EU experts discussed challenges and opportunities of NFI reporting for SMEs, how to strike the right balance between information and transparency needs, and not adding disproportionate burdens at joint ACCA, AccountancyEurope, SMEunited and EACB event.
While the Non-Financial Reporting Directive currently only applies to larger companies, SMEs are increasingly required to provide Non-Financial Information (NFI) reports, through the supply chain, banks or as part of public procurement.
While there is growing interest from SMEs in playing their part in sustainable recovery and the Green Deal, alongside the benefits of NFI disclosure in that process, this can represent a heavy burden. So how do we balance the need to address the environmental, governance and social challenges against making sure we are not creating an additional burden for small businesses already heavily impacted by the current crisis?
As the European Commission is preparing its review of the Non-Financial Reporting Directive, and EFRAG just released its interim report on preparatory work for the elaboration of possible EU non-financial reporting standards, ACCA (the Association of Chartered Certified Accountants), Accountancy Europe, EACB (the Association of European Cooperative Banks) and SMEunited co-organised a web-conference entitled Small in size, big in impact: Can Non-financial information work for SMEs?
The lively discussion between EU experts from the European Parliament, the European Commission, the banking and accountancy sectors and SME representatives revolved around what NFI requirements SMEs are expected to face in the next few years and from where (legislation, banks, supply chains etc.); what are the practical challenges and opportunities for the SMEs; and how can SMEs cope with these requirements in the most organic manner.
Lara Wolters, MEP said: ‘The European Parliament believes that the time is right to go further than Non-Financial Information (NFI), as behavioural standards for companies are also needed. SMEs are not explicitly asked to make mandatory NFI reporting but they should have a role in the forthcoming legislative package, as they are the largest part of our economy and have an important position in the value chain of larger companies.’
The discussion confirmed that SMEs are impacted immensely by the current crisis and need support. Future policies should be organically integrated into the vision to future recovery. We also need to look at the broader sustainability picture within the SME sector, and non-financial reporting/ NFI is just one element of that.
Answering a question on how EU legislators can make sure that SMEs won’t be over-burdened by possible NFI requirements, Lara Wolters, MEP replied: ‘In order to get a good picture, legislation is important, bearing in mind proportionality and other important aspects. SMEs have specific challenges in terms of capacity and influence, but they can be more flexible, their value chains are easier to report on. Specific guidelines for SMEs will also be needed’.
Aleksandra Zaronina-Kirillova, head of SME Affairs at ACCA said: ‘Being a sustainable business does not mean sacrificing your return in investment, it can actually open new markets, customer segments and growth opportunities. This needs to be addressed today, together with the practical benefits of “ greening” the small business sector.’
EU policy and decision makers were encouraged to start with co-developing solutions to reduce any reporting burden while providing consistent, reliable and comparable sustainability information. It was also stressed that to succeed, collective efforts, from the small business associations, banks and the accountancy profession, is necessary to bring the sustainability agenda closer to the small business priorities.
‘The role of the accountants and small and medium practices( SMPs) often considered as trusted advisers by SMEs is crucial in this process because of the connection they have with the small business sector and the community. From the technical perspective the accountants and SMPs also have access to robust data about Small business sector that can support informed decision making that can support reporting and sustainable transformation’, Aleksandra Zaronina-Kirillova concluded.
You can watch the event here
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