The “framework for action” developed as part of the INTEREST project is meant as an introduction to Integrated Reporting (<IR>) for SMEs. It is fully compliant with the “International <IR> Framework” recently updated by the International Integrated Reporting Council (IIRC).
The starting point of the INTEREST project was to get acquainted with and collate examples of existing practice of Integrated Reporting by SMEs, together with existing practical experiences with Integrated Reporting in the six European countries represented in the consortium, namely Germany, Hungary, Italy, Poland, Romania, and the United Kingdom.
It incorporates the insights gathered through an in-depth assessment of the level of SME readiness and of current practices in thesecountries.
After having consolidated the multi-capital approach, the consortium set out to devise a reference framework for IR designed in such a way to allow easy adoption by SMEs and avoid overburdening their management.
The framework builds primarily on the standards defined by the International Integrated Reporting Council, using them in a way compatible with the specific features typical of SMEs.
To our knowledge, this is the first systematic overview of the “state of the art” of among European SMEs; for this reason, we published these country reports as an edited volume, an additional intellectual output of the INTEREST project for researchers and practitioners alike.
This “framework for action” is a tool designed to familiarize SME owners and managers with the principles they will be required to stick to if they embark on the <IR> journey by using the Guide (Intellectual Output 2). More specifically, this framework is meant to:
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Call the attention of SME owners, managers and stakeholders to the existence and relevance of <IR>.
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Provide an explanation of <IR> in the specific context of SMEs fully compliant with the IIRC’s “International <IR> Framework”.
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Highlight why <IR> can be advantageous for SMEs, both in terms of better decision-making and stronger relationships with relevant market and non-market stakeholders.
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Emphasise that, if SME owners and managers take the first steps towards <IR> along the principles outlined in the Framework, this can help them improve their integrated thinking, i.e. their ability to understand holistically how their company actually generates value.
The adoption of <IR> by an SME is a process shaped by the availability of data and the nature of the SME’s business model. Not all SMEs will apply all principles and requirements of this framework to an equal extent.
The benefits resulting from the adoption of <IR> may not outweigh the costs in all cases. SMEs adopting <IR> for the first time are likely to have limited experience and they may lack the required reporting data. Other SMEs may have simple business models and a limited number of stakeholders as users of integrated reports. Hence, any integrated report of an SME that has been prepared with reference to this framework is expected to apply its requirements, unless:
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The required information cannot be produced at reasonable cost or a specific legal prohibition results in an inability to disclose material information.
- The SME has a limited number of external stakeholders.
- Disclosure would cause significant competitive disadvantage.
In order to familiarize SME owners and managers with <IR>, this framework defines the key principles and outlines the main concepts underlying the adoption of <IR> in accordance with the “International <IR> Framework” of the IIRC, highlighting how these principles and concepts should be applied taking into account the specific needs and operating conditions of SMEs. <IR> is a journey, and this “framework for action” shows SME owners and managers the steps, by:
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Highlighting key concepts and establishing a general understanding of the terminology.
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Identifying key stakeholders and users of integrated reports and the required types of information.
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Introducing the capitals and the interrelations among them.
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Outlining the benefits and the requirements associated to the adoption of <IR> by SMEs.
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Helping readers understand and interpret the information disclosed by an integrated report.
>> External link:
Springer book related to the INTEREST project ©2021: Development of Integrated Reporting in the SME Sector, Case Studies from European Countries.
Editors: Joanna Dyczkowska, Andrea Szirmai Madarasine, Adriana Tiron-Tudor.
