Sustainability Reporting is defined in the Global Reporting Initiative Sustainability Reporting Guidelines (“GRI Guidelines”) as “… the practice of measuring, disclosing and being accountable to internal and external stakeholders for organisational performance towards the goal of sustainable development”.

There is no specific standard definition as to what constitutes an SME. These differ from country to country and even from industry to industry.

In South Africa the National Small Business Act, 1996 (Act 102 of 1996) in summarised form, defines an SME as any entity which has more than 10 employees but less than 200, generates revenue greater than R 500 000 but less than R 64 000 000 and has total gross assets (excluding fixed property) of greater than R 500 000 and less than R 23 000 000. Within these parameters classifications vary from Industry to Industry.

However what is clear, given how wide the parameters detailed above are, is that SME’s are a significant factor in South Africa’s economy. Their contribution to the overall Gross Domestic Product of South Africa and to employment numbers is one which is of vital importance.

Similarly, when considered as a collective, the potential environmental impact which SME’s can have is considerable. Further to this, as individual SME’s tend to look at their individual impact as being insignificant, environmental issues ,as a general rule, are not considered a priority to their ongoing business operations and sustainability.

There is however an increasing trend around the world to consider SME’s as a collective group when looking at sustainability issues. Although this should be one of the more important considerations in the operation of a business today, management of the majority of SME’s are unaware of the importance of this to business operations in the current economic climate.

So what can preparing a Sustainability Report and, in particular putting sustainability reporting processes in place, do for the business of an SME?

Firstly, as alluded to above, SME’s form a significant component in the supply chain of large multinational corporations. These large entities are being placed under increasing pressure to produce Sustainability Reports. A key element to such Sustainability Reports is to look at the sustainability issues surrounding an entity’s supply chain as most of the economic, environmental and social impacts of these large corporations arise from their supply chains. If the SME’s within the supply chain have put in place appropriate Sustainability Reporting processes, this creates transparency throughout the supply chain making it simpler for large organisations to fulfil their own Sustainability Reporting Components. In turn this over time should make it easier for these SME’s to become part of the preferred supply chain for larger entities.

Secondly, in order to facilitate the Sustainability Reporting process, entities are required to assess their risk profiles over areas covering the economic, environmental and social practices which they follow in their own working environment and this further forces them to identify and develop key performance indicators for their businesses.

As a natural result of this process, entities often identify areas where they can improve their overall business model in various areas such as:

  • Enhancing business reputation, trust and respect within their given marketplace.

  • Identifying new product offerings.

  • Identification of competitive advantage or the lack thereof

  • Overall Sustainability Awareness

  • Communication with Employees, Clients and Suppliers

  • Improvement of existing management systems

Thirdly, employees are to a greater and greater extent looking at entities that have a positive sustainability profile as being employers of choice. Entities with sustainability initiatives in place are viewing these as a vital component in their business models to attract and/or retain talented and key staff and are finding these assist in improving both staff commitment and performance.

Is Sustainability Reporting feasible for an SME?

The answer to this must be yes. Sustainability Reporting is a journey which does take time and effort but is not one to be viewed with trepidation or fear of enormous cost. The GRI, as an example, has in place the GRI Level C Report Template which is ideal for SME’s to use as a starting point for their Sustainability Reporting process. With appropriate consultation a template of this nature can very quickly start an entity on its Sustainability Reporting journey.

What is important to note is that an entity is not expected to reach Sustainability Reporting perfection immediately. It is an area which can be developed and improved on over time along with an entity’s business but if utilised effectively can definitely add value to any organisation large or small.

John Jones

Audit and Corporate Taxation Partner, Johannesburg