Business Model
Companies are expected to describe how a company generates and preserves value over the long term
Legal base
Article 1 of the DIRECTIVE sets out that the non-financial statement contains information including: a. "a brief description of the undertaking's business model;".
A company may consider including specific disclosures explaining:
- The main products it makes, and how they meet the needs of consumers / customers;
- How these products are made, and what makes the production approach competitive;
- The characteristics of the market where it operates, and how it is expected to evolve.
- The natural and social environment in which it operates and how those affect its business.
A company generates and preserves value
It is frequently understood that the business model describes how a company generates and preserves value through its products or services over the longer term. The business model provides appropriate context for the management report as a whole. It provides an overview of how a company operates and the rationale of its structure, by describing how it transforms inputs into outputs through its business activities. In more simple terms, what a company does, how and why it does it.
When describing their business model, companies may consider including appropriate disclosures relating to their business environment, their organisation and structure, the markets where they operate, their objectives and strategies, and main trends and factors that may affect their future development.
As appropriate, companies may consider using key performance indicators (KPIs) to help the understanding of the business model, main trends and factors.
Companies are expected to explain their business model in a clear, understandable and factual manner. A business model is a matter of fact case. Companies should explain how they have chosen to undertake their business in a clear and objective manner. Companies should avoid disclosures of promotional or aspirational nature which distract attention from material information.
Companies are expected to highlight and explain when material changes to their business model have taken place in the reporting year.