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EFAA event reveals limited support for reporting of NFI by SMEs

At a roundtable held by the European Federation of Accountants and Auditors for SMEs (EFAA) the shared view was that making the reporting of non-financial information (NFI) by SMEs mandatory would not be effective in stimulating SMEs and driving their role for a sustainable economy.

Three policy considerations were shared by EFFA’s director Paul Thompson, and ACCA’s head of corporate reporting Richard Martin looking at the nature and extent of the reporting of NFI by SMEs in 14 countries. The concluded policy considerations were:

  • National regulators should be encouraged to refer to the Non-financial Reporting Directive (NFRD) when formulating or considering NFI requirements for their SMEs, as this will help enhance international comparability of NFI reporting by SMEs;
  • SMEs should be encouraged to carefully consider voluntarily providing NFI, as this may yield benefits to them, their stake holders and the wider public; and
  • Some elements of the NFRD might be suitable for voluntary adoption of SMEs.

Members of the European Parliament Wolf Klinz and Philippe Lamberts joined EFFA’s president Bodo Richardt, the International Integrated Reporting Council’s (IRRC) chief strategy officer Jonathan Labrey, and SMEunited’s director Luc Hendrickx to debate how best to stimulate more sustainable behaviour by SME’s and what role reporting of NFI might play in this endeavour.

Both Lambert and Klinz concurred that many SME’s especially family owned and controlled ones, were inherently more responsible, sustainable and connected with their communities than larger businesses.

Some panellists expressed that there were other mechanisms for achieving a sustainability for SMEs rather than reporting NFI. Hendrickx suggested that it was better to focus on showing SMEs to be more circular, and incentivising sustainable behaviour through subsidies and taxation as well as facilitating SME access to finance for the necessary investments, and raising the capacity of SMEs to be more sustainable. Fellow panellists also agreed with this view.

Furthermore, concerns were also raised regarding the burden of reporting outweighing its benefits. It was recognised in the panel that many if not most SMEs could do a better job of communicating their sustainable behaviour but this could be done in other ways which does not involve formal reporting.

Richardt concluded by suggesting that SMEs should be encouraged to consider integrated thinking as a way to facilitate sustainable behaviour and that SMEs need guidance on how to be sustainable rather than a requirement to report on NFI.

 

By Mishelle Thurai 

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