An exploratory case study on the barriers, challenges and benefits of sustainability reporting by small and medium enterprises (SMEs) in South Africa

Abstract

SMEs in South Africa and other developing countries have been slow to take up sustainability reporting. This qualitative study is aimed to study the challenges and barriers faced by SMEs, together with the potential benefits for SMEs participating in this type of reporting. It also makes recommendations about how SMEs can participate in and benefit from sustainability reporting. The study shows that indeed there are several challenges in terms of getting involved in sustainability reporting for SMEs. On the other hand, the research finds that the SMEs who are already participating in sustainability reporting can show the benefits of engaging in sustainability reporting and that these benefits far outweigh the challenges. The participating SMEs are also able to show that they have attained a competitive advantage as a result of engaging in sustainability reporting. If, however, sustainability reporting is to become entrenched into SMEs, a few changes need to take place to address challenges such as lack of information about sustainability reporting and its benefits, lack of regulations and more importantly, lack of awareness about sustainable development. As the South African government begins to respond to issues such as climate change, skills development and good governance, it will become necessary for them to introduce regulations to manage this risk. It is also highly possible that in the next few years, reporting will become a regulatory requirement that SMEs will be forced to comply with to continue to do business. The SMEs who are already practising sustainability practices will benefit from being first movers. Those SMEs who start sooner rather than later will already have the internal resources and capabilities to take advantage of the legislative environment. They will have a head start over their rivals in terms of gaining competitive advantage.