The annual report has been a cornerstone of corporate communications for more than 200 years, but while the past two centuries have seen sustained evolution in technology for communications, the annual report remains at its core a paper document (even if that paper is a PDF on a screen). However, corporate reporting requires a leap forward if it is to meet stakeholders’ needs for the next 200 years.
Drivers of change
Technology has changed almost every aspect of our lives. Although corporate reporting has been slow to adapt, it is now showing signs of catching up. Over the past five years, the Financial Reporting Council’s Financial Reporting Lab (the Lab) has looked at a number of leading-edge and developing technologies and their potential impact on corporate reporting.
Our Digital Future project has considered the potential for technologies from artificial intelligence to eXtensible Business Reporting Language (XBRL). Most recently, we have looked at virtual and augmented reality (VR and AR) and our report Virtual and Augmented Reality in Corporate Reporting was published in February 2021. We believe that VR and AR provide an opportunity for companies to build a more engaging corporate report that connects and communicates to a wider group of stakeholders.
What are VR and AR?
To put it simply, VR and AR are the application of various technologies (including motion tracking, sound engineering, animation, simulation and video) to create an immersive experience for a user that mimics, or seeks to enhance, the same physical experience in the real world. A number of technologies exist that provide a bridge between a fully physical and a fully digital experience.
Virtual reality aims to create a completely simulated experience. This might reflect a real-world situation or landscape, but may also be completely artificial. In VR, the user is completely immersed in the construct, possibly via a headset.
Mixed reality (MR) aims to mix the digital and real-world elements together, in a way that allows interaction with the digital elements. This is often achieved via a headset or screen.
Augmented reality aims to enhance the real world with digital elements. In AR, these digital elements might often be used to communicate information and are often presented on top of or alongside real-world objects via headsets or screens.
Why the time has come for VR and AR
When the Lab first decided to look at VR and AR in corporate communications, it seemed as if their use was very niche and likely to take time before becoming mainstream. That fact drove us to sequence VR and AR as the last part of our Digital Future series. This assumption still seemed sound at the end of 2019, when we started the project’s interview phase. However, the events of 2020 changed that.
The COVID-19 pandemic has massively accelerated the adoption of technology across business and communications. These changes have driven some to ask if the digitisation of communications will herald a permanent switch from physical to digital. While the ultimate answer to this is currently unclear, it remains a good time to consider how VR and AR might work for corporate reporting.
Although the current limitations on physical communications (caused by the need for social distancing) may soon disappear, a reduction in physical interaction plays into several wider trends accelerated by the pandemic, including:
- a reduction in office-based working;
- further internationalisation of shareholder bases; and
- reduced business travel to meet economic and climate targets.
VR and AR are designed to bridge the physical and digital world, either by augmenting the physical or by completely recreating and replacing it with virtual reality. This blending of physical and digital has value in a world where physical interaction and communication are reducing. The Lab identified three situations where using VR and AR in corporate reporting would be appropriate.
Three cases for using VR and AR in corporate reporting
- Event-based VR and AR
Company reporting is often driven by scheduled events, such as the publication of annual/interim results, annual reports or shareholder meetings. While it is increasingly common for companies to support such events with video and other media, the use of VR and AR has not been widespread. However, some companies have experimented with delivering innovative annual reports (eg, LVMH and Zalando) and annual general meetings (eg, Reliance using VR and AR technology. - Insight VR and AR
Investors gain much of their insight into a company’s operations, business model and products through meetings with management and site visits. The need to be physically present, however, limits those that can benefit from such information. VR and AR provide an alternative to physical meetings and have been used by companies to provide product and operational insight. This can be especially valuable where the product is inaccessible, such as in the case of renewable energy company Ørsted, or is not yet developed. The Japanese airline All Nippon Airways (ANA) recently premiered its upgraded business-class cabins at a new products launch event using virtual reality (search ANA mbronyic). - Aspirational and narrative VR and AR
Corporate communications and reporting are fundamentally about creating a narrative. Our report on Video Use in Corporate Reporting saw that many companies were already using video to communicate an aspirational narrative.
However, video’s 2D format limits the level of engagement it can offer. VR and AR move beyond watching to experiencing and put the viewer within the narrative. This makes VR and AR ideal for communicating emotive subjects such as sustainability, corporate purpose and history. Examples include the United Nations, which uses an immersive virtual reality video to explore how daily choices have an impact on climate change, and Burberry, which uses a similar approach to communicate its purpose.
VR and AR – future potential
The current use of VR and AR in corporate reporting is limited and experimental. However, the examples we considered within this project suggest that they do have a place in corporate reporting (albeit over the longer term). The ability for VR and AR to bridge between the physical and the digital gives them a useful role in supporting and building understanding about a company, its business model and its operations.
Such innovative ways of reporting provide the potential to improve corporate communications, particularly in a world that has had to rapidly adapt to new ways of communicating more broadly. While they might not be the answer for all companies, they do highlight that the future is about wider stakeholders and more formats for reporting. An augmented annual report and accounts could be the most engaging evolution for corporate reporting yet.
The full report Virtual and Augmented Reality in Corporate Reporting provides more examples and ideas as to how VR and AR could transform reporting, including direct links to the examples mentioned in this article. It is available on the FRC’s website at frc.org.uk/Lab.
About the author
Thomas Toomse-Smith, Project Director, Financial Reporting Lab
