From executive pay to boardroom diversity, the negative perceptions of corporate behaviour and culture have continued to weaken the public’s trust in big business. We believe business needs to work with government to set a vision for a corporate environment that is transparent, pro-growth and delivers opportunity for all. In our response to the government’s Corporate Governance Reform Green Paper, we called for a greater link between executive pay and business performance, with more attention on encouraging longer-term stewardship. Instead of introducing more regulatory demands on companies, we recommended businesses publish a fair-pay charter, focusing on pay philosophy and principles. 

Over the year, we’ve contributed to policy debates at the highest levels, responding to various policy consultations, sharing our insight on issues such as executive remuneration, the gender pay gap and responsible tax. We also commented on the review by the Institute of Chartered Accountants in England and Wales (ICAEW) looking at trust, corporate reporting and technology in the context of the audit of the future. This review explores how the entire profession (including auditors, regulators and standard setters) needs to adapt to ensure that the audit remains fit for purpose and relevant to the changing needs of key stakeholders.

Technology has the potential to transform the audit process – increasing quality, insight and, as a result, trust. Cognitive technologies and analytic capabilities are changing the level of data that companies and audit firms have at their fingertips. Access to ‘big data’ presents great opportunity but also challenge: how can you channel the right data in the right way to promote trust and transparency? Our audit innovation team is finding ways to make the most of the benefits that new technologies can bring. We’ve continued to develop our patented audit analytics software, which enables our auditors to classify large data sets and perform enhanced risk assessments. By increasing the amount of data we can analyse, we’re reducing the risk of missing any anomalies. As well as contributing to trust in the financial markets, technology is also helping us improve the quality and effectiveness of our audit delivery, ensuring we can critique matters of interest with increased judgement. 

We recognise that the training we provide our people needs to match such advancement in technology. Over the past year, we have run a number of innovation showcases and disruptive-technology events reaching thousands of our practitioners, giving them the opportunity to contribute ideas and shape our pipeline of tools and technologies. This commitment to developing our culture of innovation – alongside our analytics capabilities – was recognised in November 2016 through our British Accountancy Award for Most Innovative Large Practice. 

Our increasing focus on innovation has also helped contribute to the growth of our audit business. This year, we successfully tendered for BP, GlaxoSmithKline, Centrica and BAE – positioning Deloitte as a leading auditor of the FTSE 100, with a 27 per cent share. Our success has also been reflected in the FTSE 250, with our market capture now at 27 per cent, with wins this year including PZ Cussons, Ferrexpo and Aldermore Bank.

Audit quality is an imperative for our firm. We hold ourselves to the highest standards of ethical behaviour, and do not tolerate any actions that could bring into question the integrity of our work. In November 2016, we accepted the Financial Reporting Council’s findings and subsequent fine relating to our audit of Aero Inventory, performed between 2006 and 2008. Since these audits were performed, we have significantly evolved our audit quality processes and increased investment in our people’s training. 

We also continue to co-operate fully with the FRC in respect of its investigations into the audits of Autonomy Corporation (between 1 January 2009 and 30 June 2011), Serco Group (years ended 31 December 2011 and 2012) and Mitie Group (years ended 31 March 2015 and 2016). 

As part of our ongoing efforts to improve the quality of our audits, we have introduced an additional layer of monitoring this year. This includes interrogation of our audit software database to track trends and outcomes, accompanied by ‘health checks’ on identified areas for improvement. These health check reviews, performed by our Engagement Quality Review professionals, provide feedback to individual engagement teams throughout the entire auditing process, and provide us with a snapshot of progress across all reviews. With our audits being regularly assessed, we can keep improving the consistency of standards.

In today’s increasingly connected and technology-driven world, tax functions in all industries are under pressure to expand their role and scope. From meeting compliance and reporting obligations, to supporting the business in making strategic investment decisions, the tax function plays a critical role in every organisation. At Deloitte, we’re focused on what the tax department of the future will look like, identifying the key factors that will shape the profession.

One of the main forces of change is, of course, technology, and its ability to help companies make informed tax decisions and comply with complex regulations across the globe. Our tax innovation team is helping clients think about which processes could be automated or simplified, removing repetitive tasks, reducing cost burdens and, importantly, freeing up time to plan for business growth.

The key to the transformation of the tax adviser role is the use of robotic process automation (RPA). Such technology has far-reaching implications not only for clients but also for our own business. We’ve used RPA to turn lengthy manual documentation processes into automated procedures that take a fraction of the time – for example, a robot designed by our innovation team extracted 30,000 lines of data from our systems in just 8 hours, whereas it would have taken 20 days to complete manually.

Our tax innovation team has grown from six in FY16 to thirty-five in FY17, and we’ve doubled our investment in tax innovation this year, with plans to do the same in FY18.

Tax innovation is also helping clients prepare for major changes in the UK tax environment, such as the country’s exit from the European Union.

Businesses need to understand the impact of changes to the UK’s trading relationship with the remaining member states. This is particularly relevant in the area of customs, where there is uncertainty as to the rates and procedures that will apply to the supply of goods and services to and from the UK.

To help clients manage such uncertainty, we have created a Brexit Analysis Tool, which models potential future customs costs based on different scenarios. By allowing businesses to model the impact of, say, a lack of trade agreement with the EU, or bilateral accords with generous market access, they can prepare for some of the challenges that lie ahead, and maximise the opportunities afforded by what may be a very major change in the UK’s international trading relationships.

As critical as Brexit is for tax leaders in planning their future tax strategy, our recent Budget survey showed that clients see the OECD/G20’s Base Erosion and Profit Shifting (BEPS) project as having the most impact on their tax functions over the next five years. The BEPS project was started in 2012 to tackle tax planning strategies that exploit gaps in tax rules to artificially shift profits to low- or no-tax locations where there's little or no economic activity. 2017 is a crucial year for BEPS, with 96 countries and jurisdictions now planning to adopt the project’s minimum standards. The UK is a leader in global adoption, and Deloitte has worked closely with both the OECD and HMRC (responding to a number of technical consultations) to fully understand the impact of the BEPS changes and help clients implement them effectively.

This year, we launched 'Because tax matters', which gives our practitioners the opportunity to use their skills and tax expertise to give something back to the community. We work with two major tax charities in the UK – TaxAid and Tax Help for Older People – which give free advice to people who are on low incomes or from other vulnerable groups. Our volunteers offer in-person and telephone support, allowing the charities to help a greater number of people. 

As part of our One Million Futures social impact programme, ‘Because tax matters’ also focuses on education. We’re developing material for the Business Studies curriculum with The City of London Academy to help students better understand their finances, pay slips and how tax will affect them. Some of our One Million Futures partner schools are in the most deprived areas of the country and have asked us to offer similar education sessions to parents as well as students. 

‘Because tax matters’ has already seen us change the way we work with charities and social enterprises, building in more elements such as pro bono services. For example, we have created tax labs that help charities prioritise how they use resources, allowing them to keep costs down and use their donations to help those most in need.

As a firm, we don’t just make an impact on our clients, our people and society. We also have an impact on the environment. This is something we’re always looking to reduce, and that’s why we launched our environmental sustainability programme – our Green Journey – back in 2011, and set ourselves some tough ten-year targets.

We just passed the half-way stage, so this year we took a moment to make sure 
we’re still focusing on aspects that matter most to our stakeholders and our firm, 
by conducting a materiality review.

The global impact of climate change was a shared concern arising from our review. Reducing carbon emissions is a priority for governments and businesses alike, and for us that includes tackling both our real estate planning and business travel. We’re targeting a fall in carbon emissions by 35 per cent per full-time employee (FTE) by 2021, and have hit a 40 per cent drop by the end of FY17. We additionally procure 100 per cent green electricity where we are responsible for the energy contract as part of our commitment to supporting the growth of a low-carbon economy.

In our materiality review this year, our stakeholders flagged the value of supporting the evolution of sustainable cities through our real estate programme. Our energy emissions have fallen by 75 per cent per FTE to date, exceeding our ten-year target of 40 per cent. Our water use is down 12 per cent per FTE since 2011, although it did rise this year as we increased the use of our office spaces. We ensure our office fit-outs are certified for their high levels of environmental design, and we’re piloting wellbeing design concepts in the fit-out of our new flagship office at 1 New Street Square, which we hope will deliver health and productivity benefits to our people.

Responsible consumption was another important issue for our stakeholders. This year we used 26 per cent less paper per FTE (down 61 per cent from 2011) thanks to improvements in technology such as secure printing and high-definition screens. Our waste arisings are down 25 per cent per FTE since 2011. To continue to improve resource efficiency and improve our recycling rates, we are reviewing our procurement of goods with a view to moving to a more circular consumption model.

There is a fine balance between our desire to be on-site with our clients and our aspirations to reduce the impact of travel on the environment and our wellbeing. Travel is intrinsic to our business – we serve clients across the globe – so unsurprisingly this makes up 75 per cent of our carbon emissions. We struggled to make a reduction this year, largely due to the additional travel required for the creation of Deloitte North West Europe. We keep looking for ways to decouple business travel from business growth – for example, through enhancing our video-conferencing and online collaboration tools.

We estimate the emissions associated with our supply chain are at least the equivalent of our current footprint. We don’t currently report on these as the data is not reliable enough, but we believe there is still value in engaging and collaborating with our key suppliers on sustainability issues. 

Our sustainable procurement policy is there to help us ensure our supply chain increases both environmental and social benefits. We’re now pushing on by scoping out our alignment with the new ISO20400 standard on best-practice sustainable procurement, and will set a corporate target on supplier engagement at the completion of this project.