Why the strategic report matters 

Strategic reporting isn’t about producing more disclosure. It’s about providing better disclosure. For directors, it’s an opportunity to demonstrate stewardship. For company secretaries, it’s a chance to strengthen governance and improve communication between the board and its primary stakeholders. For investors, it remains one of the clearest windows into how an organisation intends to create sustainable long-term value.

A strategic report is required by companies within scope of the Companies Act 2006, but the FRC’s guidance makes it clear the report’s purpose extends beyond legal compliance. The strategic report exists to help shareholders assess how directors have discharged their duties under section 172 of the Companies Act and to provide context for the financial statements.  

Importantly, the report should reflect the board’s collective view of the organisation, explaining: 

• how the business creates value 

• the strategy being pursued 

• the key opportunities and risks 

• performance during the year 

• future prospects 

• how directors have considered stakeholders and long-term success in decision-making 

For company secretaries and directors, this means the strategic report is one of the most important governance documents in the annual report. Done well, it strengthens transparency, supports investor confidence and demonstrates effective board stewardship. 

The ‘tell your story’ principle 

One of the most striking themes of the FRC’s 2026 guidance is its encouragement for boards to move away from checklist reporting. Annual reports should be: 

• fair, balanced and understandable 

• forward-looking 

• entity-specific 

• linked and cohesive 

• relevant and focused on material information.  

Too many annual reports still contain generic statements that could apply to almost any organisation. The FRC explicitly discourages this, noting boilerplate disclosures add volume but not value. Shareholders want to understand the specific circumstances of the organisation, the challenges it faces and how the board is responding.  

Example: checklist vs strategic approach 

Which do you feel provides insight into strategy, risk management and future prospects to tell shareholders something meaningful? 

Traditional checklist approach: “The company continues to monitor market conditions and manage risks accordingly.” 

Strategic reporting approach: “In response to increasing regulatory requirements and rising client expectations around ESG assurance, the Board approved investment in specialist governance and sustainability capability during the year. This initiative supports our strategic objective of expanding advisory services while mitigating talent and regulatory risks.” 

Materiality: less can be more 

One of the FRC’s most significant messages concerns materiality. It defines information as material if omitting, misstating or obscuring it could reasonably be expected to influence decisions taken by shareholders and other primary users of the annual report. It’s particularly important because many annual reports have become excessively long. The FRC highlights including immaterial information can obscure the issues that matter most and reduce the usefulness of reporting.  

Materiality is not simply a numerical exercise. A seemingly small issue may be material because of reputational consequences, regulatory attention or strategic significance. 

Directors remain responsible for determining what information is material and, together with your board, should consider: 

• quantitative significance 

• qualitative significance 

• strategic importance 

• impact on future prospects 

• stakeholder relevance 

• long-term value creation  

Example: materiality in practice 

Imagine you discover a cyber-security weakness affecting only a small percentage of customer records. From a purely financial perspective, the immediate cost may be relatively modest. However, the issue could be material because it: 

• • affects customer trust 

• • creates regulatory exposure 

• • highlights weaknesses in governance 

• • has implications for future business performance 

The FRC’s guidance suggests qualitative factors like these may make disclosure appropriate even where the financial impact is limited.  

The challenge for boards is not deciding what more to include. It is deciding what can responsibly be excluded. 

Linking strategy, risk & performance 

Connectivity within reporting is important. Your strategic report should not read as a collection of disconnected disclosures. Using a coherent narrative to communicate how the organisation creates and preserves value will help investors understand how:

For company secretaries, this often means acting as the ‘editor-in-chief’ of the annual report, ensuring consistency between board reporting, risk reporting, sustainability disclosures, section 172 reporting and the financial statements.

The legal protection directors often overlook

There’s another practical reason why strategic reporting deserves closer board attention. The FRC highlights the safe harbour provisions within section 463 of the Companies Act 2006. These limit directors’ liability for forward-looking and narrative disclosures in the strategic report, provided directors have not knowingly included misleading information or dishonestly concealed material facts.

This protection is important because some boards remain reluctant to discuss future prospects, risks or strategic challenges for fear of increased liability. The message from the legislative framework is clear: Thoughtful, balanced and honest disclosure is encouraged. Concealment is not.

What good looks like

In an era of increasingly complex reporting requirements, the FRC’s message is refreshingly simple: Focus on what matters. Explain it clearly. Tell the story of the business.

In the FRC’s view, an effective strategic report should answer four core questions:

1. What is our business and how do we create value?
2. What strategy are we pursuing?
3. What are the key risks, opportunities and trends that could affect us?
4. How have directors exercised their stewardship responsibilities?

If shareholders can answer these after reading the report, the board has likely achieved its objective.

How Bridgehouse can help

At Bridgehouse we help clients review their approach to their strategic report. Blending both corporate governance and communication expertise, we’re able to help boards ensure their annual report adds real value to corporate communications to support strategic growth and tell their story effectively.

If you’d like to explore how to make your annual reporting an effective governance tool, please contact us to speak with our expert team.