Thursday, February 22, 2007

SMEs: How much is too much?

An interesting article appeared last week in the Financial Times "Slimmer accounting rule book targets small companies." It describes the decision by the International Accounting Standards Board (IASB) to create a second version of their 2500 page accounting standard specifically for small and medium sized enterprises in emerging markets - they cut it down to only 320 pages.

IASB states they did this as a move to try and push for a single set of accounting rules worldwide to make accounts cheaper to produce and easier to read. It is hoped that this provides a boost to smaller companies in Asia, Africa, and EU accession countries specifically to up their financial accounting practices and make for a more stable and competitive economy.

We have had this same discussion over the years in the GRI network. Although our sustainability reporting guidance is far less complex and comprehensive than its cousins on the financial accounting side, it is still about 100 pages long (including protocols) and contains 79 indicators in total (50 are designated as core).

Although some have called for a lighter version of the GRI Guidelines made for SMEs specifically, the overall feeling - including from the SMEs themselves - is that the diversity of SME businesses, sizes, and location means it is better if SMEs can pick and choose from the whole GRI indicator collection to custom make their own set of indicators to report on - rather than being told that they MUST report on a specified list of 10, for example. The importance of flexibility and diversity means a principles-based approach to reporting must override a perscriptive based approach.

Instead we have focused our energies on creating resources that help SME's navigate the reporting process. Check out GRI's new handbook by clicking the title of this blog.

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