Is It Time for Integrated Reporting in Small and Medium-Sized Enterprises? Reflections on an Italian Experience

Abstract

In recent decades, several contributions have addressed the debate on the diffusion of the integrated reporting approach. Why would a company decide to combine its financial, social and environmental performance into a single report? Does the integrated report represent the best tool of accountability and the best solution? If so, why and for which companies? Studies and empirical research in this area have been mainly addressed to large enterprises, neglecting the integrated reporting of small and medium-sized business (SMEs) and the factors that may facilitate the adoption and its effectiveness. Departing from these premises, the work focuses on the relationship between financial reporting and social, environmental and sustainability reporting both through a literature review and the empirical analysis, relative to a case-study and based on the action research methodology, which has been recently developed in the context of social and environmental research, through the direct involvement with the company under investigation. The paper aims to fill the aforementioned gap and to offer lines of reflection on the benefits capable of being derived from the adoption of integrated reporting (greater clarity about relationships and commitments, deeper engagement with all stakeholders, better decisions with economic, social and environmental merit and lower reputational risks) and their relationship with specific SMEs’ attributes. The empirical analysis – referred to an Italian SME, not listed, which is among the first to have introduced the global report- allows us to identify the benefits of integrated reporting and verifying how these stem from the orientation to sustainability and to the level of responsibility of the entrepreneur. The findings of the study suggest that when an authentic commitment to social responsibility, sustainability and transparent disclosure exists, the integrated report improves corporate disclosure and acts as a driver for stakeholders’ dialogue and stakeholders’ commitment.