Non-financial indicators in transitional economies: an impasse or a neglected tool?

Abstract

Purpose – Non-financial indicators (NFIs) redirect attention from financial metrics to a broader spectrum of indicators related to the effectiveness of internal processes. While their adoption in past has been driven by internal corporate decisions, the approval of the EU directive has established ESG reporting as a mandatory standard. The scope of these requirements raises concerns about their counterproductive effect. Consequently, this study aims to investigate whether NFIs would have been adopted voluntarily, even in the absence of regulatory intervention. Additional attention was given to the factors influencing decisions on NFIs. Design/methodology/approach – This research was conducted in the context one of transitional economies, characterized by the incomplete adoption of Western business standards. Data were collected through a questionnaire survey and analyzed using the Chi-square test. To gain insights into the motivations of decision-makers, the study was complemented by semistructured interviews. Findings – Only a limited number of companies demonstrate their own need to implement NFIs. Hypothesis testing showed that increased interest in these indicators is related to the size of the company, while other factors appear to be insignificant. Furthermore, this study explores the underlying causes of this situation and presents an example of good practice through a case study. Originality/value – While prior studies have concentrated on the indicators themselves, this research examines the attributes of the entire system. It contributes to a more understanding of NFIs and the barriers to their implementation within companies from transitional economy. Additionally, the study underscores the importance of organizational autonomy in the management of NFIs.