The standardization of down-Streamed Small Business Social Responsibility (SBSR): SMEs and their sustainability reporting practices

DOI: 10.4018/IRMJ.2017100103



Copyright©2017,IGIGlobal.CopyingordistributinginprintorelectronicformswithoutwrittenpermissionofIGIGlobalisprohibited.

The Standardization of

Down-Streamed Small Business Social

Responsibility (SBSR):

SMEs and Their Sustainability Reporting Practices

Laura Corazza, Department of Management, University of Turin, Turin, Italy

ABSTRACT ScholarshavebeguntoinvestigatetheprevalenceofCorporateSocialResponsibility(CSR)within thecontextofsmallandmedium-sizedenterprises(SMEs).Thispaperstudiestheimplementation ofnon-financialsustainabilityreportingtoolsinItalianSMEsaspartoftheirSmallBusinessSocial Responsibility(SBSR)longsupplychaincompactwithlargemultinationals.Thefundamentalfinding ofthisworkisthatbecauseofthedown-streamingeffectofCSRreportingfromlargecompanies tosmallones,SMEsapproachsustainabilityasastandardmanagementpractice.Thesampleis composedof73Italianmulti-certifiedentities(SA8000/ISO14001/EMAS)thathavepublishedtheir sustainabilityreportonlinebetween2011and2013.PrincipalComponentAnalysis(PCA)wasused todiscoverthreeotherwiseun-observableunderlyingeffects. KEywoRDS

Corporate Social Responsibility, CSR, PCA, Principal Component Analysis, SMEs, Social and Environmental Accounting, Social and Environmental Management Systems, Sustainability Reporting

INTRoDUCTIoN In2014,almost99.8%ofallEuropeanenterprisesweresmallandmedium-sizedenterprises(SMEs). TheseSMEsemployedaround87millionpeopleandcontributed57.6%oftheoverallEuropean economicvalueadded(EUCommissionwebsite,2016).Atthesametime,SMEsareresponsible forupto70%ofthetotalenvironmentalpollutiongeneratedontheplanet(Eurobarometer,2012). ThesefactshaveledtoagrowingawarenessofSMEs’significantimpactinfinancialterms,butalso intermsoftheirglobalnaturalenvironmentandsocietalimpacts.Moreover,theentireplanetary economyrevolvesaroundthecontributionsofSMEs. ThedefinitionofwhatconstitutesanSMEvariesamongcountries,andwithinthesamecountry overtime(Ferenhof,Vignochi,Selig,Lezana,&Campos,2014).Fromamongtheavailabledefinitions, theEuropeanCommissionhasadoptedRecommendation2003/361/EC,whichdefinesanSME accordingtothreecriteria:staffheadcount,annualturnoverandannualbalancesheet.Inparticular, anSMEisidentifiedasanenterprisethatemploysfewerthan250employees.Fromthefinancial perspectivetwocriteriaareadded:anannualturnovernotexceeding50millioneuros,andanannual

balancesheettotalnotexceeding43millioneuros.Inaddition,anSMEmustbeanautonomous enterprise,thatis,anindependententity.Anindependententityisafirmwithoutgovernancelinks betweenthefirmitselfandothercompanies.Meaning,itdoesnothaveanownershipstakeinother enterprises,andnootherenterpriseshavearelevantstakeinit.Ifthereareanycross-ownership linkages,theyarenotabletoexertarelevantinfluenceonthegovernancestructureoftheSME. AsstatedbytheGlobalReportingInitiative(GRI)andtheUnitedNationsEnvironmentProgram (UNEP),multinationalcompanies,becauseofeconomicglobalization,engageSMEsintheirsupply chain.TheseSMEsuppliersareactuallyoftenresponsibleforproducingthebulkofthecomponents andservicessoldunderthemultinational’sbrands(GRIandUNEP,2008).Nowadaysmostofthe economic,environmentalandsocialimpactsofamultinationalbusinessoccurthroughthislongsupply chain,andmostoftheseimpactsarethenobviouslyduetoSMEs’behaviors(Carboneetal.,2012). Theretrievalofsupplychainsustainabilitydataisoftenacostlyanddifficultprocessbecause ofthelackofsystematizationofdatacollectionandreportingwithinSMEs.Aspointedoutby Vázquez-CarrascoandLópez-Pérez(2012),althoughthereisagrowingtendencytofocuson CorporateSocialResponsibility(CSR)aspartoftheself-regulatorystrategies,tools,andpractices ofsmallbusinessenvironments,therearefewstudiescriticalofthetoolsaimedatSmallBusiness SocialResponsibility(SBSR),andfewerstillontheissuesofunderstanding,measuring,improving andreportingsustainabilityperformancesattheSMEmicro-scale. ThepurposeofthisresearchistoaddacontributiontoSBSRstudiesbyshowinghowatendentious globalstandardizationpracticearisesinSMEsfacingsustainabilityreportingbecauseofanearlier internalcommitmenttosustainability.ThemethodologyappliedinthispaperisPrincipalComponent Analysis(PCA).PCAisastatisticalmethodusedtoanalysetheinterrelationshipsbetweenalarge numberofvariables.Itseekstoexplainthesevariablesintermsofasmallernumberofvariables, calledprincipalcomponents,withaminimumlossofinformation. ThesampleforthestudywaschosenfromamongItalianmulti-certifiedentities.Bymulti-certified wemeananentitythathasreachedatleastoneManagementSystemcertificationonenvironmental issues-theInternationalStandardsOrganization(ISO)internationalstandardforenvironmental management,ISO14001,ortherelatedEco-ManagementandAuditScheme(EMAS)-andalsoa socialenvironmentalsystemcertification,thatis,theSA8000certificationbySocialAccountability International(SAI).Theselectedorganizationsneedinadditionhavepublishedasustainability reportonline,andhavehadfinancialinformationavailableintheItalianbusinessdatabaseAIDA. Thetemporaldimensionis2013bothforfinancialandsustainabilityinformation.Thecompanies selectedhavealreadybeeninvestigatedinanearlierstudywithrespecttotheirdifferentmanagerial behaviorstowardsCSRbyScagnellietal.(2013).Theearlierstudydidnothoweverfocusonthe standardizationofsustainabilityaccountingandreportingpracticesaddressedherein. ThispaperseekstogiveusefulinsightstopractitionersastotheeffectiveapplicationofSocial andEnvironmentalManagementSystems(SEMS)toincreaseSBSR.Onthescientificlevel,this studywouldliketocontributetotheongoingdebateontheneedfornewresearchesandstudieson theeffectsofstandardizationofsustainabilitypracticesattheSMElevel.

SMALL BUSINESS SoCIAL RESPoNSIBILITy (SBSR)

TwodecadesofstudiesonSBSRhavedemonstratedafallacyintheuseoftoolswhendownsizing CSRtosmallerscaleSMEorganizations(Tilley,2000;Spenceetal.,2003a;FullerandTian,2006; MaurilloandLozano,2006;Jenkins,2004,2006;Cambra-Fierroetal.,2008).Eveninthecase oftoolscreatedandtailoredforSMEs,iftheSMEentrepreneurdoesnotimmediatelyrecognize explicitshorttermbenefits,thentheeffectivenessofthetoolsisstillcompromised(M.P.Johnson &Schaltegger,2016).ThemostwidelyadoptedtoolsarethosepertainingtothefieldofSocialand EnvironmentalManagementSystems(SEMs),whichareaimedattransparencyandethicalpractices (Testa,Gusmerottia,Corsini,Passetti,&Iraldo,2015).

Comparedtomanagersoflargefirms,thesmallmanagers/owner/entrepreneursrunningSMEs oftendonotpossessallthenecessarytools,resourcesandknowledgetoimplementresponsible sustainabilitystrategies.Enderle(2004)notesinadditionthatinternationalstandardstoimplement CSRmayproveinappropriateforsmallerfirmsbecausetheyhavebeendevelopedthinkingoflarge businesses(Enderle,2004).Bürgi(2010)hasnotedthatSEMsdohelpSMEsaddressCSRissues inmanagementpractices,andFatokieChiliya(2012)andUhlaneretal.(2012)havetestedthisin empiricalways.WhenSMEshaveinterestsinsustainabilityissues,theymayalsobeencouragedto formalizetheirenvironmentalmanagement,andthisinturnmayhelpthemraisethequalityoftheir internalmanagement.However,alackofformalization,especiallyundercommunicationperspectives, stillremains(Graafland&Smid,2015). Relativelyfewstudieshavebeenmadeabouttheroleofsustainablereportingpractices.Thereis asubstantiallackofdata,andasaresultthesestudiesaremostlyqualitative(Borga,Citterio,Noci,& Pizzurno,2009;DelBaldo,2010).Ofcourse,asseveralauthorshavepointedout,thereasonforthe laginthedevelopmentofamoreformalizedquantititativeapproachissubstantiallyduetothecore featuresofSMEs.First,informality,or“pro-activity,”becauseitusuallyoriginatesfromthevoluntary involvementonthepartofSMEs.Then“explicitSmallBusinessSocialResponsibility”(SBSR), becausethereisotherwisegeneralyalackofdisclosure(MattenandMoon,2004;FullerandTian, 2006;DelBaldo,2010).Third,“dependency.”whichisunderstoodasaclosecorrelationbetween theactionsofthesustainabilitydriverwithinthecompany,oftentheownerortheheadofafamily ifthecompanyisalsoafamilybusiness,andthepersonalattitudesoftheowner(Testaetal.,2015). Theauthoritarian-paternalistnatureoftheSMEowner-managerisaconsequenceofthenatureof asmallerSMEbusiness.Itisdefinedbyhighpersonalization,localareaoperation,anddependency oninternalsourcesofcapitaltofinancegrowth(Vyakarnametal.,1997).Related,Spenceand Rutherfoord(2001)haveproposedfourframesofprioritywhenpursuingthepurposesoftheSME. Theseprioritiescanbeidentifiedas:profitmaximization;subsistence;enlightenedself-interest; andsocialcapital.Withinthesepriorities,SMEscompeteinaturbulenteconomicenvironment thesameaslargercompanies.However,SMEsfacetheircompetitivepressureswithmorelimited cashflow,lessknowledgeandtime,andfewerhumanresources.Becauseofthis,SMEsareoften skepticalwhenfacedwithbusinessethicsdilemmasandcomplexsustainabilityprograms,andtend toperceivethemasabusinesscostwithnorelatedbenefit(Spenceetal.,2003).Thisimpliesthe attitudeofSMEmanagersisoftentoadoptamyopicviewofthefuture(LepoutreandHeene,2006) whilemultitaskingbusilyduringtheirday-by-dayroutines. AnSMErequiresanintenseparticipationoftheowner-entrepreneurinallareas,despiteoftheir lackofspecializedknowledgeincertainareas(Nooteboom,1994).Theirconstantinvolvement, passionandmotivation,andtheirpersonalrelationswiththecommunity,areallessentialpillarsfor thelong-termsuccessofSMEs.Theircommunityrelationsarebuiltontrust,reputation,andasense ofconsensusandlegitimacywithidentifiedstakeholders.Theserelationsrepresentthelifebloodof SMEs,butonlyifproperlymanaged.SMEsseekouttheseintangibleassets,andtherelatedresources andcompetenciesareoftenembeddedwithinthesocialcapitalofthefirm(Perrini,2006;Williamson, 2006;RussoandTencati,2009;DelBaldo,2010;RussoandPerrini,2010;Fassinetal.,2011).Atthe sametime,therelationshipsbetweentheowner-managerofanSMEandtheiremployeesareoftenfluid, whichenablescontrolactivitiestobeperformedmoreinformally(Rivera-LirioandMuñoz-Torres, 2010).Theintangibleassetsalsoincludethecompany’sstrategicprofile,intermsofinitiativesand integratedbehaviorsscopedwithintheSME’soverallbusinessstrategy;thecultureoftheenterprise; theprocessesofaccountabilityaimedatimprovingsystemsforcollectinganddiffusinginformation; andthesystemsofcorporategovernance,thatis,thesystemsfordecision-makingprocessesand internalcontrol(DelBaldo,2010). Onthetheoreticallevel,theglaringlackoftheoriestoexplainSBSRhasbeennotedbyseveral papers.OnlyrecentlyhastheworkofSpence(2014)andWickert(2016)triedtoaddressthisissue. Spence(2014)providesafeministperspectivedrivenbytheethicsofcare.Wickert(2016)presents

thepoliticalroleofCSRinSMEsassomethingthatgoesbeyondconventionalnotionsofCSR,asone basedonthetraditionaleconomicroleofcorporationsactingassubstitutesforpublicgoodproviders (Spence,2014;Wickert,2016).

SBSR AND THE SoCIAL REPoRTING PRACTICES

ThenumberofSMEsthathaveshownaninterestintakingpartonsustainabilityinitiativesandin voluntarysustainabilityorintegratedreportingactivitiesisconstantlyincreasing(GRIandUNEP, 2013).Ingeneral,thedecisiontojoinagivensustainabilityinitiativeortosetupspecificplansor actionsinsustainabilityispersonalanddependsonthemoralsandpersonalvaluesoftheowners ofthefirm. Thetermsocialaccountability,orthesynonymsocialaccounting,involvesthepreparationand publicationofanaccountthatreportstheinteractionsandactivitiesofacompanywithreferenceto theenvironment,employees,localcommunity,customersandotherstakeholdersand,ifpossible,the consequencesoftheseinteractionsandactivities(Gray,1992).Accountabilitythen,whentakenas thereportingoftheresultsderivedfromsustainableactionsinatransparentway,reflectsthestrategic importanceofbusinessobjectivemeasurements,andcanhelpachievecompetitiveadvantages(Castka etal.,2004;Perrini,2006;DelBaldo,2010;AhmadandSeet,2009).Conversely,otherstudieshave demonstratedthatalackofexternalcommunicationoverthesustainabilitycommitmentofSMEs haspublicopinionandstakeholders’effectsthatcarryovernegativelyintotherelationshipsbetween themandthecompanyitself(Hörisch,Johnson,&Schaltegger,2015;Jansson,Nilsson,Modig,& HedVall,2015;Johnson,2013). ItiswellrecognizedthattheparticipationofSMEsinglobalsupplychainshasbeeninfluenced inrecentyearsbytheCSRactionsofglobalbuyers,andthatinbothdevelopedandlessdeveloped countries.ItisevenmorecommonforlargeglobalcompaniestorequiretheSMEsthatcomprisetheir supplychaintoembracesustainabilityinacost-effectivewaysoastocementtheircompetitiveness. Inthelastseveralyears,globalbuyersthathavejoinedglobalCSRactions,programsandguidelines havealsostartedtoaudittheirlongsupplychainonsustainabilitytopics.Theseauditsofthesupply chainhaveinturnencouragedSMEstoadoptmanagerialtoolsdesignedtoprovidetheinformation theirbuyersrequire.Thetoolsselectedcanbedividedincategories:accountingandreportingtools; managementaccountingandcontroltools;governancetools;socialcapitaltools;managementsystems certificationtools;networktools;andpolicyandstrategytools(Johnson,2015).Recently,software andweb-toolshaveevenbeendevelopedthatseektoapplyavendorratingoncompetitiveness,and toprovidedataansweringtothecallbytheBaselCommitteeonBankingSupervision(BCBS)to evaluateandreportthereputationalriskofbanks(Johnsonetal.,2016). SocialandEnvironmentalReporting(SER)istheprocessofcommunicatingthesocialand environmentaleffectsofanorganizations’economicactionstoparticularinterestgroupswithinsociety, andtosocietyatlarge.Socialaccountingmaycontainfinancialinformation,butitismoreoftena combinationofqualitativeandquantitativeinformation.Socialaccountingextendstheaccountability oforganizationsandcompaniesbeyondthetraditionalroleofprovidingafinancialaccounttothe ownersofcapital(Gray,etal.,1996;Grayetal,1997). Scholarshavepointedoutacorrelationbetweencorporatecharacteristicsandsocialresponsibility disclosures.Howeverthesestudieshavefocusedonlargeandoftenpubliclylistedcompanies(Cowen, Ferreri,Parker,1987;Carboneetal.,2012).ConcerningSMEs,Rusconi(1988,2006)statedthere aretwopossiblereportingmethods:thedraftofasimplesocialreport(withsome“low-cost”data), oranaggregatedreport(supplychainreportingorareportthatcombinstheinterestsofagroupof SMEs).Still,studiesonsustainabilityreportingatthesmallerscaleofSMEsarefairlyrare,andthe presentcontributiondirectlyaddressesthisgapintheliterature. Previousresearch(Olitzky,SchmidtandRynes,2003)hasfoundapositivecorrelationbetween environmentalandsocialperformancethroughameta-analysismethodology.Butfewstudieshave

beenmadeusingPCAaimedatmappingCSRperformancewhilefocusedsquarelyonsupplychain levels(Carboneetal.,2012).Furthermore,thereisasubstantiallackofstudiescompletelycoherent withtheargumentationofSBSR,andthosethatdoaddressthetopichavebeenmostlyqualitative (Battaglia,Bianchi,Frey,&Passetti,2014;Borgaetal.,2009;DelBaldo,2010). METHoDoLoGy Inordertosetupasoundfoundationforthestudy,asamplecomposedofuniformlydefined multi-certifiedSMEorganizationswasused.Multi-certifiedcompanieshavequality,socialand environmentalcertificationslikeSA8000,ISO14001orEMAS,ISO9001,andOHSAS18001. SA8000,ISO14001andEMASrequirespecificreportingdutiestoinitiallyobtainandlaterrenew themanagementprocesstheycertify.ThismakesthesampleusedtocarryoutthisstudyonSMEs homogenous,eventhoughSMEsasawholearearatherheterogeneousgroup(Hillary,2004;Ferenhof etal.,2014). Inordertohavetheirmanagerialsystemscertified,certifiedorganizationsneedhavereported theirsustainabilityperformanceindicatorsusingaformalcommunicationtool,beitforsustainability reporting,orasanenvironmentaldeclarationorcommunication.Consequently,thesecompanies havesomeexpertisewiththeprocesses,resourcesandknowledgeneededtoreportsustainability information.Soitisfromananalysisofthesereportsthatwereasonablyderiveourassessmentof thestateoftheartstatusofsustainabilityreportingbySMEs,includingthefactorsinfluencingthe reportsandthescopeandextentofthereportingitself. Becauseofthelackofearlierstudieswithwhichtocomparetheoutcomesofthisstudy,an exploratoryapproachwasused.ThedatabaseusedhasItalianfirmswhichhaveobtainedatleast onesocialmanagementsystemcertification(SA8000)andoneenvironmentalmanagementsystem certification(ISO14001orEMAS),andhaveinadditionpublishedtheirsustainabilityaccounts online,beitintheformofreports,communications,ordeclarations. Thefirststepwasthemergeofthreedistinctdatabases,thoseofISO,EMASandSAI. Thesecondstepfocusedonthecollectionoftheaforementionedsustainabilityreportsforthe period2011-2013,butonlyaftertwoyearssincecompletioninordertoincludeanybiennialreports. In2011,thesecompanieswere357innumber. Next,theeconomicandfinancialanalysisdataforthe357companieswasobtainedfromBureau vanDijk’sAIDAdatabasesandanalyzed. Especiallywhenfirstattempted,sustainabilityreportingmayincurconsiderablecostsfordata compilation,thereportingproceduredefinition,thedataassurance,andthepublicationoftheresults. Toovercometheproblemconcerningtheretrievalofthesemanyreports,wecollectedonlyreports thathadbeenpublishedonline,atotalof73. Theresultingstudysampleof73SMEscanbedefinedashomogeneousinthesensethatallthe firmshaveimplementedthesamestandardprocedurestoobtaintheircertifications;theysuccessfully capitalizedontheirknowledge,asevidencedbyhavingobtainedtheircertification;andtheyalso werewillingandabletopublishtheirreportsonline. InordertoevaluatethesocialreportingprocessaspartofSBSRstrategies,themodelof contingentforcesproposedbyContrafatto(2008)wasapplied.Contrafatto(2008)suggeststhat theprocessofsocialreportingisinfluencedbycorporate,contextualandorganizationalfactors. Table1includesarationalizationofthevariablesconsideredforthisstudy,basedontheirprevious adoptionintheliterature. AsevidentfromTable1,apartfromthetraditionaleconomicandfinancialvariables,we addedseveralvariables.Oneforregulatedreporting,calledRR,whichreferstotheuseofstandard guidelinesforthepreparationofasustainabilityreport-betheymandatoryreportsormanagement systemdrivenreports(EMASreports,ISO14001policies,SA8000filings).Onecalled“self-defined methodology,”forvoluntarynon-financialreportsthatdonotfollowasharedreportingframework

oramodeldeterminedbyexternalbodies,butmayfollownationalreportingframeworks.And oneforvoluntarysustainabilityreportsthatfollowaninternationalsharedreportingframeworkor internationalguidelines,forexampleGlobalReportingInitiative(GRI)orUnitedNationsGlobal Compact(UNGC)principles. APrincipalComponentAnalysis(PCA)wasperformedoneachdataset.Thenthesenormalized datasetsweremergedtoformauniquematrix,andaglobalPCAperformedonthismatrix.The individualdatasetswerethenprojectedontotheglobalanalysistoanalyzeandoutlinecommunalities anddiscrepanciesbetweenvariables.Afterthis,severalvariableswereevaluatedasnotfundamentalin explainingthetotalvariance,andthedatabaseaccordinglyreducedtocompriseonlythosevariables thatsimplifythecomplexityoftheobservationwithoutmateriallossofinformation(Eastment& Krzanowski,1982).The7moresignificantexplanatoryvariablesidentifiedarereportedinTable2. ThecorrelationmatrixinTable3showstheinitiallinkagesbetweenthevariables. PCAresultsconfirmthatthestructureofourdataisconsistentovertime,thusallowingforglobal analysis.Table4reportsthefactors,theeigenvaluesforeachdimension. ThescreeplotinFigure1showstherelativeimportanceofthefactors,theeigenvaluesofthe correlationmatrix,indescendingorderofmagnitude,andthepercentageofcumulativevariance. Basedonthemethodologyapplied,threedimensionsexplainthemajorityofthevariance,as illustratedinTable5andFigure2.

Table 1. Rationalization of the variables considered

Type of Factor Name Literature _Linkage Type of Variable and Acronym Corporate Corporate_dimension Gray,Kouhyand_{Lavers(1995)} Totalrevenues(euros)[TR]_{Numberofemployees(numerical)[NE]}

Corporate Companyage Roberts(1992)Robertset.al

(2006) Yearoffoundation(numerical)[YF]

Corporate Economicandfinancial performance Cowen,Ferreri, Parker(1987) Gray,Kouhyand Lavers(1995) Totalrevenue(euros)[TR] Totalassets(euros)[TA] Networth(euros)[NW] Totalleverage(rate-numerical)[LEV]

Contextual Natureandlevelof_reporting

Adams(1999, 2002) Guthrieand Parker,(1989) Useofstandardguidelineregulatedreporting[RR] Sustainabilityreportingreferredtoanintl.Standard(5) Sustainabilityreportingreferredtoanationalstandard oraself-definedmethodology(4) Mandatorycommunicationbasedontheguidelinesof thesocialandenvironmentalmanagementsystem(3) NumberofaccountedforKeyPerformanceIndicators (KPIs)(number)[NKPI] EasinessintoinformationretrievalNo.ofclickbetween company’swebsitehomepageandsustainabilityreport onthewebsite(number)[EI]

Organizational Experience Hibbitand_{Collinson(2004)}

Yearofthefirstcertification[FCY]andtypeof certification(yearandstringvariable)[TFCY] Timelapsebetweenfirstcertificationandsecondone (numberofyear)[TLFSCY] Organizational Internalmicro-process: -Stakeholder engagement -Externalassurance Adams(2002) Numberofidentifiedstakeholder(number)[NS] Presenceofstakeholderengagementactions(binary) [SE] Presenceofexternalassurancecontrols[EA]

DISCUSSIoN AsseeninTable5,thefirstcomponentcalledF1receivesitsmajorcontributionsfromregulated reportingRR,thenumberofstakeholdersNS,andwhetherthereisstakeholderengagementSE.The pervasivecredibilityoftheregulatedreportitself,thenumberofstakeholdersidentifiedinthereport, andthepresenceofrelationshipswiththestakeholdersexplainthefirstcomponent.Allthreeof thesevariablesarelinkedtoSBSRandingeneraltoCSR.Thegrowingawarenessoftheimportance ofstakeholderengagementshiftstheattentionoftheSMEsfromtraditionalreportingstructures andchannels(“one-waycommunication”-companiesjustpublishingareportwithoutengaging withstakeholders)towardsmorestakeholderdialogueandothereffectivecommunicationchannels (“two-waycommunication”).ThefirstcomponentF1reallyreferstotheopennessandtransparency

Table 2. The 7 explanatory variables

Variable Observations Min Max Mean Std. Dev.

NE 73 0,000 1413,000(*) 156,027 259,536 RR 73 3,000 5,000 3,164 0,441 NKPI 73 0,000 153,000 15,644 20,692 NS 73 0,000 23,000 4,370 5,111 SE 73 0,000 1,000 0,644 0,482 NW 73 -116665000 41976096 3360663,781 5668571,863 LEV 73 -37,454 2820,149 198,601 556,304

(*) There is only one record of a company meeting the cutoff criteria of annual turnover under $50 million euros and annual balance sheet under $43 million euros, but it exceeds the 250 maximum number of employees limit as it is a large cooperative where shareholders are at the same time also employees.

Table 3. Correlation matrix with the initial linkages between variables

Variables NE RR NKPI NS SE NW LEV

NE 1 -0,084 0,098 -0,026 -0,004 0,156 -0,162 RR -0,084 1 0,416* 0,231* 0,148 -0,071 0,077 NKPI 0,098 0,416* 1 0,233* 0,136 0,028 -0,046 NS -0,026 0,231* 0,233* 1 0,488* -0,083 0,154 SE -0,004 0,148 0,136 0,488* 1 -0,170 0,169 NW 0,156 -0,071 0,028 -0,083 -0,170 1 0,126 LEV -0,162 0,077 -0,046 0,154 0,169 0,126 1 *α=0,05

Table 4. The eigenvalues for each dimension

F1 F2 F3 F4 F5 F6 F7

Eigenvalues 1,894 1,262 1,130 1,044 0,651 0,532 0,487

Variance(%) 27,058 18,032 16,138 14,914 9,304 7,600 6,954

ofthecompany.ThemorestakeholdersinfluenceandengagedintheSME’sbusinessactivities,the morethereporthasbeendetailedaccordingtointernationalstandardsguidelines.Inasensethen, thisprincipalcomponentF1alsodealswithreputationalcapital. Table5alsoshowsthatthesecondcomponentF2instrictlyinfluencedbythenumberofemployees NEandthenumberofaccountedforKeyPerformanceIndicatorsNKPI.Thenumberofemployeesand thenumberofKPIsaccountedforreflectstheabilityofthecompanytoacquirespecificknow-how aspartofthesocialreportingprocess.Asnotedabove,withinSMEs,employeesarerecognisedas importantstakeholders.ThisfactisevidentinthemeanvalueofregulatedreportingRR.Table2shows themeanofRRisonlyaround3.164,veryneartotheinferiorlimitof3.0giventothosecompanies preparingtheirsustainabilityreportsaccordingtosolelysocialandenvironmentalmanagementsystem guidelines.ThisfindingisevidenceforthetrapdooreffectofdownsizinglargecompanyCSRreporting totheSMElevel.ItappearsthereisasortofstandardizationinsocialreportingpracticesinSMEs. SMEsareawaretheirsocialandenvironmentaldeclarationisanormativeaspectofthesustainability certificationstheyhave,buttheydonotgofurther.Theirreportsaregenerallystandardizedand

Figure 1. Scree plot

Table 5. The three factors F1, F2 and F3 explain most of the variance

Dimension F1 F2 F3 F4 F5 F6 F7 NE 0,012 0,405* 0,024 0,370 0,173 0,008 0,008 RR 0,388* 0,087 0,006 0,263 0,040 0,214 0,003 NKPI 0,314 0,365* 0,001 0,062 0,002 0,255 0,001 NS 0,574* 0,011 0,007 0,096 0,093 0,008 0,210 SE 0,484* 0,060 0,000 0,218 0,001 0,000 0,236 NW 0,046 0,108 0,651* 0,004 0,152 0,019 0,020 LEV 0,076 0,226 0,442* 0,030 0,190 0,028 0,008

uniformintheirapplicationoftheguidelines.Thereportcontentvariesasthecorporatedimension varies.Forexample,themoreemployeesarecoveredbySA8000,ISO14001andEMAS,themore thecompanyprovidesindicatorsonthem.Thisdimensionisindeedexplainedbytheknow-howand theuseofmanagementsystemsaspropermanagementaccountingtools.Whencompaniesarewell awareoftheuseofenvironmentalmanagementsystems,thentheyraisetheirqualityandmorefully exploitthepotentialityoftheirmanagementsystem(Graafland&Smid,2015). Table5showsthethirdcomponentF3isinfluencedmostheavilybynetworthNWandtotal leverageLEV.ThesevariablesreflectthefinancialandcapitaldimensionsoftheSME.Asalso indicatedbytheliteraturepresentedabove,F3expressesthepressurefromscarceresourcesand limitedbudgetsontheSME’sbehaviorstowardsthesocialaccountingimplicitintheircorporate socialresponsiblitysustainabilityreportingpractices. CoNCLUSIoN Theuseofintegratedmanagementsystemsallowscompaniestodealwithsocialandenvironmental issuesthroughmorestandardizedandformalizedprocesses.Ifacompanyacquiresasocialand environmentalmanagementsystemcertification,itmustcreateareportthatshowsitactuallymeets theguidelinesitissupposedtoadhereto.Forexample,ifafirmhasanEMAScertification,ithas toreportandaccountbasedontheEMASreportingschemerequirements. Whereastheadoptionofasustainabilitycertificationprogramisavoluntarydecision,once adopted,theenvironmentalaccountinglinkedtothecertificationbecomescompulsory.Andifafirm thendecidestoaddothervoluntaryKeyPerformanceIndicators(KPIs),andsoaccountforother societalorenvironmentalissues,itmakesprogresstowardsamorevoluntaryapproachtosocial accounting.

Wenoteagainthatthetraditionalandinternationalsustainabilityreportingguidelines,suchas theGlobalReportingInitiative(GRI),theUnitedNationsGlobalCompact(UNGC),andtheCarbon DisclosureProject(CDP),werecreatedwithlargecorporationsinmind,whereasSMEspreferto exclusivelyreportonlyinformationmandatorilyincludedintheirmanagementsystemstandard guidelines,roughly15indicators.SMEstendtoonlyreportdatamandatedtobeincludedincertified managementsystemreportsbecausetheyareannuallyauditedontheirreportsbythirdparties.Butto auditothervoluntarydata,companieswouldneedtopayadditionalfeestotheexternalauditors.Still, forSMEs,theauditedvalidationofreportabledataisfundamentalbecausethefirstusersoftheirdata aretheirmaincustomers,evenifonlyindirectlythroughtheirmembershipinalongsupplychain. TheresultsofourPCAanalysisshowninTable2suggestthattheeconomicandfinancial dimensionsNWandLEVonlyweaklyinfluencetheattitudetowardsreportingactivity.Regardless oftheheterogeneityofthegroupofSMEsselected,companiespublishingasustainabilityreportdo notgobeyondtherequiredcertificationscheme.Theydonotadoptamorecomprehensivevisionof reporting.Instead,theItalianSMEsinthisstudysticktothesimplestreportingpossible,onethatlimits itselftoonlymeetingthereportingrulesrequiredtoobtainandmaintaintheirmultiplecertifications. ThisobservationissharedbytheworkofJohnsonetal.(2016),whichfoundthatGermanmicro-sized companiesalsosticktoshort-form,pre-definedsustainabilitycheck-lists. OnesurprisingresultshowninTable3isthestronglinkbetweenstakeholderengagementSEand thenumberofstakeholdersNS.ThegeographicalproximitybetweenSMEsandtheirlocalenvironment appearstoexplaintheabilityofSMEstointeractcloselywiththeirstakeholdersandobtainfeedback inputfromthemtowardstheirreports.Itappearsthenthatinordertobettermanagethecomplexity ofreportingsustainabilityissuesinthelongsupplychain,theSMEsanalyzedhereinseemtoadopt anintegratedapproachthatcombinessocialandenvironmentalaspects.Thistie-incouldrepresenta significantthreattothevoluntarinessofCorporateSocialResponsibility(CSR)becausecertification asrevealedhereinseemstoencourageamorestandardizedandsouniversalapproach.Additional researchisneededtopuzzleoverthecomplexityofSmallBusinessSocialResponsibility(SBSR), andmoreovertostartthinkingaboutSBSRfromthegroundup,possiblyfromalessimposedand regulatedperspective,andmorefromamarket-drivenperspective.

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