sustainability

Article
European Financial Services SMEs: Language in
Their Sustainability Reporting
Esther Ortiz-Martínez * and Salvador Marín-Hernández
Department of Accounting and Finance, University of Murcia, 3100 Murcia, Spain; [email protected]
* Correspondence: [email protected]; Tel.: +34-868-887-925




Received: 29 August 2020; Accepted: 8 October 2020; Published: 12 October 2020


Abstract: In this study we concentrate on the segment of small companies in the financial sector
in Europe. Services in this sector are developing rapidly and are not necessarily provided only by
traditional banks and financial companies. Many nonfinancial companies provide financial services,
and this may open the sector to additional risk. In this context, the aspects of both financial and
nonfinancial reporting are important and need to be taken into consideration as a whole to provide
a complex picture of a particular institution. The goal of this paper is to analyze sustainability
reporting according to the Global Reporting Initiative (GRI) by European financial services small
and medium-sized enterprises (SMEs). First, we conducted a descriptive analysis of the features
of nonfinancial information and its assurance, studying a sample of all European SMEs reporting
according to the GRI from 2016 to 2018. Then, we chose only financial services SMEs to apply
lexical analysis to their narrative reporting based on a corpus of 102,056 words. We conclude that
nonfinancial information does not have the same importance as traditional financial information,
and this sustainability reporting only complies with the minimum requirements. Thus, there is still a
long way to go in this field.

Keywords: European financial services; SMEs; nonfinancial information; sustainable reporting;

disclosure; lexical analysis; nonfinancial reporting

1. Introduction
Initially, disclosure of nonfinancial information was voluntarily assumed by companies,
mainly large global ones. The European Commission decided that the heterogeneity in this field
was an inconvenience for transparency and comparability, so it required the compulsory issuance of
nonfinancial information by big European groups [1]. Although the transposition of this directive
can vary and includes certain flexibility in order to be adopted by each Member State, no state has
extended the obligation of issuing this sustainable information to small and medium-sized enterprises
(SMEs) [2]. Bearing in mind that most of the companies in Europe are SMEs, it is important to study
the nonfinancial information that they provide because disclosure of nonfinancial information is a
way to improve companies’ transparency and communication of social and ethical practices. The first
contribution of this paper is to show which European SMEs are disclosing sustainability reports
according to the Global Reporting Initiative (GRI) voluntarily, which will add important knowledge to
this field of research traditionally based on large companies.
SMEs are the backbone of the European economy and are traditionally dependent on bank loans
for their external financing. The last financial crisis and now the situation generated by COVID-19
have increased both the need for financial resources and the difficulties in accessing it. The European
Commission highlights these difficulties and promotes the provision of suitable alternatives to bank
loans, so it enacted a specific regulation “to make SMEs more visible to investors and markets more
attractive and accessible for SMEs. Regulatory changes will keep the right balance between prudential

Sustainability 2020, 12, 8377; doi:10.3390/su12208377 www.mdpi.com/journal/sustainability

Sustainability 2020, 12, 8377 2 of 20

regulation and financing of SMEs, and between investor protection and tailored measures for SMEs” [3].
This sector is also in the spotlight of transparency after the recent crisis and has an additional obligation
with society to try to balance the unequal distribution of information [4]. We focused our study on
European financial services SMEs that provide sustainability reports according to GRI standards.
The development of this sector is linked to economic growth [5], and the effect of the recent crisis on
bank credit has increased the importance of other types of financial resources, such as trade credit [6].
Thus, the recent evolution of the financial sector has turned to SMEs to provide these services because
their traditional problems in obtaining financial resources can be more easily solved by other SMEs [7].
Although at first sight the small size can seem to be a limitation to operating in the financial sector,
it can be an important advantage because specializing as another SME or in retail services in order to
provide a more similar service is seen as a positive way to attract SMEs to this sector [7]. Banks and,
by extension, financial services companies are expected to approach climate risks and other risks
related to sustainability in the same way that they approach any other financial risks [8].
The development of regulations in Europe to require sustainability reporting by financial
services companies and obtain financial resources is under discussion, and recently a roadmap of
regulation on taxonomy-related disclosures was launched by undertaking the reporting of nonfinancial
information included in the European Commission’s Action Plan on financing sustainable growth [9].
European financial sector companies have their own regulatory and supervisory bodies that do not
depend on their size in terms of national and international financial compliance, although groups of
European listed companies are directly regulated by European Union–International Financial Reporting
Standards (EU-IFRS). IFRS also include requirements on disclosure as a response to the need for
high-quality standards in order to be endorsed in Europe. In this line, in 2018 the European Securities
and Markets Authority (ESMA) expanded its supervisory activities to nonfinancial information on
environmental, social, and governance (ESG) matters assessing compliance with IFRS, and in 2019 it
continued to focus on this disclosure. When speaking specifically about regulation of nonfinancial
disclosure, large financial services companies are mainly considered entities of public interest in each
Member State, which means that they are compulsorily required to disclose nonfinancial reporting
according to Directive 2014/95/EU, although the specific requirements depend on its transposition by
each Member State [1]. Hence, financial services SMEs that publish sustainability information do it
voluntarily because they are not within the scope of the directive, and this field is not regulated.
Background information on the field of sustainability reporting of financial services SMEs is
scarce and far from sufficient to develop requirements about it now when the European Commission
is working on a review of nonfinancial reporting. Studying nonfinancial information is also difficult
due to its mainly qualitative and narrative nature, which makes the information heterogeneous.
Although most companies are using GRI standards, this does not suppose comparable homogeneous
information. Hence, it is necessary to look for another type of methodology, such as lexical analysis,
which means studying the words used in the narratives of sustainability reports by European financial
sector SMEs, and this is the main objective of this study.
There are three main streams of theoretical framework on which this paper is based. The first
refers to disclosure of nonfinancial information and global trends in this subject, such as the general
use of GRI standards. Background information about the disclosure of nonfinancial information is
mainly based on large companies, which are accustomed to listing because they try to inform their
stakeholders and cope with the requirements established by the capital markets [10–12]. All global
trends in this field have been adopted by large companies, which are globally shaping the features
of disclosure with their voluntary reporting [13]. The generally accepted standards of nonfinancial
information are GRI standards because “the GRI guidelines seem to fulfil the need for standards
when reporting, identifying and implementing sustainable practices in the companies, since the GRI
framework has become, de facto, the standard in sustainability reporting around the world” [14].
Reporting according to GRI standards means there is some kind of homogeneous disclosure as well as
use of the GRI database [15–22].
Sustainability 2020, 12, 8377 3 of 20

Another important global trend in nonfinancial information is to verify it externally, or to gain

assurance, which is linked to disclosure of these issues [23]. All of these practices have been extensively
studied at the level of big companies, but background information on SMEs is scarce. Some studies
have tried to obtain differences in disclosure between big companies and SMEs [24]. SMEs have fewer
resources to report nonfinancial information [10], which does not mean that they do not behave in
a sustainable way or do not have a sustainable culture. Studies have also argued that SMEs adopt
better corporate social responsibility (CSR) practices, although they do not issue information about
it [25]. Until recently, all sustainable reporting was issued voluntarily, but for a few years the European
Union has made some kind of nonfinancial information on large companies compulsory [1], and some
SMEs issue this information due to the influence of large companies [26] or because they want to gain
a competitive advantage [12].
Currently, important work is being done to advise SMEs on how to voluntarily issue nonfinancial
information. This is being done by regulators (such as the European Commission), the regulators´
advisors (the European Financial Reporting Advisory Group (EFRAG) advises the European
Commission, focusing on disclosure requirements), and professional organizations (the International
Federation of Accountants (IFAC) and active organizations representing European SMEs such as
the European Federation of Accountants and Auditors for SMEs (EFAA for SMEs) and SMEunited).
However, the literature on sustainability reporting by SMEs is scarce and mainly based on a single
research method, surveys, which means there is a need for further studies that combine other methods
to add additional conclusions about this subject [27]. In this line, we point out the situation of voluntary
sustainability reporting according to the GRI by European SMEs, which provides another point of
view in a field of research traditionally based on large companies.
Second, there is background information focused on disclosure of financial services companies
due to their important role in the economy. This sector has traditionally been a determinant of social
issues of companies [28–30] because the information being issued depends on the kind of activity of
the firm. Financial services companies are vital agents in the economy, so they are a benchmark for
greater transparency [31–33]. They are also under special supervision and regulation in each country,
with specific requirements on top of those applied for nonfinancial entities [34], and there can be an
effect of the type of market economy on banks´ disclosure (coordinated or liberal market economy) [35].
This vital activity and the effects of the recent crisis have increased research on the relationship between
social responsibility and profitability in financial services companies and companies operating in
other sectors [36–43]. Nowadays, there is also “ethical banking” in comparison to “conventional
banking” because it is supposed to be more responsible and issue more information, both financial and
nonfinancial, in response to stakeholders [44,45]. Notwithstanding ethical banking, traditional banking
is supposed to take care of different aspects of its social responsibility such as consumer satisfaction [46]
and the opinions of providers of financial resources [47]. The European Commission is promoting
alternative financial plans for SMEs, trying to make it easier for SMEs to access markets [3], while not
forgetting investor protection, which also includes sustainable reporting to respond to the increasing
pressure to provide nonfinancial information [48].
The third theoretical framework is related to the methodology that we used in this paper:
lexical analysis. The area of study, disclosure of nonfinancial information, is complex because it mainly
consists of heterogeneous qualitative and narrative information. It is true that most companies are
using GRI standards, but this does not mean there is comparable information, as there are different
levels of adherence, and the formats of presenting the information can be quite diverse and flexible.
Hence, analyzing disclosure implies many problems, which the majority of studies have tried to solve
using content analysis or disclosure indices to measure this information (one recent study using indices
is [49]), or to check if there is any relationship between disclosure and other features, although there are
proven disadvantages when using this methodology [50]. Lexical analysis has been used in research
having to do with semantics and language in a variety of fields, such as in [51,52], which strictly refer
to language skills, as well as in analyzing qualitative narrative information in the field of economics,
Sustainability 2020, 12, 8377 4 of 20

such as [53], which examined statements by the chairman and CEO in BP plc´s Annual Report 2010 [54],
which used lexicometric analysis to study a corpus comprising speeches of European Central Bank
presidents; [55], which analyzed the results of open-ended interviews in the field of management;
and [56], which used lexical analysis to try to extract the sentiments of a group of people to predict
the movement of the stock market. Studies using lexical analysis of nonfinancial reporting are scarce,
and none has analyzed disclosure by European financial sector SMEs. Mainly they have focused on big
firms, such as [57], which conducted lexical analysis of annual reports of Shell plc.; [58], which reviewed
previous research on sustainable banks for three periods depending on the financial crisis and used
a descriptive bibliometric analysis and a co-word analysis to study the topics in the literature; [59],
which applied lexical analysis to environmental disclosure of listed companies; [60], which asserted
that the discourse included in the social reports of BP and IKEA was constructed to present the face that
the companies wanted to show; and [61], which created two corpora from seven corporate governance
reports of listed companies.
In this paper we use lexical analysis to study disclosure of nonfinancial information because it is
mainly narrative, and this is a good way to obtain conclusions from the text provided and the words
used to compose the narrative. The analysis is based on reporting by European financial sector SMEs,
and the background on this field is scarce. Sustainability reporting in the financial sector is mainly
inadequate and focused on financial aspects rather than on material issues, as highlighted by the UN
when studying sustainability reporting in the financial sector [62]. Only a few of these initiatives
of sustainability reporting provide a picture of all sustainability factors of financial companies [62].
In addition, the overwhelming majority of SMEs perceive sustainability reporting as a burden, and it
appears that SMEs either do not have the capacity to comply or are reluctant to invest the necessary
resources [63], so taking all this together, we propose the following research questions:
Research Question 1. Are European financial sector SMEs preparing their sustainability reports only in
accordance with minimum nonfinancial disclosure requirements?
Research Question 2. Are European financial sector SMEs still more influenced by financial terms in their
nonfinancial reporting?
The paper is organized as follows: first we describe the methodology, in the next section we
discuss the results, and in the final section we wrap up the paper and describe the limitations and
future research.

2. Materials and Methods

As the first goal of this paper is to point out the situation of sustainability reporting according
to GRI voluntarily disclosed by European SMEs, we obtained the sample from the GRI database.
Bearing in mind that GRI nonfinancial reporting standards are the most widely used all over the
world and that SMEs in Europe are not compelled to issue this information, this database is a suitable
resource to get these data. The search tool of the GRI database allows searches for nonfinancial reports
according to firm size, and specifically reports issued by SMEs. We made our search on 11 November
2019 with the following criteria: firm size—SMEs; region—Europe; report type—GRI-Standards.
Although previous versions of the GRI standards are included in the report type, these are the latest
ones, published by GRI on 1 July 2018, replacing the GRI 4 version (https://www2.globalreporting.org/
standards/g4/Pages/default.aspx). In total, 116 organizations and 157 reports were found. This means
that there are firms (or other types of organizations) that issued more than one report because these
standards refer to 2016, 2017, 2018, and even 2019. As shown in Table 1, there are many sectors in
which SMEs that issue nonfinancial information operate.
Sustainability 2020, 12, 8377 5 of 20

Table 1. Nonfinancial information issued by European small and medium-sized enterprises (SMEs)
according to Global Reporting Initiative (GRI).

Frequency % Frequency %
Real estate 16 10.2 Sweden 26 16.6
Tourism/leisure 3 1.9 Slovenia 1 0.6
Energy utilities 3 1.9 Belgium 3 1.9
Food and beverage
4 2.5 Andorra 1 0.6
products
Media 3 1.9 Poland 2 1.3
Healthcare services 7 4.5 Greece 5 3.2
Nonprofit services 15 9.6 Country Austria 5 3.2
Commercial
10 6.4 Portugal 3 1.9
services
Telecommunications 1 0.6 Russian 1 0.6
Textiles and apparel 6 3.8 Denmark 2 1.3
Sector Forest and paper
2 1.3 United Kingdom 1 0.6
products
Agriculture 4 2.5 Netherlands 8 5.1
Conglomerates 1 0.6 Norway 1 0.6
Mining 2 1.3 Spain 38 24.2
Waste management 8 5.1 Iceland 3 1.9
Aviation 1 0.6 Germany 18 11.5
Universities 1 0.6 Switzerland 8 5.1
Construction 7 4.5 France 4 2.5
Energy 7 4.5 Italy 20 12.7
Metal products 3 1.9 Finland 7 4.5
Healthcare products 6 3.8 Total 157 100
Household and
4 2.5 Real estate 16 10.2
personal products
Logistics 3 1.9 Agriculture and mining 6 3.8
Public agencies 2 1.3 Industry 34 21.6
Consumer durables 1 0.6 Services 38 24.2
Grouped
Sector Public agencies
Water utilities 1 0.6 6 3.8
and services
Construction
1 0.6 Nonprofit services 15 9.6
materials
Automotive 3 1.9 Financial services 9 5.7
Construction and
Financial services 9 5.7 8 5.1
construction materials
Railroads 1 0.6 Energy 7 4.5
Retailers 1 0.6 Other 18 11.5
Chemicals 3 1.9 Total 157 100
Other 18 11.5 – – –
Total 157 100 – – –

Second, if we focus on the financial services sector, due to the specific features that we highlighted
previously, we see that there are only nine reports to analyze. Hence, there are nine sustainability reports
by European financial sector SMEs according to GRI, which supposes an important number of reports
according to sector based on the breakdown in Table 1, and a percentage of reports (5.7%) important in
Sustainability 2020, 12, 8377 6 of 20

comparing nearly all sectors, with the exception of real estate, nonprofit services, commercial services,
and others. It was necessary to group the sectors in order to get higher percentages of sustainability
reports (grouped sector breakdown in Table 1).
Analyzing the language of these reports to see if they can be investigated more deeply, we find
(Table 2) that only four out of nine reports are written in English, and the others are in the mother
tongue. Although there is no English financial services SME in the sample, the majority of SMEs use
English to prepare this information. It does not seem logical to prepare nonfinancial information
according to GRI using the mother tongue in response to the market and stakeholders, but we must
bear in mind that we focus on SMEs, and their goals in disclosing this information may not be so global.

Table 2. Nonfinancial information issued by European financial services SMEs according to GRI.

Frequency % Frequency %
Sweden 1 11.1 2016 1 11.1
Iceland 1 11.1 Year 2017 4 44.4
Country Germany 2 22.2 2018 4 44.4
Italy 3 33.3 Total 9 100
Finland 1 11.1 Pdf 9 100
Format of Report
Belgium 1 11.1 Html 0 0
Total 9 100 In accordance core 7 77.7
Adherence Level In accordance
Swedish 1 11.1 1 11.1
comprehensive
Language English 4 66.6 GRI referenced 1 11.1
of Report
German 1 11.1 Total 9 100
Italian 3 11.1 Yes 3 33.3
Integrated Report
No 6 66.6
Total 9 100
Total 9 100

Hence, only four European financial services SMEs issued nonfinancial information according
to GRI standards and, fulfilling the methodological requirements, reported in English. We used all
the data obtained from the GRI database during this period, so the sample is the whole population of
European financial services SMEs that complied with GRI standards from 2016 to 2018 and wrote their
reports in English. From the point of view of the lexical analysis methodology, the studied sample has
the appropriate size, measured by the size of the corpus (number of words or tokens) compared to
previous valid studies [57,64,65].
We used SPSS to analyze the features of the nonfinancial information and its assurance, showing the
frequencies in absolute values and percentages. All features were taken from the GRI database.
After describing the features of the nonfinancial information issued by European financial services
SMEs in English, we studied the narrative discourse of these reports, as this is the best way to analyze
qualitative heterogeneous information. Hence, it was necessary to look for another type of methodology,
such as lexical analysis, which involves studying the words used in the narrative. The reports are in
PDF format in the GRI database, and to do a lexical analysis it is necessary to convert them into TXT
files. We used free PDF-to-text software (https://pdftotext.com/es/) to get four TXT files correspondingly
organized according to firm. These files made up the corpus for analyzing nonfinancial disclosure.
To analyze the narrative reporting, we used another statistical methodology that allowed us to compare
the disclosure to obtain the main characteristics of a corpus and find word patterns. The chosen tool
was WordSmith Tools 7 software (version 7, Oxford University Press, Oxford, UK), published by
Lexical Analysis Software and Oxford University Press since 1996. We used different utilities that this
lexical analysis software offers, which are explained in the Results section.
Sustainability 2020, 12, 8377 7 of 20

3. Results

3.1. Features of Nonfinancial Information and Its Assurance of European Financial Services SMEs
First, 5.7% of all European SMEs that voluntarily disclosed nonfinancial information according to
GRI (9 out of 157) operated in the financial services sector (Table 1). The most important sector in this
sample was real estate companies (10.2%; Table 1), and financial services occupies an important position
of nonfinancial information according to sector. The nine financial services companies that issued
nonfinancial information came from different EU countries (Table 2). There are two effects to bear in
mind. First, sometimes SMEs that need credit have to report on some sustainability aspects to align
with banks´ sustainability requirements. Second, these SMEs provide financial services, which means
they have to report on their own sustainability [63]. As previously pointed out, only four of the nine
used the English language to report their nonfinancial information, and five used their mother tongue,
although it is supposed that these reports are published for global stakeholders (Table 2).
To get an idea of the importance of this type of SME in Europe, we can highlight that two of
the four are asset managers, one in Germany and one in Finland. According to the European Fund
and Asset Management Association [65], in 2017 there were 380 asset management companies in
Germany (one of the leading European countries with this type of company) and 26 in Finland.
Hence, bearing in mind that these numbers are not detailed by company size, we can say that these
two SMEs are a good sample to study. The other two European financial services SMEs are a bank in
Iceland, a state-owned bank created from an old bank during the last crisis (a national bank, thus its
small size), and a provider of financial market infrastructure services in Belgium. The bank’s main
services are based on consumer, corporate, and private banking; mortgage loans, private equity,
wealth management, and credit cards. The German asset manager offers one global investment
platform focused on multi-asset alternative credit, real asset debt, and sustainable investments through
a digital environment for retail investors. The Belgian provider of financial market infrastructure
services acts as an international central securities depository (ICSD) and as the central securities
depository (CSD) for some other securities. Retail investors can also have direct accounts in their local
CSD. The Finnish asset manager offers asset management solutions and financial advice globally to
private investors, institutions, professional athletes, and artists. Finally, the analyzed companies offer
a valuable picture of the narrative discourse included in sustainability reports, taking into account
particular niches in the financial industry. At the same time, these reports are comparable because all
the companies are SMEs operating in the financial services sector, bearing in mind that the sector is
one of the most important determinant variables influencing nonfinancial reporting [66–68].
As regards the adherence level, most of the nine European financial services SMEs (80%) adjust
their information to the core level of GRI, which is referred to as the “in accordance” core, and prefer
not to prepare integrated reports (Table 2). Thus, it seems as if these companies try to issue nonfinancial
information following the minimum established standards as highlighted by the UN when it studies
sustainability reporting in the financial sector and says that it is not offering information about all
sustainability factors of financial companies [69], even more if we are speaking about SMEs.
Bearing in mind the assurance of this information (Table 3), two-thirds of these financial services
companies verified the disclosure externally. The predominant level of assurance is limited/moderate,
and the assurance scope is a specified section as defined by GRI. The assurance providers in the
analyzed reports were mainly accountants (55.5%); one-third of verifications were done by one of the
Big Four companies, KPMG (33.3%), and one-third were done following the ISAE 3000 assurance
standard. However, the financial services companies did not issue information about this assurance
after they verified their nonfinancial information (at least four of them, or 44.4%, did not have this
information available; Table 3).
Sustainability 2020, 12, 8377 8 of 20

Table 3. Features of nonfinancial assurance of European financial services SMEs.

Frequency % Frequency %
Yes 6 66.6 Type of Accountant 5 55.5
External
No 3 33.3 Assurance Not available 4 44.41
Assurance
Provider
Total 9 100 Total 9 100
Not available 4 44.4 Not available 5 55.5
Level of Assurance
Assurance Limited/moderate 5 55.5 Scope Specified sections 4 44.4
Total 9 100 Total 9 100
Not available 4 44.4 Not available 4 44.4
Assurance ISAE 3000 3 33.3 Assurance KPMG 3 33.3
Standard AA1000AS 1 11.1 Provider Deloitte 2 22.2
National 1 11.1
Total 9 100
Total 9 100

3.2. Lexical Analysis of Sustainability Reporting of European Financial Services SMEs

First, we used the WordList application to obtain the principal characteristics of the text analyzed.
The main features are shown in Table 4. Although the companies are in different countries and the
reports are from different years, these data are comparable because all are SMEs and operate in the
financial services sector. Finally, we analyzed 102,056 words, which are called tokens, and all together
are defined as a corpus. The size of the corpus, and thus of the sample, is appropriate to apply
lexical analysis (the number of analyzed words or tokens is always bigger than the corpus analyzed in
previous valid studies [57,64,65]).

Table 4. Principal characteristics of analyzed sustainability reports.

Types * Type–Token Standardized

Corpus/SME Country Year Words (Tokens) Sentences
(Distinct Words) Ratio (TTR) ** TTR
Corpus – – 102,056 7927 7.77% 40.63% 3800
SME1 Iceland 2018 38,753 4214 10.87% 38.01% 1423
SME2 Germany 2018 29,795 3659 12.28% 42.46% 1150
SME3 Belgium 2017 23,728 3570 15.05% 42.37% 725
SME4 Finland 2016 9780 1870 19.12% 41.37% 502
* Types: different words that are not repeated in the text. ** Standardized TTR: TTR that does not depend on different
text lengths.

It can be seen that the four companies are in different European countries. There are no big
differences between words in the reports of the last three years, except that in 2016 the reports were
much briefer than in the following years. This may be due to the early application of GRI standards
or to the fact that companies show greater effort “from year to year in giving more information in
order to comply with the transparency principle, or at least to give this appearance” [57]. The same
can be checked in the different words used in the reports, which are called “types” in this software,
and in the type–token ratio (TTR), calculated as different words over total words, which increases
when the number of total words decreases (Table 4). However, when the TTR is calculated without
considering the extension of the whole text, standardized TTR, the largest number of different words,
without repetition, is found in the latter reports, with the exception of the report of the Icelandic
financial services company, which seems to repeat words more frequently although the report is
the most extensive (more words and more sentences; Table 4). Perhaps more words are used to
say the same thing, and the opposite was the case in the 2016 report; fewer words were used to
say the important things, which were not repeated. Although, as mentioned, there is value in a
Sustainability 2020, 12, 8377 9 of 20

reporting narrative, that does not mean it is an extensive report because a sustainability report is not for
storytelling [70]. Previous studies on the relationship between disclosure length and greater readability,
transparency, or complexity were inconclusive [71] and were not focused on financial services SMEs.
The next tool used in the lexical analysis was the word list (results are shown in Table 5). This counts
the frequency of words used in the corpus, i.e., how often each word appears in the whole text, and their
percentage of use in the text. The position is the ranking of the most frequently used words. We included
in Table 5 the most significant frequent words for this analysis (the first position is included as an
example). Only the word “risk” appeared in more than 1% of the cases in the corpus (1.04%), in position
8, followed by “bank” in position 12 and “management” in position 20. To classify these most frequent
words, we created three groups: words that are basically related to financial meaning such as “risk”,
“bank”, “management”, “financial”, “capital”, “investment”, “business”, and “funds”; other words
that have to do with the core sense of nonfinancial information, such as “employees”, “sustainability”,
“board”, “environmental”, “committee”, “governance”, “pillar”, and “GRI”; a group with words related
to information and requirements, such as “information”, “compliance”, “reporting”, “disclosures”,
and “requirement”. This classification was based on the assignment of a certain term to a concept,
which can be done in specialized languages, as in this case, when analyzing sustainability reporting;
for example, the word “meager” is identified as a specialized term in the realm of finance, since it is
very commonly used in expressions such as “meager economic recovery” and “meager 10%” [71].
Although the word “pillar” is included in the financial group, it could also be included in the second
group related to nonfinancial aspects, which we called sustainable most frequent words. This is due
to the Basel II and III requirements, which ask for reporting on financial and nonfinancial items of
these kinds of companies, so it contains both dimensions of the concept, financial and nonfinancial.
Although these three groups of most frequent words were made following the assignment of terms
to concepts in specialized languages [72], sometimes some words refer to more concepts and the
assignment is not so simple.
The following results were obtained from the analysis of the most frequent words, shown in
Tables 6–8. The number of occurrences of the search word (hits), occurrences of each word per
1000 words, and their dispersion are calculated. To establish comparisons, it is better to use hits per
1000 words as a homogeneous measurement. As can be seen, “financial” words are used the most:
the occurrences per 1000 words were clearly the highest for these kinds of words. The most used
was “risk” (10.16 times per 1000 words), followed by “bank”, “management”, and then a sustainable
word, “sustainability” (3.75 times per 1000 words; Table 7) followed by other financial words:
“financial”, “capital”, “investment”, “business” (2.40 times per 1000 words), and then “employees”,
previously included in the group of sustainable words (2.29 times per 1000 words) and “GRI” (2.13 times
per 1000 words). This means that what counts the most in sustainable reports is the financial information
over the nonfinancial information, or at least the typical financial aspects of the business are highlighted
more with the use of the language. These companies do not seem to include sustainable words in
their vocabulary and, hence, in their culture. Although the four companies are in different countries
and operate in different niches of financial services, the results are similar when classifying the most
used words.
Analyzing the information on the use of these frequent words considering the four reports
separately, we can see that some of the words appear to be used more because they are used very often
in some reports, which increases the global frequency in the corpus. This is the case of the words
“risk”, “bank”, and “capital” (20.15, 18.23, 6.80 per 1000 words; Table 6), which occur frequently in the
report of the financial services company in Iceland. The word “sustainability” appears as the second
most frequent in this group due to its use in the Finnish company’s 2016 report, although it is only
used in three of the four reports (8.10 per 1000 words; Table 7). Something similar happens with the
word “employees”, whose use increases due to the Finnish company’s report (5.36 per 1000 words,
Table 7). The case of the word “pillar” deserves some reflection because, although it is a frequent word
in the corpus, the detailed analysis of the reports showed that it was only used in two, and essentially
Sustainability 2020, 12, 8377 10 of 20

only in one because the frequency of use in the other was very low. Thus, “pillar” was exclusively used
by the financial services company in Iceland in its 2018 report (Table 7). Another example is the term
“GRI”, which would be expected to appear in all of the reports, given that all are prepared according to
GRI standards, yet it did not appear in one report, which is one of the most recent ones (Table 7).

Table 5. Word analysis of sustainability reports.

Position Word Frequency %

1 The 5001 4.90%
8 Risk 1103 1.08%
12 Bank 899 0.89%
20 Management 566 0.55%
24 Financial 374 0.37%
26 Capital 356 0.35%
41 Investment 276 0.27%
44 Business 261 0.26%
45 Employees 248 0.24%
46 Sustainability 234 0.23%
52 Board 207 0.2%
53 Information 206 0.2%
69 Responsibility 157 0.15%
73 Compliance 153 0.15%
74 Reporting 147 0.14%
75 Disclosures 147 0.14%
76 Requirements 145 0.14%
77 environmental 145 0.14%
79 Committee 143 0.14%
82 Governance 135 0.13%
83 Pillar 134 0.13%
84 GRI 133 0.13%
86 Funds 131 0.13%
Sustainability 2020, 12, 8377 11 of 20

Table 6. Statistics of the most important financial words in sustainability reports.

Words Risk Bank Management Financial

Corpus/SME Hits * Per 1000 ** Dis. Hits Per 1000 Dis. Hits Per 1000 Dis. Hits Per 1000 Dis.
Corpus 1103 10.16 0.831 899 8.28 0.796 566 5.22 0.839 374 3.45 0.811
SME1 931 20.15 0.818 842 18.23 0.777 237 5.13 0.711 170 3.68 0.699
SME2 95 3.25 0.728 28 0.96 0.753 187 6.40 0.797 114 3.90 0.796
SME3 68 2.88 0.497 28 1.19 0.630 103 4.36 0.814 59 2.50 0.652
SME4 9 0.95 0.340 1 0.11 0.000 39 4.10 0.736 31 3.26 0.802
Words Capital Investment Business Funds
Corpus/SME Hits * Per 1000 ** Dis. Hits Per 1000 Dis. Hits Per 1000 Dis. Hits Per 1000 Dis.
Corpus 356 3.28 0.630 276 2.54 0.852 261 2.40 0.834 131 1.21 0.820
SME1 314 6.80 0.595 41 0.89 0.618 80 1.73 0.729 69 1.49 0.727
SME2 11 0.38 0.665 169 5.78 0.755 96 3.29 0.806 38 1.30 0.607
SME3 16 0.68 0.646 16 0.68 0.410 58 2.46 0.820 10 0.42 0.553
SME4 15 1.58 0.435 50 5.26 0.653 27 2.84 0.669 14 1.47 0.646
* Hits: number of occurrences of the search word. ** Per 1000 words: number of occurrences per 1000 words. Dis., dispersion.

Table 7. Statistics of the most important sustainable frequent words in sustainability reports.

Words Employees Sustainability Board Environmental

Corpus/SME Hits * Per 1000 ** Dis. Hits Per 1000 Dis. Hits Per 1000 Dis. Hits Per 1000 Dis.
Corpus 248 2.29 0.802 234 3.75 0.732 207 1.91 0.732 145 1.34 0.733
SME1 12 0.26 0.184 – – – 99 2.14 0.563 1 0.02 0.000
SME2 92 3.15 0.688 147 5.03 0.722 62 2.12 0.718 64 2.19 0.612
SME3 93 3.94 0.704 10 0.42 0.528 37 1.57 0.498 57 2.41 0.608
SME4 51 5.36 0.551 77 8.10 0.682 9 0.95 0.340 23 2.42 0.489
Sustainability 2020, 12, 8377 12 of 20

Table 7. Cont.

Words Committee Governance Pillar GRI

Corpus/SME Hits * Per 1000 ** Dis. Hits Per 1000 Dis. Hits Per 1000 Dis. Hits Per 1000 Dis.
Corpus 143 1.44 0.648 135 1.24 0.730 134 1.78 0.785 133 2.13 0.810
SME1 103 2.23 0.452 29 0.63 0.630 133 2.88 0.783 – – –
SME2 7 0.24 0.270 74 2.53 0.639 1 0.03 0.000 68 2.33 0.767
SME3 33 1.40 0.485 22 0.93 0.665 – – – 53 2.25 0.751
SME4 – – – 10 1.05 0.419 – – – 12 1.26 0.184
* Hits: number of occurrences of the search word. ** Per 1000 words: number of occurrences per 1000 words. Dis., dispersion.

Table 8. Statistics of the most important frequent words related to information and compliance in sustainability reports.

Words Information Compliance Reporting Disclosures

Corpus/SME Hits * Per 1000 ** Dis. Hits Per 1000 Dis. Hits Per 1000 Dis. Hits Per 1000 Dis.
Corpus 206 1.90 0.813 153 1.41 0.751 147 1.35 0.841 147 1.35 0.806
SME1 84 1.82 0.703 48 1.04 0.572 42 0.91 0.681 118 2.55 0.759
SME2 85 2.91 0.741 66 2.26 0.526 56 1.92 0.829 11 0.38 0.356
SME3 10 0.42 0.419 36 1.52 0.725 28 1.19 0.747 17 0.72 0.651
SME4 27 2.84 0.620 3 0.32 0.299 21 2.21 0.600 1 0.11 0.000
Words Requirements
Corpus/SME Hits * Per 1000 ** Dis.
Corpus 145 1.34 0.855
SME1 101 2.19 0.815
SME2 34 1.16 0.730
SME3 6 0.25 0.582
SME4 4 0.42 0.465
* Hits: number of occurrences of the search word. ** Per 1000 words: number of occurrences per 1000 words. Dis., dispersion.
Sustainability 2020, 12, 8377 13 of 20

Analyzing Table 8, with the statistics of the most important frequent words related to information
and compliance in the sustainability reports, there was one report in which they had less importance,
as was previously obtained, that of the Belgian company from 2017. The most used words in the other
three reports were those generally obtained as the most frequent words; hence, they follow the general
pattern. For example, “information” showed higher frequency per 1000 words in the German and
Finnish reports (SME2 and SME4: 2.91 and 2.84, respectively; Table 8) and so on with the other words.
The last three tables of this analysis (Tables 9–11) include the results obtained from the concordance
tool of the lexical analysis. The last step is to analyze the most frequent words in their context. This means
counting the number of times one word is found in the neighborhood of the chosen word. This tool
allows us to discover whether or not the most frequent words are related to the disclosure they
supposedly refer to. The method of considering the relationships between certain words and the other
words that appear a sentence was used in previous studies, such as [73]. All the tables of concordance
include the first eight words with the most important relationships (in the tables, they are in positions
from 1 to 8, and position 1 is always the most frequent word analyzed). In the case of the word
“requirements”, its position 8 showed very low frequency, and it was not included in Table 11.

Table 9. Concordance of most important financial frequent words in sustainability reports.

Position Word Total * Word Total Word Total Word Total

1. Bank 936 Risk 1538 Management 610 Financial 394
2. Risk 254 Bank 254 Risk 252 Services 33
3. Arion 190 Management 252 Asset 55 Report 33
4. 2018 139 Credit 210 Bank 53 Statements 28
5. Disclosures 104 2018 160 Approach 51 Risk 26
6. Pillar 97 Disclosures 147 Capital 48 Institutions 25
7. Capital 64 Pillar 118 With 38 Bank 25
8. Management 53 Arion 110 Senior 36 Undertakings 25
Position Word Total Word Total Word Total Word Total
1. Capital 450 Investment 302 Business 279 Funds 149
2. Bank 64 Responsible 47 Risk 36 Investment 21
3. Risk 64 Sustainable 22 With 29 Bank 15
4. Requirements 64 Funds 21 Bank 20 Pension 13
5. Buffer 51 Platform 21 Travel 17 Sustainable 12
6. Requirement 50 Fund 18 Units 17 Capital 11
7. Management 48 Process 18 Management 17 With 10
8. Adequacy 32 Into 17 That 13 Risk 10
* Total: number of times the word was found in the neighborhood of the search word.
Sustainability 2020, 12, 8377 14 of 20

Table 10. Concordance of most important sustainable frequent words in sustainability reports.

Position Word Total * Word Total Word Total Word Total

1. Employees 260 Sustainability 258 Board 241 Environmental 157
2. Time 19 Report 129 Committee 53 Social 51
3. With 16 2018 82 Executive 44 Impacts 15
4. That 15 Information 36 Directors 42 Impact 14
5. Have 15 Supplementary 32 Management 27 Group 12
6. Permanent 15 Topics 25 Risk 27 Assessment 12
7. Total 12 This 22 Bric 19 Footprint 12
8. Their 12 Clients 21 Policy 17 Economic 11
Position Word Total Word Total Word Total Word Total
1. Committee 203 Governance 147 Pillar 148 GRI 133
2. Board 53 Corporate 46 Risk 118 2017 25
3. Credit 40 Risk 15 Disclosures 105 Index 24
4. Risk 25 Data 12 2018 97 Responsibility 24
5. Management 24 Social 11 Bank 97 With 19
6. Executive 21 Policy 11 Arion 94 Disclosure 18
7. Level 17 Body 11 Capital 24 Reporting 16
8. Arion 14 Environmental 11 Requirements 21 Report 14
* Total: number of times the word was found in the neighborhood of the search word.

Table 11. Concordance of most important frequent words related to information and compliance in
sustainability reports.

Position Word Total * Word Total Word Total

1. Information 214 Compliance 165 Reporting 152
2. Report 48 With 33 Risk 22
3. Sustainability 36 Risk 27 Financial 22
4. Security 35 Officer 19 Sustainability 16
5. Risk 31 Control 18 Report 14
6. 2018 27 Regulatory 14 Bank 13
7. Supplementary 26 Management 13 Internal 12
8. Bank 18 2018 13 Period 11
Position Word Total Word Total
1. Disclosures 148 Requirements 155
2. Risk 148 Capital 64
3. Pillar 106 Regulatory 25
4. Bank 104 With 21
5. 2018 98 Bank 21
6. Arion 96 Risk 19
7. Credit 21 Buffer 15
8. Management 18 – –
* Total: number of times the word was found in the neighborhood of the search word.
Sustainability 2020, 12, 8377 15 of 20

The words that were previously grouped as financial terms in the analysis of the most frequent
words are related to the same type of financial words: bank–risk, management–risk, financial–services,
capital–bank–risk, business and risk, and funds–investment–bank (all are in position 1, 2, or 3 in
Table 9, which means they appear next to each other). The only most frequent financial word included
previously that was more frequently related to other sustainable terms was “investment”, appearing in
the reports with “responsible” and “sustainable” (Table 9).
The most frequent words about sustainable aspects appeared fewer times that the financial ones
(Table 10), and the concordance shows the following:

• The word “employees” is not related to other important words.

• The word “sustainability” is linked mainly to “report”, due to the requirement to issue sustainable
information, and is totally consistent with the results obtained in Table 11.
• The words “committee” and “board”, “environmental” and “social”, “governance” and “corporate”
are found frequently in the same neighborhood, a result that is totally logical.
• The word “pillar” appears in the neighborhood with two other words, “risk” and “disclosures”,
as is also seen in Table 11 with “disclosures”. This result proves that “pillar” is a word that comes
from the Basel II and III requirements regarding these aspects.
• Finally, the most important link is found between “GRI”, “2017”, and “index”, as reports include
the GRI index to show that they are elaborated according to GRI standards.

The majority of results included in Table 11 go further in the importance of the words
“compliance”, “requirements”, “disclosures”, and “risk”. According to GRI good practices for
SMEs, sustainability reporting has to comply with the following checklist: it describes the sustainable
development and draws objective and available information and measures of sustainable development,
presents the performance of sustainable conditions and goals and the magnitude of the contribution to
(un)sustainability, and describes the relationship between sustainability and long-term organizational
strategy, risks, and opportunities [74]. Thus, if we use this lexical analysis to understand whether
these financial services SMEs properly developed their sustainability reporting, the obtained results
show that although they used some specific words to meet the minimum requirements, the financial
dimension of reporting continues to be more important, and the other information is used to increase the
length of the report but still does not reflect significant environmental and social impacts. According to
previous studies [75], sustainability reporting in financial companies has as the highest priorities those
directly related to their business operations.

4. Discussion
Our analysis is based on European SMEs included in the GRI database, hence the population
of SMEs that voluntarily use GRI standards, although only between 10 and 15% of sustainability
reports in the database from 2017 to 2018 came from SMEs [76]. Then, we focused on European SMEs
operating in the financial services sector. Bearing in mind their specific activity, sustainability reports
by European financial sector SMEs represent an important percentage of reports in comparison with
nearly all other sectors (5.7%).
The results obtained from the lexical analysis lead us to think that the answer to our first research
question is yes because there is no significant use of symbolic concepts in the narrative discourse in the
reports analyzed; hence, there is minimum compliance with nonfinancial requirements. Opposite results
were obtained by the authors of [53] after applying a lexicometric analysis to speeches delivered by
European Central Bank presidents, although in this case we analyzed sustainability reporting.
Although initially it may be thought that sustainability reports are specific for each company,
the broader corpus analysis suggests they were prepared similarly and used the same template [52],
even more if it is pointed out that the four companies are in different countries and, although operating
in financial services, are focused on different niches. As the sector is a strongly determinant variable
of nonfinancial reporting [66–68], the analyzed reports follow the same pattern. Financial services
Sustainability 2020, 12, 8377 16 of 20

companies not only operate in the same sector, but they also have their own regulatory and supervisory
bodies. In this case the sector is decisive in following the same financial trend in sustainability
information, and as found in KPMG´s 2017 survey, financial services companies are in last place in
corporate responsibility reporting [77].
These financial services companies are still imbued with traditional financial objectives and
information. This means that what counts most in sustainable reports is financial information over
nonfinancial, or at least the typical financial aspects of the business in this important sector are
highlighted more through the language used. The analysis of the most frequent words in context
shows that all financial terms are related to other financial terms. Hence, our second research question
is supported. These results are the same as those obtained in previous studies, although in developing
countries, based on financial services companies, because it is argued that the most important priorities
of these enterprises are those directly related to their business operations [75].
Although a first view of sustainable reporting may show that companies try to exert more effort
to increase the extent of their disclosure, the deep lexical analysis of these reports shows that the
language used is not so extensive or rich, as some words are repeated many times, which highlights
the problem of the lack of content in sustainability information. This shows evidence of the gap that
still exists between financial and nonfinancial information and takes us to the same question posed by
other researchers: “If it is like this for disclosing firms, what is happening in the case of nondisclosing
firms?” [55].
Future research directions depend on an increase in nonfinancial reports, which will make it
possible to get a bigger sample, more companies, and a longer period. Currently, the most important
limitation is the number of sustainability reports published according to GRI by European financial
services SMEs. Another future research project involves using a proper sample of nonfinancial reports
to describe and compare financial sector vs. nonfinancial sector SMEs and financial sector SMEs
vs. large financial sector companies.

5. Conclusions
These financial services SMEs should particularly focus on the proper elaboration and publication
of sustainability reporting. There are many initiatives to increase the importance of this type of
company in Europe and to move toward more sustainable finance. There is a challenge for these
companies, taking into account all of their stakeholders, to give the proper role to nonfinancial
information. It is desirable that SMEs, as well as those that operate in the financial services sector
due to their essential role in the economy, start issuing nonfinancial information, especially now,
when alternatives to traditional bank financing are being promoted for financing SMEs. These results
and conclusions have theoretical and practical implications for the importance of sustainability
reporting. It may be a burden, but it can also have multiple advantages, such as being an opportunity
to create value in the company, differentiate from other companies, improve operational performance,
or enhance market reputation, among others. Our contribution with this work is to point out that
these financial services SMEs play an important role, and sustainability reporting has to mean there
is another way to do business [78]. This study provides an opportunity to improve sustainability
disclosure and standards considering the specific features of financial services SMEs. Regulators must
take into account the specific features of this type of company in order to adapt the standards and
requirements. Sustainability reports must include all relevant topics that reflect the organization´s
economic, environmental, and social impacts or influence the decisions of stakeholders [74]. The main
reasons argued for not having proper sustainability reporting by SMEs are the lack of resources,
awareness of sustainability´s importance and potential impacts, access to financing, information and
skills to elaborate this information, and regulatory requirements [76]. Thus, this is an opportunity
for practitioners, academics, and regulators to try to solve these problems from all points of view,
theoretical and practical, to make up for this lack of resources according to their different tasks.
Now, when the European Commission is working on amending the nonfinancial reporting directive
Sustainability 2020, 12, 8377 17 of 20

through the mission of the European Financial Reporting Advisory Group (EFRAG) and its Project
Task Force on nonfinancial reporting standards, it is time to think about these specific features of SMEs
and financial services companies to make the process of sustainability reporting easier.

Author Contributions: Conceptualization, E.O.-M. and S.M.-H.; methodology, E.O.-M. and S.M.-H.;
software, E.O.-M.; validation, S.M.; formal analysis, E.O.-M. and S.M.-H.; investigation, E.O.-M. and S.M.-H.;
resources, E.O.-M. and S.M.-H.; data curation, E.O.-M. and S.M.-H.; writing—original draft preparation, E.O.-M.
and S.M.-H.; writing—review and editing, E.O.; visualization, S.M.-H.; supervision, E.O.-M. and S.M.-H.
All authors have read and agreed to the published version of the manuscript.
Funding: This research received no external funding.
Conflicts of Interest: The authors declare no conflict of interest.

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