This must contain:

• a fair review of the company’s business; and
• a description of the principal risks and uncertainties facing the company.

The review is required to be a balanced and comprehensive analysis of the development and performance of the company’s business during the financial year, and the position of the company’s business at the end of that year. It is required to be consistent with the size and complexity of the business.

• Business review – case studies

The review of the company’s business as outlined above must, to the extent necessary for an understanding of the development, performance or position of the company’s business, include:

• analysis using financial key performance indicators; and
• when appropriate, analysis using other KPIs, including information relating to environmental and employee matters.

• Key performance indicators – case study

Some KPIs are known as Alternative Performance Measures (APMs). APMs are financial measures of historical or future financial performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial reporting framework.

As part of its role of promoting stability in the financial markets, the European Securities and Markets Authority (ESMA) released the following guidance in 2015. This aims to improve the comparability, reliability and comprehensibility of Alternative Performance Measures (APMs) for entities whose securities are traded on regulated markets:

• ESMA's Guidance on APMs

For all companies required to prepare a strategic report, that report must, when appropriate, include references to, and additional explanations of, amounts included in the company’s annual accounts.

The review of the company’s business as outlined above must help users of the strategic report to understand the development, performance or position of the company’s business. This may include, when appropriate, analysis using non-financial KPIs, including information relating to environmental and employee matters.

Known as the s172(1) statement, companies are required to include a statement within the strategic report explaining how the directors have complied with Part 1 of the s172, CA 2006 duty ‘to promote the success of the company’. Part 1 requires directors to do so ‘for the benefit of its members as a whole’ and in doing so, to have regard to the following six factors:

• the likely consequences of any decision in the long-term;
• the interests of the company’s employees;
• the need to foster the company’s business relationships with suppliers, customers, and others;
• the impact of the company’s operations on the community and the environment;
• the desirability of the company maintaining a reputation for high standards of business conduct; and
• the need to act fairly as between members of the company.

The s172(1) statement is required at an individual company level. This means that all companies in scope of this requirement within a group, including subsidiaries and parent companies, are required to produce an individual s172(1) statement within their strategic report. To find out more visit:

• Financial Reporting Faculty guide on Section 172(1) statements

The strategic report must include:

• To the extent necessary for an understanding of the development, performance or position of the company’s business, information on the main trends and factors likely to affect the future development, performance, and position of the company’s business.
• A description of the company’s strategy.
• A description of the company’s business model.

The strategic report must include a breakdown showing at the end of the financial year the number of people of each gender who were each of directors, senior managers and employees of the company or group. For this requirement, senior manager is defined as a person who has responsibility for planning, directing or controlling the activities of the company, or a strategically significant part of the company, and is an employee of the company.

To the extent necessary for an understanding of the development, performance or position of the company’s business, information is required to be provided about:

• environmental matters (including the impact of the company’s business on the environment),
• the company’s employees, and
• social, community and human rights issues.

This information includes details about any company policies in place for these matters and the effectiveness of those policies.

When the strategic report does not provide information of each kind noted in the above list, the strategic report must state which of those kinds of information it does not contain.

A non-financial and sustainability information statement must contain information, to the extent necessary for an understanding of the company’s development, performance and position and the impact of its activities, relating to, as a minimum:

• environmental matters (including the impact of the company’s business on the environment);
• the company’s employees;
• social matters;
• respect for human rights; and
• anti-corruption and anti-bribery matters.

For the above matters, a non-financial information statement must include a description of the policies pursued, any due diligence processes implemented by the company in relation to those policies, and the outcome of those policies. If the company does not pursue any policies in relation to the above matters it must outline its reasons for not doing so. In addition, a non-financial and sustainability information statement must include a description of the principal risks relating to the above matters arising in connection with the company’s operations and, where relevant and proportionate:

• a description of its business relationships, products and services which are likely to cause adverse impacts in those areas of risk; and
• a description of how it manages the principal risks.

The following information is also required in a non-financial information statement:

• a brief description of the company’s business model;
• a description of the non-financial key performance indicators relevant to the company’s business; and
• references to, and additional explanations of, amounts included in the company’s annual accounts.

For financial years starting on or after 6 April 2022, PIEs must also include the additional climate-related disclosures meaning the existing non-financial information statement will be expanded and renamed the non-financial and sustainability information statement.

The non-financial and sustainability information statement is additionally required to include the following climate-related financial disclosures:

• a description of the company’s governance arrangements in relation to assessing and managing climate-related risks and opportunities;
• a description of how the company identifies, assesses and manages climate-related risks and opportunities;
• a description of how processes for identifying, assessing and managing climate-related risks are integrated into the company’s overall risk management process;
• a description of the principal climate-related risks and opportunities arising in connection with the company’s operations and the time periods by reference to which those risks and opportunities are assessed.

The following requirements can be omitted if the directors of the company reasonably believe that these disclosures are not necessary. In cases where this option is taken, a clear and reasoned explanation as to why it is appropriate to omit the information must be given.

• a description of the actual and potential impacts of the principal climate-related risks and opportunities on the company’s business model and strategy;
• an analysis of the resilience of the company’s business model and strategy, taking into consideration different climate-related scenarios;
• a description of the targets used by the company to manage climate-related risks and to realise climate-related opportunities and of performance against those targets; and
• a description of the key performance indicators used to assess progress against targets used to manage climate-related risks and realise climate-related opportunities and of the calculations on which those key performance indicators are based.

This statement must be included in the strategic report, but it can cross-refer to other parts of the annual report where appropriate. Any material information must be included in the annual report; references outside the annual report can relate only to complementary information.

For financial years starting on or after 6 April 2022, PIEs with > 500 employees, AIM-listed companies with > 500 employees and high turnover (>£500m) companies with > 500 employees must include within a non-financial and sustainability information statement, the following climate-related financial disclosures:

• a description of the company’s governance arrangements in relation to assessing and managing climate-related risks and opportunities;
• a description of how the company identifies, assesses and manages climate-related risks and opportunities;
• a description of how processes for identifying, assessing and managing climate-related risks are integrated into the company’s overall risk management process;
• a description of the principal climate-related risks and opportunities arising in connection with the company’s operations and the time periods by reference to which those risks and opportunities are assessed.

The following additional requirements can be omitted if the directors of the company reasonably believe that these disclosures are not necessary. In cases where this option is taken, a clear and reasoned explanation as to why it is appropriate to omit the information must be given.

• a description of the actual and potential impacts of the principal climate-related risks and opportunities on the company’s business model and strategy;
• an analysis of the resilience of the company’s business model and strategy, taking into consideration different climate-related scenarios;
• a description of the targets used by the company to manage climate-related risks and to realise climate-related opportunities and of performance against those targets; and
• a description of the key performance indicators used to assess progress against targets used to manage climate-related risks and realise climate-related opportunities and of the calculations on which those key performance indicators are based.

The non-financial and sustainability information statement must be included in the strategic report, but it can cross-refer to other parts of the annual report where appropriate. Any material information must be included in the annual report; references outside the annual report can relate only to complementary information.

AIM companies and high turnover companies with > 500 employees are required to include the above climate-related disclosures in a non-financial and sustainability information statement. If the entity is not also a PIE with > 500 employees, it is not required to include the other information outlined in the PIEs with > 500 employees category above.