It’s a well-known fact that SMEs and entrepreneurs provide the backbone to economies around the world. Indeed, SMEs employ more than two thirds of the global private sector workforce and provide more than 80% of net job growth.
But it is also well-known that a significantly high proportion fail before they can get off the ground. Half of start-ups fail within just five years in the UK alone. And those that do survive in the longer term are often so focused on day-to-day survival and necessary short-term measures that they are not always able to achieve their full potential.
With this in mind it was clear to see why the Turkish B20 Presidency created the new SME & Entrepreneurship Taskforce at the beginning of the year to tackle the critical issue of lending and other fundamental obstacles that must be addressed if this sector is to flourish.
As a core partner to the IIRC and with strong support from our CEO Charles Tilley, CIMA took part in the Taskforce to ensure that integrated reporting and thinking was on the agenda. As one of over 100 other members we focused specifically on the issue of lending and the group’s ‘Access to finance’ recommendation because of the very real role <IR> has to play.
By attending a number of international roundtables we liaised closely with the IIRC and global advocates to lobby the B20, other members and knowledge partner Accenture, on the critical need to highlight <IR> within their white paper of recommendations which has subsequently been taken to the G20.
And our reasons for doing so were very clear. Integrated reporting can enable SMEs to communicate effectively with lenders and tell the story of how – by focusing on their full value proposition including critical pre-financial information – they are a safe long term bet.
When I personally spoke with the other members and B20 about the need for SMEs to have a more integrated approach to how and with whom they create value, I was very clear on the need for integrated thinking. Which is, in effect, management accounting.
To thrive in the long-term SMEs must ensure they are focusing on the right information from across the business to take the right decisions to create value over time. Critically they must use information to generate insight on what will create value that goes well beyond pure financials.
Examples I used included that of Imphala Clothing, an SME based in South Africa, that has grown in the last ten years from an ailing company with 40 employees to a thriving business with well over 400 staff by taking an integrated approach. By focusing efforts on the wider stakeholders and ‘capitals’ critical to its success the owners have developed a stronger understanding of their own business model and the risks and opportunities alive to them. They have also been able to communicate their business model and how they create value to their core stakeholders, which include local banks and lenders.
This detail resonated well with the Taskforce and you can read more about CIMA’s own thinking via this paper authored by our thought leader Nick Topazio.
Next steps include sharing the much wider value integrated reporting and thinking can bring to SMEs and entrepreneurs around the world. For while lenders are a key stakeholder, so too are employees, global customers and the wider communities within which they operate. And if SMEs can communicate and operate effectively with all of these people to co-create value it will ultimately drive a stronger economy and better business. It will also drive a stronger society.
Katie Scott-Kurti – @KSKurti