Last updated: 02.21.2024
Reporting on Strategy

Strategy is the formulation of long-term goals and objectives of a company and the actions taken and resources needed to achieve these goals based on the internal and external environments in which the organization competes.

Reporting on strategy helps investors and other stakeholders understand what a company does and how it does it, providing important insight regarding its future. It answers the question: What does the organization want to achieve, and how does it plan to achieve it?

Complete, transparent strategy disclosure includes:
01

A clear explanation of the business model and the strategy

02

Insight into the company’s external environment and stakeholders’ concerns and interests.

03

Review of performance against strategic objectives, including risk management and material sustainability issues.

Strategic Review
  • The strategy overview describes what the company plans to do, how it conducts its activities and the expected results and impacts. It includes an overview by management with an explanation of progress and setbacks in the implementation of the strategy, and any change of plans.

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  • The business model describes what the company does and how it does it. It includes the company’s main products and services, its customers, and where it fits in the value chain for the industry. It also describes the business processes that are most important to the creation of long-term value.

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Strategic Context
  • The external environment is the context in which the company operates, including the relationships, resources and input necessary for the business to succeed. It includes the company’s markets, legal environment, and internal cost drivers.

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  • Reporting on stakeholder engagement provides an understanding of the company’s key stakeholders and their concerns, and how their interest and preferences are considered in the strategy and its implementation.

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Strategic Implementation
  • The strategic objectives describe objectives which are most relevant for the realization of their strategy. It also includes KPIs to measure progress towards key objectives.

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  • The report should describe the process of identifying and managing the company’s internal and external risks, to ensure that it achieve its strategy, remain profitable and create value for all stakeholders.

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  • Reporting on material sustainability issues provides a more comprehensive view of value creation, considering the interests of various stakeholders, including investors, workers, customers, communities, and the environment. It should include the process for identifying and managing material sustainability issues.

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Climate Disclosure
  • The Task Force for Climate-Related Financial Disclosure strategy pillar recommends that companies disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning, where such information is material.

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  • The Task Force for Climate-Related Financial Disclosure Risk Management pillar recommends companies to disclose how the company identifies, assesses, and manages climate-related risks.

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International Sustainability Standards Board (ISSB) Standards and European Sustainability Reporting Standards (ESRS)

The Strategy section is aligned with the main recommendations of the Strategy and Risk Management pillars under ISSB IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information, which includes disclosure on strategy and risk management as two of the four pillars for sustainability disclosure (1. governance, 2. strategy, 3. risk management, and 4. metrics and targets). Find below an excerpt from the standard for your reference.

The Strategy section is aligned with the main recommendations of the Strategy and Impact, Risk and Opportunity Management pillars under European Sustainability Reporting Standards: ESRS 2 General Disclosures, which includes disclosure on strategy and impact, risk and opportunity management as two of the four pillars for sustainability disclosure (1. governance, 2. strategy, 3. impact, risk and opportunity management, and 4. metrics and targets). Find below an excerpt from the standard for your reference.

  • STRATEGY

    28. The objective of sustainability-related financial disclosures on strategy is to enable users of general purpose financial reports to understand an entity’s strategy for managing sustainability-related risks and opportunities.

    29. Specifically, an entity shall disclose information to enable users of general purpose financial reports to understand:
    a)the sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s prospects (see paragraphs 30⁠–⁠31);

    b)the current and anticipated effects of those sustainability-related risks and opportunities on the entity’s business model and value chain (see paragraph 32);

    c)the effects of those sustainability-related risks and opportunities on the entity’s strategy and decision-making (see paragraph 33);

    d)the effects of those sustainability-related risks and opportunities on the entity’s financial position, financial performance and cash flows for the reporting period, and their anticipated effects on the entity’s financial position, financial performance and cash flows over the short, medium and long term, taking into consideration how those sustainability-related risks and opportunities have been factored into the entityʼs financial planning (see paragraphs 34⁠–⁠40);

    e)the resilience of the entity’s strategy and its business model to those sustainability-related risks (see paragraphs 41⁠–⁠42).

    Source: ISSB IFRS S1 General Requirements For Disclosure Of Sustainability-related Financial Information

  • STRATEGY

    37. This chapter sets disclosure requirements that enable an understanding of: 

    (a) the elements of the undertaking’s strategy that relate to or affect sustainability matters, its business model and its value chain;  

    (b) how the interests and views of the undertaking’s stakeholders are taken into account by the undertaking’s strategy and business model; and   

    (c) the outcome of the undertaking’s assessment of material impacts, risks and opportunities, including how they inform its strategy and business model.

    Source: Draft European Sustainability Reporting Standards: ESRS 2 General Disclosures.

For more information about the IFRS Sustainability Disclosure Standards and the European Sustainability Reporting Standards, see Understanding Sustainability Disclosure Frameworks and Standards

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