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What is Narrative Reporting?
Narrative reporting refers to the qualitative information companies provide to complement their financial statements. It explains business performance, strategy, risks, governance, and future outlook in a story‑driven format that helps stakeholders understand the context behind the numbers.
Definition
Narrative reporting is the disclosure of non‑financial, descriptive information that explains an organisation’s strategy, performance, risks, and long‑term value creation alongside its financial statements.
Key takeaways
- Explains performance context: Goes beyond numbers to show why results occurred.
- Forward‑looking: Includes strategy, risks, and future plans.
- Enhances transparency: Builds trust with investors, regulators, and the public.
- Required in many jurisdictions: Forms part of annual or integrated reports.
- Supports decision‑making: Helps stakeholders assess long‑term sustainability.
Core components of narrative reporting
1. Business overview
Mission, vision, purpose, and organizational structure.
2. Strategy and objectives
Long‑term goals and how management plans to achieve them.
3. Key performance indicators (KPIs)
Operational and non‑financial metrics that show progress.
4. Risks and risk management
Principal risks and how they are mitigated.
5. Operational review
Analysis of performance, challenges, and achievements.
6. Sustainability and ESG information
Environmental, social, and governance disclosures.
7. Future outlook
Forward‑looking statements and expected trends.
Why narrative reporting matters
- Provides richer insight than financial numbers alone.
- Helps investors assess future viability and strategic direction.
- Improves corporate accountability.
- Enhances comparability through standardized frameworks.
Common frameworks for narrative reporting
1. Integrated Reporting ()
Focuses on long‑term value creation across six capitals.
2. Sustainability/ESG frameworks
- GRI Standards
- SASB Standards
- TCFD Climate Risk Disclosures
3. Management Commentary (IFRS Practice Statement)
Guidance for explaining performance and strategy.
Narrative vs. financial reporting
| Aspect | Narrative Reporting | Financial Reporting |
|---|---|---|
| Focus | Qualitative story & context | Quantitative financial results |
| Scope | Strategy, risks, performance drivers | Income, cash flow, balance sheet |
| Orientation | Forward‑looking | Historical |
| Value | Understanding sustainability | Assessing profitability |
Examples of narrative reporting
- A company explaining supply chain disruptions in its annual report.
- A CEO letter discussing market trends and long‑term strategy.
- ESG disclosures detailing carbon emissions and social programs.
Related concepts
- Annual reporting
- Integrated reporting
- ESG disclosure
- Management commentary
- Corporate governance
Sources
- IFRS Foundation – Management Commentary
- International Integrated Reporting Council (IIRC)
- Global Reporting Initiative (GRI)
Frequently Asked Questions (FAQ)
Is narrative reporting mandatory?
In many countries, yes, especially for public companies.
Why is it important for investors?
It provides context behind financial results and future prospects.
What makes good narrative reporting?
Clarity, consistency, transparency, and forward‑looking insights.
Does narrative reporting include ESG?
Yes, ESG factors are increasingly central to narrative disclosures.
Is narrative reporting audited?
Some sections may be reviewed, but extensive auditing varies by jurisdiction.
