Sustainability issues around the non-financial information directive in small and medium-sized enterprises

From the perspective of Zaradis and Mousiolis (2014) there are different definitions for SMEs, for Filion (1990) there is no single universally accepted criterion to define SMEs, and several criteria are used for their classification in the categories of micro-enterprise, small business and medium company. For the author, most of the definitions of the different types of SMEs emerged, not only for tax reasons, but also with the intention of establishing criteria for the purposes of eligibility of companies to the different financing and support programs of different countries. Therefore, says Filion (1990), currently the comparison of SMEs in different countries becomes incoherent, especially when the indicator of the number of workers is not the one adopted, but the economic indicator of the business – turnover and total assets. Studies carried out suggest that the number of workers is preferred as a term of comparison between SMEs, since there is some difficulty in providing economic and financial information to third parties.

For Osteryoung and Newman (1993) SME classification criteria are based on turnover, number of employees and market share. However, for the authors, these criteria are inadequate to define an SME, because it is not possible to objectively differentiate a company that has 250 employees, from another one with 249 employees, with the same situation regarding turnover. According to the European Parliament (2015), micro, small and medium-sized enterprises constitute 99% of enterprises in the European Union (EU), accounting for two out of three jobs in the private sector and contributing to more than half of the total added value. created by companies in the EU.

The growing awareness of society and stakeholders on environmental and social issues has resulted in the need for companies to improve the transparency and comparability of the information disclosed (Kolk & Van Tulder 2010). In this way, companies focus their attention on long-term viability and sustainability (Adams & Simnett, 2011) and begin to disclose the impact of their activities on the environment through reports that contain non-financial information, with the purpose of the economic dimension social and environmental.

In this context, sustainability reports compile a set of information with a view to identifying, evaluating and disseminating sustainable practices. Therefore, these reports allow a balance between the expectations of stakeholders and the need for credible information, demonstrating the sustainable performance of organizations. Thus, the need arose to regulate non-financial information, allowing it to be measurable, comparable and reliable (Tschopp & Nastanski, 2013). For this reason, the European Parliament recognized the need for companies to disclose information on sustainability, drawing up Directive 2014/95/EU of the Parliament and of the Council, of 22 October 2014. The European directive aims to promote the social responsibility of companies. companies, reducing the problems associated with comparability, credibility and effectiveness resulting from the disclosure of non-financial information.

Non-financial information (INF) is essential for stakeholders as they have a broader and more complete approach that encompasses current impacts and possible future impacts, with implications for value creation. The importance of this report (in the economic, environmental and social dimensions) to increase the level of transparency and contribute to improving the decision-making process by stakeholders is unequivocal (Maroun, 2017; Simnett et al., 2009).

The credibility of sustainability reports has deserved the attention of several international standards used as a basis for carrying out audit procedures on non-financial information, namely AA1000AS, ISAE 3000, ISO 2006 and GRI (PWC, 2013). These standards are guidelines for fundamental principles and procedures and are intended to guarantee that the information disclosed in the reports is reliable. Therefore, the disclosure of non-financial information requires certification of its quality and veracity, in order to guarantee the reliability and transparency of the principles, practices and performance of the companies. Therefore, companies turn to external entities to verify the non-financial information disclosed, in order to increase the reliability and credibility of the reports (Junior et al. 2013; De Beelde and Tuybens 2013) and, consequently, increase the quality of the reports. of sustainability (Boiral et al. 2018; Gürtürk and Hahn 2016).

Hassan et al. (2020) studied the relationship between non-financial information and the audit of this information, suggesting that companies that disclose non-financial information are more likely to audit non-financial information. In addition, the authors state that companies operating in sensitive industries are also more likely to audit non-financial information, with the aim of increasing the credibility and reliability of the reports. The size of the company positively influences the performance of an audit, while profitability has no influence.

Factors that contribute to the growth of non-financial information disclosure include pressure and interest from stakeholders on non-financial data (Eccles et al., 2011; Delmas & Toffel, 2008; Reid & Toffel, 2009), increased reputation (Cho et al. 2015) and improve communication with stakeholders (Patten & Zhao, 2014).The need to make the company’s performance measurable and comparable led to the regulation of non-financial information (Tschopp & Nastanski, 2013). It is in this context that the European Parliament recognized the need for companies to disclose information on sustainability, drawing up Directive 2014/95/EU of the Parliament and of the Council, of 22 October 2014.

The ONU – United Nations is another of the reference organizations regarding the dissemination of initiatives associated with the practice of corporate social responsibility (CSR). In this context, the UN Global Compact (1999) aims to align the activities and strategies of companies with the ten universal principles associated with human rights, work, the environment and the fight against corruption. Since companies are encouraged to develop their activities in a more responsible manner, conditions are created that are more conducive to the creation of value for the entity itself, but also for the various stakeholders, thus meeting the widespread mission: companies by committing to sustainability they can assume shared responsibility for achieving a better world (UN Global Compact, 1999). The UN Global Compact complements CSR practices and cannot be interpreted as a mandatory document with rigid procedures, but as a document supporting the promotion of sustainable growth. This pact was one of the bases for the creation of ISO 26000.

Of the numerous standards published by the International Organization for Standardization (ISO), the ISO 26000 published in 2010 stands out, which can be seen as a complement to the international structure of the Integrated Report (The International Framework), since it intends to provide companies with a deeper understanding of the context and scope of Integrated Reporting and how to create and manage value. In this sense, the IIRC provides a guiding structure for the Integrated Report and ISO 26000 presents guidelines for companies to adopt sustainable development, and cannot be seen as a management system with pre-defined rules and guidelines, and must be complemented and adapted to the reality of each organization, thus providing conditions for the implementation of sustainable development.

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Sustainability; Non-financial information;   Small and medium-sized enterprises