An approach to using the best-worst method for supporting sustainability reporting decision-making in SMEs

Abstract

This paper proposes a novel methodological approach to help decision-makers in SMEs evaluate and prioritize sustainability reporting (SR) standards. It can thus help SMEs to overcome some of the problems they encounter when initiating SR. In order to explore this decision in more depth, a set of decision criteria are identified, reflecting the costs and benefits that could be derived from SR adoption. The methodological approach proposed is based on the best-worst multi-criteria decision-making method and is tested on a sample of Spanish SMEs. The results highlight the relevance of SR for the legitimacy and reputation of the firm, with GRI ranking first among the SR alternatives. This research helps to strengthen the link between academia and business, by developing a tool with which firms can select a reporting standard. This is especially relevant for SMEs given their relevant role in national economies and their general failure to disclose such information.

Keywords:

• non-financial reporting
• GRI
• UNGC
• multi-criteria decision-making
• small and medium-sized enterprises

Acknowledgements

The authors would like to thank the managers and the experts who took the time to be interviewed for this project. A previous draft was presented at the 2020 WEARE international research group seminar. Comments received from participants are gratefully acknowledged. We are also grateful to the financial support received from the University of Córdoba for the development of this project. We are also grateful to Nicolás García-Torea for his observations.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 https://www.globalreporting.org/standards (accessed March 5 2020).

2 https://database.globalreporting.org/search (accessed March 5 2020).

3 These firms comply with the definition of an SME under EU criteria (EU recommendation L124/36 2003/361/CE), which establishes that SMEs “employ fewer than 250 persons and […] have an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million.”

4 The transposition into Spanish law of the 2014/95/EU Directive on non-financial information through Law 11/2018 affects companies with over 500 employees, and the law will be in force for companies with over 250 employees by 2021. The tendency is clearly towards the regulation of SMEs.