INTEgrated REporting for SMEs Transparency, the INTEREST project supported by the ERASMUS+ European programme
 

INTEREST News & Events

Nowadays, economic development in the newest EU Member States arrived to a point (what happened earlier in the older EU Member Sates) where SMEs have to work together with large, multinational companies, they need investments from different finance providers and other stakeholders, and must internationalise themselves.

To comply with these challenges SMEs must build understanding of and trust in their business.
Therefore, they have to communicate a clear, concise story of their value creation process overarching their wholesale business activities.
Here comes the story to the holistic corporate reporting approach, which is called Integrated Reporting (IR), a product of integrated thinking on all key elements of the business.

Corporate reporting is not the strong point of SMEs but the above-mentioned needs impose rapid evolution. To display the whole value creation process of the SME, much beyond a financial report, is indispensable for building investors’, finance providers’ and other stakeholders’ confidence.

IR is of common use in the world of large (>500 employees) national or multinational companies (See: EU Directive 2014/95, Annex 6).
The Directive does not impose the same requirement on SMEs to avoid overburdening them.
The original idea of the INTEREST project is to try to derive from this experience the more adaptable elements possible to SMEs and transform them to guidance and training materials for SMEs on IR practical issues.

However, preliminary research pointed out that international organisations have been trying and will keep trying to pursue research for elaborating IR frameworks for undertakings. So the members of our partnership got into contact with such organisations: International Integrated Reporting Council (IIRC), Global Reporting Initiative (GRI), International Federation of Accountants (IFAC), European Federation of Accountants and Auditors for SMEs (EFAA) etc. in order to get access to their results. It was pointed out by the members of our consortium that very different, sometimes conflicting IR frameworks are proliferating, which constitutes a major impediment to a converging evolution of IR on businesses.

The partnership got the information that key standard setters and framework developers have been invited recently by IIRC to cooperate in order to stirring better alignment in the corporate reporting landscape, integrate financial, and non-financial reporting of the businesses.

To avoid any repetitions and overlaps with the above mentioned researches the partnership is not conducting research per se, but it builds on the research results produced and to be produced.

The major objectives of the INTEREST project

  1. To collate results on the different IR frameworks and derive from this a model Framework all SMEs can have easy access to. Since all IR frameworks operate on pre-defined financial and non-financial capitals – in most cases 6 capitals (Financial capital, Manufactured capital, Intellectual capital, Human capital, Social and relationship capital and Natural capital) but frequently same names cover different contents in different frameworks – to select and define unambiguously the capitals to use them in the model Framework for SME-IR.
  2. To compose a Guide for the SMEs defining the financial and non-financial capitals, quantitative and qualitative (narrative) key performance indicators (KPIs) on the whole value creation process. The Guide is to give practical instructions for SMEs how to edit their IR according to the new model Framework.
  3. On the basis of the Guide to develop gamified curricula for SMEs’ senior managers on one side and for students (future SME CEOs, accountants, mentors etc.) on the other. These are the two major target groups of the project.

Both the Guide and the course material aim to explain why integrated thinking and IR is useful, if not necessary to apply by an SME.
Instillation of integrated thinking in the entrepreneurial mind-sets is a high priority of the INTEREST project. This makes dissemination of the results especially important all the way down of the project implementation.

As it is outlined above, the general state of play of SMEs’ IR is quite inhomogeneous in the European countries and worldwide. National experiences are diverse; IR methodology frameworks form a clutter in the world of business; this makes international comparability difficult. So, to arrange this clutter and offer an easy access operational IR practice guide for the SMEs requires a transnational partnership.

Coordinator:

Dr. Péter Soltész and László Varga
BBS - Budapest Business School
29-31 Markó Street,
H-1055 Budapest, Hungary
INTEREST project
EU flag Erasmus+
This project has been funded with support from the European Commission under the ERASMUS + European programme.
This publication reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained therein.