporate Responsibility Report[7]. In 2017 it published a GRI Index showing where the GRI indicators are reported on the website or in the Annual Report.

Standard Bank Group

The Standard Bank Group which operates in 20 African countries has produced an integrated report[8] since around 2010 as required by the South African King III and IV Codes together with a number of other specific reports.

During the seminar, students were divided into small groups, with approximately six students in each. Each group was asked to discuss and answer one of the following questions:

  1. What are the reasons for the increase in non-financial reporting such as integrated reporting and sustainability reporting?
  2. You have job offers from each of these banks. Like many potential employees, you decide to review the non-financial reporting of each bank as part of your decision-making Based solely on this non-financial reporting, which of the three banks would you chose to work for? Why?
  3. You have been given a significant lump sum to invest in shares for your retirement with a condition that you invest all of it in one of these three banks. As part of your decision-making process, you review the non-financial reporting of each bank. Based solely on your review of the non-financial reporting which bank would you select to invest in. Why?

Each group got an answer sheet and one student was responsible for summarizing his/her group members’ responses and filling the sheet. After a 15-minute discussion, one representative of each group presented the answers to all students.

How the students answered

As seminar tutor I collected the answer sheets and summarized the responses from all small groups.

Reasons for the increase in non-financial reporting

In some groups, students divided their answers into two parts, analyzing the disadvantages of traditional financial reporting and the advantages of non-financial reporting respectively. They argued that the financial reporting could not provide a complete picture of an entity and its business performance because it reveals a historical overview of the entity’s financial performance only. There is a reporting mismatch between how business value is created and how business performance is reported. For example, intangible assets that don’t appear in the balance sheet have increasingly become a significant proportion of company value.

Non-financial reporting includes information regarding the entity’s business strategy, corporate governance, implementation plans and other business performance, enabling readers to obtain more information and gain a comprehensive overview of the entity. It mitigates the mismatch mentioned above. It also facilitates integrated thinking in the entity, since management and those charged with governance are encouraged to manage various risks from a broader perspective and consider how to run the business to create value in the long-term.

Students also stated some other reasons for the increase in non-financial reporting:

  • Increasing awareness of corporate social responsibility (CSR). Companies have the responsibility to protect the natural environment, care about social welfare and operate ethically.
  • Intention to manage, retain or refine companies’ reputation, to acquire competitive advantages over other competitors and to attract potential customers and excellent staff.
  • Increase in Stock Exchange requirements/guidelines, non-financial reporting frameworks and other regulations. For example, South African King III and IV Codes; Guidelines on Environmental Information Disclosure of Listed Companies on the Shanghai Stock Exchange; Global Reporting Initiative (GRI) Standards; The International Integrated Reporting <IR> Framework; Task Force on Climate-related Financial Disclosures (TCFD).
  • The desire to manage and control key environmental, social, ethical and governance risks and opportunities faced by the entity.
  • Increasing demand for additional information by investors to analyse all the risk they are bearing and to inform their investment decisions
  • Increasing demand from other stakeholders for broader transparency and accountability in corporate reporting.

Which job offer would you accept?

To decide which bank to work for, some students listed factors considered while reviewing the non-financial reporting of each bank. For all the banks, they predominately focused on employees’ working environment and welfare. Students cared about the diversity and inclusivity of their working environment, especially gender diversity. They also mentioned issues such as remuneration/reward policies, colleague engagement and whistleblowing system. The importance of sufficient training programs and promising promotion opportunities was also import. In addition, students judged the business strategy of the banks, reviewing whether they would contribute to sustainable growth in the long run.

Some students analyzed the advantages of the three banks respectively based on their non-financial reports. HSBC was favoured due to its large size (the 5th largest bank in the world), perceived good reputation, higher employee retention rate and global business strategy. HSBC’s effort to build gender balance in its diverse employee network was highlighted too. RBS has distinct advantages of its healthy company culture, excellent staff training opportunities, Employee Assistance Program, remuneration policies and rewarding working environment (a Top 10 Employer for Working Families and a Times Top 50 Employer for Women). As for Standard Bank Group, students mentioned the overall employee turnover rate (8.8%), reflecting a high level of job satisfaction and staff loyalty. Standard Bank Group was perceived as an employee-oriented entity, with its relevant performance highlighted in Human Capital Report (p. 78-85). It particularly focuses on the personal development of employees, providing staff with progressive learning opportunities. Moreover, domiciled in African countries, Standard Bank Group shoulders a broader responsibility for driving growth in Africa, aiming at delivering broader stakeholder expectations and superior value.

Overall, most of the groups expressed their preference for Standard Bank Group in choosing the bank to work for. They were impressed by specific information provided regarding employee diversification, gender equality, staff learning opportunities and ethical company culture. In addition, they found its commitment to the sustainable development of Africa region quite impressive, which would make employees feel proud of their employer. This was considered equally as important as salary and benefits when choosing between job offers. Other groups chose HSBC due to its global business strategy and network, especially its connections with China. The students also considered its healthy working environment, global sustainability strategy and risk management. RBS was the least favoured potential employer probably because it provided much less relevant information in its report (“Our Colleagues”, p.33-34), compared with the other banks. For example, students found it difficult to find detailed data regarding graduate programs and leadership programs in RBS’s strategic report 2017, while this information was specifically mentioned in Standard Bank Group’s annual integrated report 2017 (p.82).

Which bank would you invest in?

From the perspective of long-term investors, students generally considered the following elements in deciding which bank to buy shares in:

  • risk management framework and corporate governance system;
  • the business model, measurement of materiality and value creation process;
  • six capitals and how the entity invests in each capital;
  • commitment to corporate social responsibility (CSR);
  • the ability to meet customers’ demand.

In considering a long-term investment for their retirement, students primarily paid attention to how the banks managed and controlled different risks. Consequently, HSBC was dominantly favoured due to its international network (p.2; p.10-13), global business strategy (p.3) and sustainable finance (p.26). Some students argued that HSBC’s business strategy would contribute to better risk diversification and a long-term success. Standard Bank Group and RBS were equally preferred for different reasons. The former was praised for its shared value model which explicitly identified inputs, outputs, key risks and value drivers of the business (p.14-15). While the latter was regarded as a customer-focused bank which put customers at the heart of everything, including its value creation model, in order to achieve long-term success (p.24; p.28).

Overall, Standard Bank Group shows more integrated thinking than other two banks as it extensively demonstrates material issues, strategic value drivers, value creation process and stakeholder engagement. Readers could easily gain a comprehensive view of how its business model connects six capitals (“inputs”), identifies key risk types and achieves shared value outcomes (p.14-15). RBS also reveals its integrated thinking to some extent by demonstrating how its customer-led business model leads to sustainable growth and long-term success (p.20). HSBC explicitly highlights the typical advantage of its global business network. However, its strategic report 2017 delivers less integrated thinking, which considerably enhances financial performance indicators. It fails to demonstrate how the business model is set up to create long-term value for various stakeholders. Positively, HSBC continuously performs actively in supporting sustainable growth and taking responsibility for CSR issues. For example, it is an early supporter of Task Force on Climate-related Financial Disclosures (TCFD). In addition to its Strategic Report, HSBC published an ESG report in 2017 to demonstrate its commitment to sustainable development and CSR.


By reviewing the reports and answering the questions, students have obtained a general understanding of non-financial reporting and acquired the ability to identify the strengths and weaknesses of each report. More importantly, they have gained an awareness that different stakeholders would have different focuses on relevant non-financial information during their decision-making processes.

Xinwu He

The students made their decisions wholly based on the information presented in the reports. However, the quality of non-financial reporting could be questioned. Therefore, readers are supposed to remain sceptical while viewing non-financial reports or use the reports to make decisions. To enhance the credibility of non-financial reporting, the three banks use various mechanisms. For example, RBS appointed an assurance provider (Ernst & Young LLP) to provide limited independent assurance over selected sustainability content within its Strategic Report 2017 (p.42). Similarly, HSBC appointed PricewaterhouseCoopers LLP to provide assurance over selected information and the assurance statement is available on its official website. Instead of hiring an external assurance provider to audit its annual integrated report 2017, Standard Bank Group performed an internal combined assurance review of the information gathering process to ensure the accuracy of its reporting content. The process of internal assurance included reviews of internal controls, together with reviews by management, compliance and internal audit (p.5). Overall, all the banks made the effort to enhance the credibility of their non-financial reports and demonstrate boarder stakeholder accountability.

[1] See https://www.investopedia.com/articles/investing/122315/worlds-top-10-banks-jpm-wfc.asp

[2] Some video and written material of senior executives at HSBC speaking in support of integrated reporting is linked from http://drcaroladams.net/the-banking-sector-and-integrated-reporting-focus-on-hsbc/

[3] See http://drcaroladams.net/the-banking-sector-and-integrated-reporting-focus-on-hsbc/ for a critique.

[4] Required by the UK Companies Act. The Financial Reporting Council has provided guidance on the content of a Strategic Report at https://www.frc.org.uk/Our-Work/Publications/Accounting-and-Reporting-Policy/Guidance-on-the-Strategic-Report.pdf

[5] See http://drcaroladams.net/hsbcs-corporate-reporting/ for a review of its 2014 reports.

[6] See http://www.hsbc.com/our-approach/reports-and-documentation

[7] A review of its 2013 Sustainability Review is available at http://drcaroladams.net/rbs-sustainability-review-2013-building-trust-integrated-thinking/

[8] See http://drcaroladams.net/changing-the-way-business-is-done-south-african-integrated-reports/ for a review of SBG’s 2013 integrated report.

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