University of Bayreuth promotes climate and sustainability reporting by SMEs

The joint project "KliK" is coordinated by the Business Administration Research Institute for questions concerning small and medium-sized businesses at the University of Bayreuth (BF/M-Bayreuth) at the University of Bayreuth. Project partners are the Finance and Banking Management research group at the University of Bayreuth, headed by Prof. Dr. Klaus Schäfer, and the bifa Umweltinstitut GmbH (bifa), headed by Prof. Dr. Wolfgang Rommel.

Listed large companies with more than 500 employees are already required by an EU directive to provide sustainability reporting in which the topics of climate protection and climate neutrality play a central role. The EU Commission has now proposed a further directive, the Corporate Sustainability Reporting Directive (CSRD), which also requires listed companies with fewer employees to carry out such reporting. In addition, non-listed small and medium-sized enterprises (SMEs) are recommended to regularly inform their stakeholders and, in particular, the lending banks about their handling of sustainability issues. It is these companies in particular that the KliK joint project aims to support in their future climate reporting.

"For many small and medium-sized companies, regular sustainability reporting is associated with particular challenges. Often, they lack the necessary competencies in terms of economic, social and ecological sustainability, but the instruments for systematic and time-saving collection of the relevant data are also insufficiently developed. This is precisely where the KliK project comes in: Based on empirical studies, we want to develop guidelines that help small and medium-sized companies with standardized and transparent climate reporting," says Prof. Dr. Klaus Schäfer. At the same time, the project partners are aiming to establish an interdisciplinary network on the topic of sustainability that will bring together the commercial, trade and financial sectors. The network will be based in Bavaria, but will operate throughout Germany.

The first step will be to investigate which methods and tools are already being used by large companies for their own climate and sustainability reporting. This will also address the question of the extent to which the experience of these companies can be transferred to small and medium-sized enterprises. A framework will then be developed specifically for SMEs, with which the economically, socially and ecologically sustainable performance of SMEs can be presented in a standardized, transparent and comparable manner. The limited capacities of SMEs are to be explicitly taken into account in order to avoid excessive demands. Important individual aspects of the project relate to the benefits of such systematized climate and sustainability reporting – for example, the influence on company valuations, on the creditworthiness of SMEs, on the granting of loans and on the risk management of investors – is to be specifically analyzed. Joint evaluation workshops with companies will serve to continuously review and optimize the results.

Overall, "KliK" aims to contribute to the development of a generally applicable sustainability standard that will enable small and medium-sized enterprises to produce an "ethical balance sheet" – equivalent to a financial balance sheet. With the aim of applying the system developed in practice and deriving recommendations for action in everyday corporate life, the research work will also apply the instrument of life cycle assessment. "Only when companies can provide information about their goals and performance in the area of sustainability as naturally as they can about their key financial figures will they be in a position to manage their business successfully in a sustainable manner. Only then, for example, can they take appropriate measures that lead to more efficient use of materials and energy and thus to improved climate and environmental protection. In this way, our project promotes corporate strategies that systematically incorporate green indicators into economic decisions," explains Schäfer.

The findings, which will be obtained over the next two and a half years, will serve the German government and the relevant ministries as a scientific and at the same time practical basis for the implementation of the national Sustainable Finance Strategy, which the German government launched in May 2021.