Benefits of integrated reporting to SMEs demonstrated

A new report led by Deakin University researchers has highlighted the benefits of adopting integrated thinking and reporting for SMEs.

In the report Empowering Global SMEs for Future Success – Exploring how SME business performance can be improved through integrated thinking and reporting approachesDeveloped with support from the Association of Chartered Certified Accountants (ACCA) and Chartered Accountants Australia New Zealand, Deakin shows that integrated reporting and integrated thinking techniques are credited with bringing about transformative change in culture, operations and financial performance.

The report also highlights the fact that this approach has already been adopted by some of Australia’s leading organizations such as Lendlease, Cbus and Australia Post. However, research continues to show that very few SMEs have decided to follow suit.

“Our report shows that active intervention is needed to engage SMEs in integrated reporting – led by government, technology providers and the accounting profession – because they have too little time to do this themselves,” Professor Peter Carey, Director of Deakin’s Integrated Reporting Center, said. “Right now, rising inflation and interest rate hikes, supply chain disruptions, the energy crisis and limited access to finance are hitting SMEs in all countries.”

‘If we cannot increase the productivity of SMEs in the next few years, our economy will go backwards,’ added Professor Carey. “The large-scale adoption of integrated thinking and reporting among SMEs could help catapult national and global economies into a new era of growth and prosperity, and insulate them against future adverse impacts.”

The principles of integrated reporting were set out in a framework developed by the International Integrated Reporting Council in 2013 and currently administered by the International Financial Reporting Standards Foundation (IFRS Foundation).

‘Although the framework has so far mainly been adopted by larger companies, it is designed for companies of all sizes and types, including for-profit, public and not-for-profit organisations,’ said Professor Carey. “Integrated thinking and reporting is defined by a more open and inclusive approach to decision-making and communication across the organization. It encourages greater collaboration within companies and with partner companies, leading to more informed and considered decision-making, as opposed to traditional silo-based organizational structures.

“A critical element of integrated thinking and reporting techniques is the consideration of non-financial factors – such as environmental impact or the value of human and intellectual capital – that affect a company’s ability to create and sustain value over the long term,” he continued. “Another key element is the inclusion of multiple stakeholders – from employees to suppliers, customers, funders and others – in communication and decision-making. Such an inclusive and transparent approach not only leads to better internal decision-making and a more forward-thinking culture, but also to commercial benefits by improving reputation with potential business partners and customers.”

The Deakin report recommends that government should empower and encourage SMEs to support and incentivize SME service providers to develop the skills, guides and tools to facilitate the adoption of integrated thinking and reporting. Also, as trusted advisors, accountants, either working in SMEs or providing professional services to SMEs, are invited to assess the potential benefits of integrated thinking and reporting for their SME clients and to encourage adoption where appropriate.

Small and medium-sized accounting practices (SMPs), in particular, play a critical role in helping their SMB clients adopt integrated thinking and reporting, Carey said.

“SMPs are SMEs’ most trusted and preferred advisors,” he said. “Therefore, it is a great business opportunity for them to help their customers to become more prosperous through holistic thinking. But the findings of our expert panel show that the first step for SMPs is to become accustomed to integrated thinking in the way they run their own practices. Only after SMPs apply integrated thinking to their own practice will they have the confidence to guide and support their SMB clients to adopt integrated thinking and reporting.” Benefits of integrated reporting to SMEs demonstrated

Adam Bradshaw

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