{"id":3911,"date":"2019-07-31T08:49:23","date_gmt":"2019-07-31T08:49:23","guid":{"rendered":"https:\/\/cafr.sdone.ro\/en\/?p=3911"},"modified":"2019-07-31T08:49:24","modified_gmt":"2019-07-31T08:49:24","slug":"benefits-of-integrated-reporting-for-small-businesses-and-not-for-profit-organizations-npos","status":"publish","type":"post","link":"https:\/\/www.cafr.ro\/en\/benefits-of-integrated-reporting-for-small-businesses-and-not-for-profit-organizations-npos\/","title":{"rendered":"Benefits of Integrated Reporting for Small Businesses and Not for Profit Organizations (NPOs)"},"content":{"rendered":"\n
\"\"\/<\/figure>\n\n\n\n

by Matteo Pozzoli, member of the IFAC SMP Committee and \nJohnny Yong, Technical Manager \u2013 Global Accountancy Profession Support \n(GAPS), IFAC | July 22, 2019 | <\/p>\n\n\n\n

Integrated reporting (IR) represents one of the most recent \ninnovative approaches to corporate reporting. One of the important, \nsometimes underrated, implications of this idea is that IR is not only \nabout drawing up a management report. An integrated report is the output\n of a value creation journey that starts with integrated thinking<\/a>,\n which is an active consideration by an organization of the \nrelationships between its various operating and functional units and the\n \u2018multiple capitals\u2019<\/a>\n that the organization uses or affects. Integrated thinking leads to \nintegrated decision making and actions that consider the creation of \nvalue over the short, medium, and long term.<\/p>\n\n\n\n

The underlying \ncorollary is that the implementation of IR can lead to change in the \nentity\u2019s strategic focus and the identification of material issues \nimpacting the entity\u2019s sustainable success over time. In many parts of \nthe world, enterprises apply IR to satisfy non-financial disclosure \nrequirements (see Trends in Disclosing Non-Financial Information<\/a>). Others adopted an integrated approach voluntarily.<\/p>\n\n\n\n

The International Integrated Reporting Council (IIRC) has developed the International Integrated Reporting Framework<\/a>\n which, as of today, constitutes an important but non-authoritative, \nprinciples based reference for entities wishing to adopt IR. This \narticle considers two specific features: (a) the adoption of IR by \nsmall- and medium-sized entities (SMEs) and the role played by small- \nand medium-sized practices (SMPs); and (b) the development of IR and the\n contribution from the analysis of the various best practices (as a form\n of benchmarking), again with specific relevance to SMEs and \nnot-for-profit organizations (NPOs).<\/p>\n\n\n\n

The benefits of IR for SMEs and not-for-profit organizations (NPOs)<\/strong><\/p>\n\n\n\n

IFAC, together with the IIRC, published \u2018Creating Value for SMEs through Integrated Thinking \u2013 The Benefits of Integrated Thinking<\/a><\/em>\u2019<\/em> and also explored some of the many benefits that arise from SMEs\u2019 adoption of IR<\/a>.\n However, there remains a perception that IR is more appropriate for \npublic companies with a wide range of stakeholders. But, what about \nprivate companies and, more precisely, SMEs? They can benefit from an \nintegrated approach: combining an understanding of business strategy \nwith a multi-capital lens while promoting long-term perspectives and \nholistic enterprise story telling.<\/p>\n\n\n\n

For SMEs, communicating the key\n factors that affect their ability to create value through an integrated\n report can help build much needed stakeholder trust around past and \nfuture performance. An SME could benefit from this change of approach, \nfor example, when it desires to re-position itself in the market, aims \nto obtain financial resources from capital lenders and investors, \ndecides to investigate a new strategic orientation, aspires to \nreconsider its business model and\/or its organizational structure or \naims at investing in corporate social responsibility.<\/p>\n\n\n\n

Another \nimportant consideration in the application of IR to SMEs concerns the \nadaptability of such approach for NPOs. Many NPOs are required to \nproduce social reports or other similar reporting. IR is a model that \ncan be adopted by different entities. Even mission driven entities can \napply the integrated approach as they are required to optimize the use \nof available resources and to report on operations to their \nstakeholders. This is a principle of good governance, which can \ndetermine a transparent process and, consequently, promote a virtuous \nprocess by which a solid relationship is created with the community the \nNPO operates within.<\/p>\n\n\n\n

The Evolution of IR <\/strong><\/p>\n\n\n\n

The\n second issue in this article concerns the development stage of IR for \nSMEs and NPOs. The transition to integrated reporting is likely to take \nseveral reporting cycles to achieve, so can be a big commitment for \nsmaller organizations with limited resources at their disposal. It is \ntherefore important that SMEs and NPOs first understand the strong \nbusiness case for integrated reporting implementation. Considering \nuncertainty of cost, the perception of increased reporting burden and \nthe potential to improve internal management processes will enable a \nbetter understanding of value drivers and ultimately improve \ncommunication with stakeholders.<\/p>\n\n\n\n

Integrated reporting is \nprinciples based and can be applied in a proportionate and scalable \nmanner to all organizations regardless of their size and sector. \nProducing an integrated report is an iterative process and organizations\n will learn through experimentation. From this perspective, it seems \nreasonable that when an SME or NPO adopts the IR Framework, they enrich \nthe good management practices within the organization. These entities \nneed not worry about preparing a report that may fall short of \ncompliance with the IR Framework at the initial stage. It\u2019s worth \nbearing in mind that IR is a general concept that requires commitment by\n management for implementation. IR can accommodate different business \napproaches to produce an ideal output over time. Getting it right for \nthe first time is not critical to IR\u2019s ultimate success. A progressive \nand forgiving approach towards the implementation of IR could reduce the\n unnecessary efforts and costs (as well as possible management stress). \nPractitioners, especially SMPs, can usually support the SMEs or NPOs in \nthis journey.<\/p>\n\n\n\n

Examples<\/strong><\/p>\n\n\n\n

The IR Framework includes guidelines and, thanks to the IIRC\u2019s initiatives, an examples database<\/a>\n that help contribute to the evolution of good practices in this area of\n reporting, albeit on a voluntary basis. This goes a long way to support\n the application of IR, be it for large organizations or SMEs and NPOs.<\/p>\n\n\n\n

Included\n herein are examples of integrated reports by SMEs and NPOs that \ndemonstrate approaches to integrated thinking and reporting taken by \norganizations in these sectors.<\/p>\n\n\n\n

Manufacturing<\/em><\/p>\n\n\n\n
Monnalisa S.p.a<\/a><\/td>A\n garment producer for children with head office in Arezzo, Italy. \nTurnover for 2017 was at Euro 47 million. The average number of \nemployees in 2017 was 264.<\/td><\/tr>
Dellas S.p.a<\/a><\/td>A\n manufacturer of diamond tools for granite, marble and agglomerate based\n in Lugo di Valpantena, Italy. Turnover for 2017 was at Euro 17 million.\n The average number of employees in 2017 was 122.<\/td><\/tr>
Stafer S.p.a<\/a><\/td>A\n manufacturer of accessories for the mechanical and automatic handling \nof the rolling blind in Italy. Turnover for 2016 was Euro 11 million. \nThe average number of employees for 2016 was 60.<\/td><\/tr><\/tbody><\/table>\n\n\n\n


Services<\/em><\/p>\n\n\n\n
Anglo African Investments Ltd<\/a><\/td>A\n diversified technology investment firm based in Mauritius with a \nturnover of MR 273 million (or US$8 million) in 2017. Total number of \nemployees was 90 in 2017.<\/td><\/tr><\/tbody><\/table>\n\n\n\n


Academy\/ Foundation (NPOs)<\/em><\/p>\n\n\n\n
Pasqual Maragall Foundation<\/a><\/td>With\n the vision of achieving a future without Alzheimer\u2019s, this Foundation \npromotes and develops the ultimate biomedical research to contribute to \nthe decisive solutions to the Alzheimer disease. For 2017, it had a \nbudget of Euro 6.6 million with a staff of 75 at the headquarters based \nin Barcelona.<\/td><\/tr>
Arguden Governance Academy<\/a><\/td>This\n Academy was founded in Istanbul with a mission to help improving the \nquality of governance in public, non-profit, private and international \norganizations. It recorded a revenue of TL 819,000 (or US$ 155,000) in \n2017. The Academy operates through a Board with four full time employees\n but relies heavily on volunteer support.<\/td><\/tr><\/tbody><\/table>\n\n\n\n


Readers\n are encouraged to share other SME or NPO examples that they are aware \nof so that the profession as a whole will benefit from such resources.<\/p>\n\n\n\n

Readers may also be interested in the following Gateway articles and videos that have been published in the past few years:<\/p>\n\n\n\n