Spanish SME companies’ readiness for European sustainability reporting standards compliance

Abstract

Purpose – This paper aims to enhance the understanding of the readiness of listed small and medium-sized enterprises (LSMEs) for the adoption of the forthcoming European Sustainability Reporting Standards for LSMEs. To achieve this objective, the study examines the current level of voluntary disclosure among SMEs, categorizes them into clusters and identifies the factors influencing these practices within the framework of agency theory and the resource-based view. Design/methodology/approach – Based on hand-collected data, a voluntary sustainability disclosure (VSDI) index was developed and scored, followed by a cluster analysis and an ANOVA test to identify the factors that significantly influence the level of voluntary disclosure in Spanish SMEs. Findings – The results reveal a generally low level of voluntary sustainability reporting, particularly regarding materiality assessment disclosures and they are consistent with some of the recent research findings that seek to explain VSDI in SMEs within the framework of the same theories. Factors such as the client’s business model, accounting standards adopted in financial reporting, as well as size and profitability contribute to the classification of the identified disclosure levels. Between the two analyzed periods, 2022 and 2023, a slight increase in the level of voluntary disclosures has been identified. Originality/value – The originality of this study lies in the first-time use of a measure for the level of VSDIs in SMEs, which considers not only environmental, social and governance thematic sections but also the materiality assessment process and its outcomes. It is also a novelty, the introduction of the value chain profile as an agency characteristic, with the potential to influence the level of voluntary sustainability information disclosure. This study offers valuable insights into the reporting areas that require enhanced support, emphasizing the crucial role of preparers, stakeholders and standard setters in facilitating the future adoption of mandatory standards by LSMEs.