ESG indicators and SME: towards a simplified framework for sustainability reporting

The transparency of corporate disclosure represents one of the fundamen-tal pillars of corporate governance. Sustainability reporting is a corporate practice of public reporting of company economic, environmental, and social impacts and of its contributions towards sustainable development. Sustainability reporting helps inter-nal and external stakeholders to make informed decisions and to be aware of how the company approaches sustainable development. Alongside mandatory information, companies provide voluntary information with the aim of differentiating themselves from competitors and making themselves better known by investors. However, this practice is still uncommon for SMEs. This is understandable given the complexity of existing information frameworks – which combined offer more than 5000 KPIs – and competing data requests from customers and financial institutions. All of this makes the collection of sustainability data extremely difficult and costly for SMEs, which have limited financial and human resources for such spending. In this context, the need emerges for ESG (Environmental, Social, Governance) rating methodolo-gies to be adapted to SMEs. In fact, although the main nonfinancial rating agencies are now focused on large companies, ESG criteria are entering the investment decisions of an increasing number of funds, and an increasing number of investors are called upon to apply these parameters to companies of smaller size. Small and medium-capitalization companies have peculiarities that require an ad hoc approach to be correctly represented by an ESG assessment. This work, therefore, aims to analyze the state of the art through a review of the scientific and grey literature on ESG criteria and their applicability to SMEs and to develop a conceptual model for identifying sustainability KPIs and ESG criteria for SMEs.