How to write a good CEO letter for your annual report

This spring, the first true CSRD reports will be released. If the trend follows the best 2023 reports, the ESG narrative will become narrower and more precise as the annual and sustainability reports are integrated, cutting away all unnecessary communication. This development sharpens the requirement for the foreword of the annual report. The ESRS standards offer no guidance on how to craft a comprehensive CEO letter for an integrated report. Therefore, here is a guide.

When written correctly, a foreword from the leadership and board is an exercise in corporate communication that can serve many purposes beyond just being a reading guide for the annual report. It sets the strategic framework for the difficult conversations that all companies have with their stakeholders about the relationship between business and sustainability in this era—where it is crunch time for ESG and where more and more companies are struggling to meet their transition goals.

The foreword can list reasons, foundations, and arguments for the decisions made—decisions that employees and the public may have questions about. The foreword sets the tone of the company and is a unique opportunity to stand out as a responsible corporate citizen.

As annual and sustainability reports are integrated, and standards dictate a new format and flow, space for softer storytelling within the report is shrinking. Communication in the form of case studies, dilemmas, and reflections must find new platforms. This shift heightens the requirement for the informational value of the CEO letter in the report.

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Qualitative analysis of 24 CEO letters from C25

The ESG Barometer 2024 includes an analysis of CEO letters from C25’s 2023 reports, showing that CEO letters remain an overlooked discipline for most companies. While busy adapting to the CSRD language, few businesses have the capacity to focus on their CEO letter.

In an interview for ESG Barometer 2024, ?rsted’s Head of Global Sustainability, Ida Krabek, explained that in 2023, the team focused on breaking into the CSRD agenda, ensuring that sustainability played a more significant role than ever before in the report. However, this focus did not extend to integrating this narrative into their CEO letter.

This is expected to change in the upcoming report. Meanwhile, Birgitte Rose Mogensen and I have compiled some recommendations for crafting a comprehensive CEO letter.

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CEO letter analysis findings

• Companies are still learning how to balance ESG and financial (F) reporting. This challenge also extends to the CEO letter.
• As reports become integrated, the focus on sustainability in the CEO letter diminishes. Financial and commercial aspects take precedence, often causing sustainability to disappear entirely from the foreword.
• There is an absence of dilemmas in CEO letters. When a dilemma is mentioned, it typically relates to decoupling.
• Few companies mention which ESG and sustainability topics were discussed by the board during the year.
• Nearly all CEO letters mention diversity and inclusion, but none link these themes to materiality or specific targets.

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Look to DSV for inspiration

It is no surprise that C25 companies are still practicing how to balance financial and sustainable goals, results, and challenges within their CEO letters. Integrating F (financial), E (environmental), S (social), and G (governance) is a discipline that few companies have mastered so far. As a result, the best examples of informative CEO letters can still be found in standalone sustainability reports from 2023, which had not yet been merged with the annual report.

A good example is found in DSV’s Sustainability Report 2023. Its foreword clearly outlines the company’s sustainability strategy and commitments. It addresses the decoupling dilemma within sustainability work and provides a timeline for DSV’s sustainability targets, which include both long-term and very long-term targets. There is a clear E focus in the company’s strategic tagets and, finally, the CEO letter comments on the progress towards achieving these sustainability targets. Read and take note!

A good CEO letter is not a dry, technical summary but a vital contribution to your company’s communications at a time when transparency is no longer optional. Use strong, impactful language, create compelling headlines, and invest time and energy into crafting messages that can be used actively in other areas of your corporate storytelling.

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Guide to writing a great CEO letter

A well-crafted CEO letter helps readers understand your company’s ambitions, progress, dilemmas, and challenges. It offers insight into how your company operates and its leadership style. It invites readers into a transparent and engaging story about the year’s results, processes, and challenges.

1: Executive summary of the year across FESG

The CEO letter should reflect management’s perspective on the past year, highlighting key results and events. With the CSRD requirement for integrated reporting, there is an added expectation that companies

spotlight what they want to emphasize on the sustainability agenda, including addressing relevant dilemmas.

Readers should be able to grasp the following after reading your CEO letter:

·?????? What happened during the year?

·?????? What are the key results across the four bottom lines (FESG)?

·?????? Where is the company headed?

·?????? What are the main challenges?

It is logical to use the materiality assessment as a compass for what should be included in the CEO letter. Which material ESG topics have strategic relevance for the company?

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2: High informational and communicative value

Like all corporate communication, the CEO letter should be tailored to its audience. Who are the primary readers of the report, and what do they need to know most? What critical questions and expectations should be addressed?

A CEO letter has high informational value when it provides a strategic elevator pitch about the past year and the direction ahead—delivered clearly and credibly.

An integrated report should begin with a transparent account of both successes and challenges, offering readers a guide to the key messages in the report.

Interestingly, integrated reports in 2023 have often lost focus on sustainability in their foreword, even though an integrated report should have an integrated foreword.

Finally, the CEO letter should look as much ahead (What’s coming?) as it does backward (What went well? Where did we fall short, and why?).

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3: A great CEO letter is easy to understand

Your foreword should contribute to the overall clarity of the report, as the ESRS 1 standard defines a quality requirement for understandability (QC 16):

"Sustainability information is understandable when it is clear and concise. Understandable information enables any reasonably knowledgeable user to readily comprehend the information being communicated information.”

A great CEO letter is not just a technical summary. It is a key part of corporate communication at a time when transparency is no longer a choice. Use strong, engaging language, create impactful headlines, and craft messages that can be reused throughout your corporate narrative.

With these recommendations and observations, we wish you good luck!

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PS! You can download the ESG Barometer 2024 in Danish and English at https://esg.make.dk, where you can also read the results of the CEO letter analysis.