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

The non-financial dimension of entrepreneurship has become a prominent topic resonating throughout the corporate sector of the European Union (EU). The launch of this evolution dates back to the issuance of the Corporate Sustainability Reporting Directive (CSRD), which, as an extension of the Green Deal, mandates a broader scope of corporations to publish sustainability reports (ESG reports). Non-financial indicators (NFIs) are recognized as a new standard in corporate reporting, with the potential to enhance both company transparency and the efficiency of corporate governance (Permatasari and Narsa, 2022; Liu and Jin, 2023).

Recent studies confirm that the ESG disclosures can enrich corporate reporting (Fornasari and Traversi, 2024; Di Tullio et al., 2022). However, the scope and depth of the obligations have raised concerns that ESG will be more of a financial burden than a development opportunity (Strouhal et al., 2025; Sætra, 2024). Empirical researchers describe the high cognitive costs of reporting, purely formal nature and inefficiency (Rossi et al., 2023; Hu, 2024). Strong criticism contributed to the release of the Omnibus package, which postponed the ESG requirement by two years (European Commission, 2025). In addition, the EU officials announced the preparation of a significant revision in the reporting standards. In this context, the discussion on ESG returned to “point zero.”

Examining the insights from the period when the first version of the standards was developed, the authors of this paper concluded that some findings from academic research had been overlooked. In particular, studies addressing the unclear impact of mandatory reporting on the quality of disclosed information were not taken into account by regulators (Traxler et al., 2023; Korca et al., 2021). Evidence from the business sector indicates that the formal structure of reporting takes precedence over the substantive quality of disclosures (Haji et al., 2023). As illustrated by Strouhal et al. (2025), there is not enough time for important projects, now the priority is reporting. These findings suggest that the development of detailed standards came at the expense of dialogue with business and academic communities. Such an approach contrasts with then-current knowledge, which held that the effectiveness of sustainability reporting depended primarily on managers’ and stakeholders’ comprehension of its potential (Pigatto et al., 2023; Krasodomska and Zarzycka, 2021). If ESG reporting rules do not undergo a significant upgrade, there is a risk not only of limiting the practical benefits but also of deepening disparities in reporting practices between firms regarding their size (Gholami et al., 2022). Moreover, the current system contradicts the expectation that the stance on sustainability and NFIs should also be influenced by macroeconomic stability, or external environment (Strouhal et al., 2025; Ahmad and Zabri, 2016).

The findings above indicate a lack of contact with the corporate sector and insufficient data on its capabilities. In this context, we can recall the appeal by Dumay et al. (2016) and Roslender and Nielsen (2020), who advocated further research of voluntary reporting, and they perceived it as the appropriate knowledge base for the development of a regulatory framework. In light of this assumption, it appears crucial to examine the intrinsic willingness of the corporate sector to adopt NFIs. However, this measure would not assess the quality of the reported information. Therefore, the research should also focus on identifying the non-financial KPIs collected by companies and on comparing whether they can be considered theoretically robust. To achieve this purpose, data from the period immediately preceding the COVID-19 pandemic will be used, allowing the attitudes of the selected group of firms to be examined without the influence of the CSRD. Furthermore, as the literature increasingly points to a lack of “insider information” and insights into local phenomena (Di Tullio et al., 2022; Pigatto et al., 2023), the authors decided to incorporate semistructured interviews. The case study could offer readers an opportunity to gain insight into the context in which decisions regarding NFIs are made. Therefore, the primary objective of this study is to analyze the factors that influenced the implementation of NFIs, and to uncover the motivations of company management in making decisions in this area.

The authors have decided to examine this phenomenon in the transition economy of Central or Eastern Europe. The reason for this selection lies in the diversity of EU. If we were to choose a Western economy with continuous access to a free market, the research results might be overestimated and difficult to generalize. In contrast, post-socialist countries with a long history of totalitarianism have a shorter tradition of building capitalism. As a result, they tend to be more hesitant in implementing Western standards, including management accounting methods. In this group of countries, the authors applied the criterion of an “information-rich case sample” and selected the Czechia.

The theoretical contribution of this paper lies in: (1) testing the influence of conceptual variables on a sample of companies operating in transitional economy; (2) describing the specific consequences of applying NFIs in companies where Western management tools lack a tradition; (3) mapping the transfer of know-how from a foreign parent company to a subsidiary during NFI implementation; and (4) assessing small and medium-sized perceptions of NFIs and the impact of firm size on their use.

Transition economies have shifted from centrally planned systems to market-based economies, typically including countries in Central and Eastern Europe, the former Soviet Union and countries from East Asia (Gurkov, 2015). The focus on this group of economies is supported by a disparity in the intensity of research. Albu and Mustata (2013) pointed out that recently privatized firms operating in transition economies have attracted little attention from researchers. Khan (2016) states that studies on performance measurement in transition economies are relatively rare and often lack a solid theoretical foundation. Moreover, existing studies are frequently characterized by an underestimation of the local context into which these advanced methods are implemented (Alawattage et al., 2017; Uddin et al., 2021). As Wagner et al. (2019) notes, while in the West recent changes in management accounting have involved implementing modern methods or procedures into existing systems, Eastern firms had to switch to a completely different management system.

Given the still greater prevalence of research on Asian transition economies, the authors of this paper chose to prioritize purely European emerging economies, with the core represented by the Visegrad Group countries (V4). Their long-standing neglect by researchers and the underestimation of their global importance stand in clear contrast to empirical data, which show that these countries experienced significant economic growth and improvements in most key macroeconomic indicators between 1991 and 2019 (Polski Instytut Ekonomiczny, 2021). In terms of purchasing power parity (PPP), the V4 countries achieved a combined GDP of $3.1tn in 2023, approximately 3.1% of global GDP (World Bank, 2025). This demonstrates the global relevance of this group of countries.

The V4 countries are comparable in their fundamental characteristics (labor market structure, the share of industry and services, etc.), so selecting a specific country was not unambiguous. In making this choice, the authors applied the criterion of an “information-rich case sample” and selected the Czech Republic (Czechia), which is, among the V4 countries, associated with various superlatives. During the socialist era, it was one of the economies with the highest level of state ownership. Prior to the spread of the COVID-19 pandemic, Czechia became one of the fastest-growing economies in the EU (European Commission, 2020). According to the classification of the World Bank, Czechia has the status of a developed economy, whose graduation process was completed in 2006. However, according to the globally well-known MSCI Emerging Markets Index, Czechia is ranked as an emerging market due to the accessible and liquid investment market, the potential for further growth, and the sustainability of its economy (MSCI, 2022).

The adjective “emerging” is also appropriate for Czechia in terms of experience with advanced management methods. As found by Uddin et al. (2021) through an analysis of historical data, during several decades of centrally planned economies, most enterprises had to fulfill material production indicators closely linked to political proclamations. Therefore, in the first half of the 90s, many of today’s large corporations began using advanced management methods completely “from scratch.”

Non-financial indicators (NFIs) were highlighted by Kaplan and Norton (1996), who defined them as metrics that measure factors influencing an organization’s long-term growth and competitiveness but are not directly expressed in monetary terms. While in previous years, the disclosure of non-financial information was primarily voluntary, the introduction of the European Non-financial Reporting Directive and, later, the Corporate Sustainability Reporting Directive (CSRD) fundamentally transformed this practice (Hamrol et al., 2024).

As a result of these directives, ESG reporting has become a key tool for organizations to communicate their commitment to responsible corporate conduct (Aziz and Alshdaifat, 2024). Hamrol et al. (2024) summarized that ESG reporting, which focuses on environmental, social and governance issues, involves around 50,000 European companies. However, while this study was being finalized, the European Commission introduced the Omnibus − a set of proposals aimed at simplifying existing legislation and reducing the administrative burden in the EU (European Commission, 2025). Moreover, the first mandatory reporting year was postponed to 2027.

Several theoretical approaches have been described to explain corporate behavior in the adoption of various management practices (Otley, 2016; Mahajan et al., 2023). Given the nature of this topic, contingency theory and stakeholder theory are identified as key frameworks for studying why companies disclose NFIs.

According to Chenhall (2006), the term “contingency” means that something is true only under specific conditions. Contingency researchers assume that there is no single management control system that can be universally applied across all organizations with equal effectiveness (Alves and Lourenço, 2022). In previous studies using contingency theory, contextual factors such as size, ownership structure, strategy, organizational culture and the external environment have been found relevant in the selection of various control systems (Chenhall, 2006; Alves and Lourenço, 2022). These determinants remain strong even today, although some researchers call for considering how the dynamic nature of current firms may lead to changes in organizational contexts, and consequently, to different paths in the design of management control systems (Otley, 2016; Martin, 2020). Examination of these variables forms the following research question (RQ1): What factors influenced the implementation of NFIs before the introduction of the CSRD directive?

Stakeholder theory builds on the idea that companies should not focus their decision-making solely on maximizing profits for shareholders but should also consider other stakeholder groups (Schaltegger et al., 2019). According to Osadchy et al. (2018), these groups include employees, customers, communities and the environment. Stakeholder theory thus supports a more comprehensive approach to decision-making, considering the broader impacts of business activities. However, Silva et al. (2019) perceive many current performance measurement and evaluation methods as insufficient, citing surveys on stakeholders’ unmet expectations. These findings have paved the way for the emergence of ESG reports, which share similar values with stakeholder theory (Del Gesso and Lodhi, 2025). In this context, the second research question is formulated as follows (RQ2): What motives influence decision-making regarding NFIs? Are the interests of specific groups of stakeholders considered during the implementation of these measures?

Both research questions outline the direction of the study and specify its scope. Research questions are typically formulated prior to the literature review when the research is grounded in an existing theory − as is the case in this paper, which discusses the influence of contingency theory and stakeholder theory on the selection of NFIs.

NFIs are usually discussed in studies on performance measurement systems (Micheli et al., 2011; Kotane, 2015; Cho and Ibrahim, 2021). The integration of NFIs into management accounting practices reflects a shift from purely cost-based control to a holistic approach that aligns performance measurement with strategic objectives and sustainability aspects (Androsenko, 2024; Alves and Lourenço, 2022; Rajnoha et al., 2017).

At the beginning of the widespread implementation of NFIs in the corporate sector, there was criticism regarding the shortcomings of traditional financial indicators commonly included in budgets and financial statements. As stated by Pavelková et al. (2018), financial indicators distract managers from strategic areas, such as production quality, the efficiency of internal processes or customer satisfaction. Although the significance of financial performance indicators is undebatable, as they express a company’s market success, their relevance is reduced by a volatile business environment (Ahmad and Zabri, 2016). The inability of financial measures to provide relevant information in the context of dynamic changes is repeatedly observed with chain-like regularity throughout studies on performance measurement systems (Alves and Lourenço, 2022; Jelínková and Stříteská, 2015), which illustrates their distance from the issues, such an organizational resilience or internal efficiency (Werner et al., 2021; Upadhaya et al., 2014).

Such limitations of financial-based measurement have resulted in the popularization of NFIs (Sulistyo et al., 2020; Budding et al., 2022), which may include quality control, internal efficiency or customer and employee-based measures (Ahmad and Zabri, 2016; Pavelková et al., 2018). Cho and Ibrahim (2021) praise that outputs of non-financial measures are available more promptly for evaluation and are less susceptible to manipulation than financial metrics. Omran et al. (2019) point out that many companies have begun perceiving NFIs as a tool that has the power to increase long-term value, rather than simply maximizing short-term financial performance.

According to Agyei-Mensah (2017), non-financial and financial performance indicators are not substituted, but NFIs could complement financial measures. Efforts to take an advantage of both types of indicators have led to the creation of the Balanced Scorecard concept (Kaplan and Norton, 1996) and have initiated many different variants of the performance measurement system (Neely et al., 2002; Sorooshian et al., 2016). The huge fragmentation of methods and procedures supports Choong’s (2013) view highlighting gaps in understanding the basic features of the performance measurement system. In his opinion, the discussion focuses mainly on using appropriate indicators, but practically does not address the basic parameters of the system or factors of its implementation. Choong′s findings still do not lose their relevance, as systematic research about factors influencing the setting up of a performance measurement system is scarce. Existing studies have brought mostly partial conclusions, and in the conditions of specific economies (Ahmad and Zabri, 2016; Agyei-Mensah, 2017; Amel-Zadeh and Serafeim, 2018). The specificity of the study′s economy, e.g. Ghana, Malaysia, makes it impossible to generalize them for a wider group of countries.

These inconsistent findings clearly call for a study examining the factors of performance measurement systems in a comprehensible context. A new challenge for the field of NFIs has emerged with the adoption of the CSRD directive, which acts as a driving force for the implementation of sustainability reporting in the EU (Hamrol et al., 2024; Cordazzo et al., 2020). This trend aims to demonstrate the increasing awareness among stakeholders that a company’s success should not be assessed only through its financial results, but also through its environmental, social and governance impacts (Masmoudi, 2024; Risso and Longarini, 2023). However, reactions from the corporate sector indicated that this idea soon deviated from its original direction. Some opinions even suggest that the established ESG reporting does not truly support sustainability, as it is carried out on paper only and not coupled with strong action (Rossi et al., 2023; Hu, 2024). The application of ESG reporting has several consequences for companies, including increased operational complexity, and is widely perceived as a formalized process (Strouhal et al., 2025; Haji et al., 2023).

This “over-regulation” raises many questions, particularly regarding the impact of mandatory ESG reporting on trust in non-financial metrics and the willingness of companies to view them as useful tools for supporting effective management control. These concerns about the potential consequences are particularly relevant in Europe, where trust in previously typically Western techniques is rather fragmented. As Uddin et al. (2021) note, the simple transfer of accounting technologies rooted in developed or capitalist economies to countries such as transition economies requires further investigation. This statement also reflects the views of researchers who remain relatively skeptical about the introduction of Western management accounting in transition economies, due to various limiting factors ranging from the development of capital and labor markets to the state of accounting infrastructure (Alawattage et al., 2017; Tsamenyi et al., 2017). These findings highlight the need to pay closer attention to the use of NFIs in the context of transition economies.

The authors aim not only to contribute to the ongoing debate on the use of NFIs in this globally relevant group of countries but also to raise the question of whether the extent of regulation prescribed by the CSRD directive was necessary. The use of data from the period prior to the clarification of the CSRD regulatory framework offers an opportunity to assess the willingness of companies from the selected transition economy to voluntarily implement NFIs at that time. If the corporate sector’s attitude toward this type of indicator was not strictly negative, the imposed regulation may be perceived as a hazard − particularly in the case of companies in transition economies, which carry a communist legacy and have spent years building their relationship with Western standards.

The main part of the research is quantitative in nature and relies on a conceptual framework derived from contingency theory, as introduced in Section 3. Questions related to strategy and organizational culture were also included in the questionnaire; however, they were not incorporated as testable factors, as they are more complex in nature and generally more difficult to measure. The second part of the research consists of semistructured interviews conducted in the industrial company operating in a transition economy. The aim of the interviews was to gain a more detailed insight into decision-making regarding the use of NFIs and, within the framework of stakeholder theory, to determine whether either company prioritizes any specific stakeholder groups within this agenda.

Among the determinants, a key role is played by company size (Ahmad and Zabri, 2016; Hálek et al., 2020), which can be considered one of the crucial variables in the corporate economy. However, larger corporations are logically associated with a broader range of management, greater complexity of control processes and a higher incidence of the so-called symbolic practice (Uddin et al., 2021). “Symbolism” may be expressed as manipulating key indicators in favor of employees’ monetary bonuses. This shows that the “label” of a large company does not automatically imply a tendency toward adopting NFIs. The inclusion of this factor is also supported by the observation that the approach of SMEs to NFIs and sustainability remains underexplored (De Villiers and Sharma, 2020; Gholami et al., 2022).

Second, previous studies have indicated that the business environment, especially its stability, can significantly influence the choice of performance indicators (Ahmad and Zabri, 2016; Pavelková et al., 2018). Furthermore, it can affect the pressure to disclose non-financial information (Amel-Zadeh and Serafeim, 2018; Strouhal et al., 2025), which can be useful for companies in times of uncertainty.

On the other hand, although the authors originally intended to test the effect of the share of foreign capital, this was not possible due to the very low concentration of foreign-owned firms in the sample. Consequently, the test results would have been inconclusive:

Quantitative research was selected to capture the opinions and behaviors of a comprehensive sample of respondents from the corporate sector. The authors used a questionnaire, regarded as the core of quantitative research and a universal method for data collection (Krosnick, 2018). To test the effect of a company’s size on the selection of NFIs, the target group of respondents includes not only large and medium-sized companies but also small companies. This sampling approach is supported by several authors researching management methods and sustainability (De Villiers and Sharma, 2020; Massicotte and Henri, 2021). Hálek et al. (2020) emphasize the importance of SMEs enterprises to the Czech economy. Their share of more than 99% of the corporate sector underscores the importance of these businesses.

The Google Forms tool was used to create the Web-based questionnaire and also served as the platform for its distribution. The questionnaire was sent to executive-level staff, with the specific job titles of the respondents varying according to company size. While owners were most often contacted in the case of small businesses, among larger firms, the attention was focused on senior positions, such as CEO, CFO or heads of financial and controlling departments. Contact information was obtained from a database of corporate data called Albertina.

The data collection was carried out immediately before the spread of the COVID-19 pandemic and took two months. The distribution of the questionnaire was completed when the questionnaire was sent to 1,500 companies. However, only 136 of them filled out the questionnaire. Although the overall return rate of 9.1% could be evaluated as relatively low, the anonymity of the survey did not allow repeated contact of companies that did not respond to the e-mail invitation. Table 1 contains the structure of respondents in terms of company size.

For a more detailed understanding of the research sample, the affiliation of the surveyed companies is listed here: manufacturing 55 (40.4%), automotive 7 (5.1%), construction 10 (7.4%), engineering 10 (7.4%), agriculture 7 (5.1%), services 27 (19.9%), energy supply 3 (2.2%) and other 17 (12.5%).

The structure of the respondents corresponds to the Czech industrial tradition. Holub (1998) noted that, before the Velvet Revolution in 1989, the Czech economy was characterized by the so-called industrialization structure of GDP, where industry was the largest and most developed sector in the economy. During the initial phase of transformation, the share of services dramatically increased, while the percentage of the industry declined. However, the Eurostat data (2020) confirm that the contribution of manufacturing to the GDP in Czechia remains high, even one of the highest in the European Union (23.1%). A company’s classification in terms of size was based on the number of employees, which is a critical criterion in the European Commission methodology (2003).

Pearson’s Chi-square test of independence was chosen for the quantitative part of this paper to test the above hypotheses. It belongs to the non-parametric tests and is based on comparing the observed frequencies with the expected frequencies (for each field of the contingency table), assuming a normal distribution. Using this test, we evaluate whether the tested variables are independent of each other. For the Chi-square test, it is crucial to define the zero and alternative hypotheses. While the zero hypothesis (H0) assumed the independence of both variables, the alternative hypothesis (H1) was confirmed if the variables were dependent on each other. The level of significance was set at α = 0.05. After collating the answers from the survey in Google Forms, the database containing these responses was transferred to MS Excel. The calculation occurred in XL Statistics statistical software.

The use of the Pearson’s Chi-square test was inspired by the frequent application of this method in similar types of research (Gálová et al., 2018; Massicotte and Henri, 2021). According to McHugh (2013), the advantages of the Chi-square include its robustness concerning the distribution of the data, ease of computation and the detailed information that can be derived from the test or use in studies for which parametric assumptions cannot be met. Limitations include, for example, its requirements for the sample size and difficulty of interpretation when there are large numbers of categories in the independent or dependent variables.

The qualitative part of the research includes a case study, which Merrian and Tisdell (2016) describe as an approach in which the researcher investigates a specific system (a case). The aim is to gain a deep understanding of a given phenomenon in its full scope and context. A case study does not have to be extensive; even brief illustrative examples can be valid and informative. In case studies, open and less structured interviews are typically used to allow respondents to express their views in the most authentic way possible. For the purposes of this study, semistructured interviews were conducted. These are guided by a list of topics or key questions, although the exact wording and sequence are not fixed. This format enables the researcher to respond flexibly to the course of the conversation and the responses provided (Merrian and Tisdell, 2016).

While six questions in the questionnaire focused on the issue of NFIs, three follow-up questions examined the characteristics of respondents. First of all, the authors narrowed down the range of surveyed companies because they did not expect that all entities, especially the smallest ones, deal with NFIs. The structure of the respondents according to their approach to performance planning is shown in Table 2. As can be seen, 48 companies, predominantly small entities, were eliminated from the study at this point.

In the following part of the research, it was necessary to determine how many respondents (from the sample reduced by the initial screening question) monitor NFIs. At the time of the survey, this type of indicator was not widely used in the Czechia, as the Czech legal framework − particularly the Accounting Act − has traditionally imposed reporting obligations solely for financial indicators. From this perspective, the result is not surprising: only 48.9% of the companies in this sample confirmed the use of NFIs. Nevertheless, this result is not strong enough to be interpreted as a strictly dismissive stance. These findings also indicate that this topic was “alive” within the corporate sector and held potential for further development.

Furthermore, the questionnaire investigated whether NFIs are linked to the respondents’ strategic activities. Contrary to the authors’ expectations, the number of companies with strategically-oriented NFIs was relatively low (69%). However, an explanation was offered by the following open question examining the specific form of NFIs used by the respondents. Indicators such as gross margin, return on investment and others, expressed in monetary units, appeared among the answers, although the literature review defines the essence of NFIs as entirely different. In fact, NFIs should focus on the efficiency of internal business processes and should be expressed in non-monetary units, while external factors rarely influence their value. The indicators mentioned above have almost no connection to these principles. Since they are not typical NFIs, it becomes clearer why they are not compatible with the company’s strategic activities.

In any case, significant differences in the perception of NFIs highlight the need to test factors that can be drivers when deciding on the (non)implementation of these indicators. The first relevant factor is connected to the influence of the size of the organization (H1).

A complete sample of respondents, consisting of 136 organizations, was included in the testing of H1. Results in Table 3 confirm the preliminary assumption of the authors that organization size is a key driver in the application of performance indicators (Agyei-Mensah, 2017; Nazari and Jamshidinavid, 2019). At the level of significance α = 0.05, the zero hypothesis on independence is rejected, and we support the alternative hypothesis because there is a statistically significant relationship between the size of the organization and usage of NFIs (P-value < 0.01). According to the value of residuals (highlighted in grey in Table 3), larger businesses use NFIs routinely, while small businesses generally do not. Therefore, H1 was accepted.

A detailed analysis of the respondents’ answers brought one more insight. If we proceed from the finding that a significant number of companies use NFIs that are incompatible with their theoretical principles, this mostly concerns small companies with up to 50 employees. However, these findings cannot be generalized. The sample of subjects with an irrational perception of NFIs was too small for statistical verification. But without a doubt, it underlines the influence of the company’s size on the implementation of NFPIs, as research has shown that this process is “failure-free” in large companies. The findings from H1 testing also support the opinion of Hálek et al. (2020), who stated that the measurement of NFIs is relevant for medium and large enterprises. This type of indicator is applicable also for small entities if they operate in an international market.

Another part of the research examines the perception of the external environment and its impact on the decision to implement NFIs. This relationship is investigated by the H2, which is based, in contrast to the first hypothesis, on a limited sample of respondents, as only 88 firms answered the question regarding the subjective perception of the stability of the external environment.

As visualized in Table 4 (P-value = 0.205), no statistically significant relationship was found between the perception of the external environment and the incorporation of NFIs into the performance management system. Therefore, at the significance level α = 0.05, the H2 was rejected.

This result not only contradicts the authors’ expectations, but also does not replicate findings from compatible surveys (Ahmad and Zabri, 2016; Amel-Zadeh and Serafeim, 2018). However, when examining the perception of the external environment, it is necessary to consider the limiting factors of this research. The data collection took place at the end of the long-term growth of the Czech economy characterized by an increased gross domestic product and a low unemployment rate (OECD, 2021a, 2021b). Based on these data, in hindsight, the period when the research was conducted might not have been the most suitable for examining the influence of the external environment. The economic cycle, supplemented by a high degree of confidence in the business sector, did not give respondents many reasons to evaluate the stability of the external environment negatively. It can be argued that the entrepreneurs participating in the research may have had previous experience with economic fluctuations, and the momentary phase of the economic cycle did not influence their answers. However, this assumption cannot be confirmed, as a question on the age of the company was missing in the survey.

Research into the implementation of non-financial information in corporate practices has highlighted a lack of studies that develop an understanding of their impacts on daily practice (Dumay et al., 2016). Existing studies predominantly offer content analysis but provide limited “inside information” (Di Tullio et al., 2022). As a result, many researchers argue that examining local phenomena through interviews can create scope for a better explanation of corporate practice (De Villiers and Sharma, 2020; Krasodomska and Zarzycka, 2021).

Therefore, the authors of this paper used data from unpublished case study conducted in industrial company “PV” that was established after the transformation of the Czech economy as a greenfield investment and functions as a subsidiary of a multinational corporation. This entity is classified as large enterprise with more than 250 employees, thus corresponding to the sample examined in the questionnaire survey. Its industrial nature can also be seen as suitable, given that Czechia has long been considered the most industrialized country in the European Union, both in terms of GDP share and the percentage of the workforce employed in this sector (Czech Statistical Office, 2023). Fundamental information is presented below in Table 5.

Since semistructured interviews were selected as the primary data collection method, the content of individual questions was adapted to the specific context and available information in the company. Nevertheless, the authors established a set of core topics to be explored, including the following:

• Is a system of key performance indicators (KPIs) implemented in the company?

• Does this set of indicators include NFIs? If yes, what factors influenced their implementation?

• Could you provide some examples of these indicators? How do they impact the daily operations of the workforce?

• If NFIs are not used, what would influence your willingness to implement them? What would your position be if the reporting of non-financial information became mandatory?

Table 6 provides basic information about the employees who participated in the interviews, as well as the dates of the interviews. The selection of respondents was made by the companies themselves, based on the requirements of the authors’ team to ensure representation from both the managerial level and the lower levels of the organizational structure. The interview with the HR manager was even conducted twice to verify the results.

At the time of establishment in the Czechia, the company PV primarily relied on budgeting and financial metrics. A breakthrough occurred in the years 2009 and 2010, when − driven by the company’s growth and as a response to the adoption of such tools by competing firms – a comprehensive system incorporating both financial and non-financial indicators was implemented. However, this was not a decision made by the Czech entity, but rather by the parent company in Spain which also assigned an experienced manager familiar with this system to the Czechia. The HR Manager noted: “The group has established a standard package of indicators, such as production scrap rate and overall equipment effectiveness (OEE), thereby ensuring continuity in performance management aligned with the company’s strategic interests. However, the group allows the individual plants to supplement the system of indicators according to their specific needs.”

The result is a system that combines company-wide and cross-functional indicators. Since it influences the variable component of salaries for all employees except production operators (their bonus is based on attendance), it can be said to permeate all levels of the organizational structure and affect daily work routines. As mentioned above, the selection of indicators is primarily based on the standard package defined by the group, but the specific configuration of the employee motivation system – including the weighting of individual metrics − is managed by Czech executives. “Compared to my previous experience, the system is well designed. I believe we are monitoring truly critical indicators for our department,” said the Production Manager. The Czech mentality has clearly influenced the structure of the motivation system, in which collective financial indicators carry the greatest weight. The Production Manager explained it as follows: “An employee should be as well as the entire company does.” However, this does not reduce the relevance of NFIs. Most of them are monitored and evaluated on a daily basis, and the results are presented to employees in detail during regular monthly meetings. Their impact is differentiated by the type of job, so while production specialists are primarily influenced by the scrap rate, the HR Department is evaluated by the rate of employee turnover. Therefore, it cannot be definitively stated that NFIs have no place in the environment shaped by Czech management − but they are typically assigned second priority compared to financial indicators.

On the contrary, regular monthly meetings are the first sign of the Spanish organizational culture implemented by the parent company. Employees are referred to as collaborators in the internal terminology of company PV. To facilitate consultation on key decisions affecting the workforce, an Employee council was even established, also to address sustainability-related topics. In doing so, it partially expands the traditional role of trade unions, which are a characteristic feature of the Czech labor landscape. In this context, it is important to emphasize that the practices described in such detail by the CSRD Directive had already been operating spontaneously in the company PV approximately three years before the directive was published. In addition, the company continued discussions on how to create a dignified and motivating environment for employees, and invited a team of university researchers to review the existing system of performance indicators. This initiative was also driven by labor market pressures, as industrial companies were clearly competing for qualified employees in the region where PV has its seat. On the other hand, the Spanish mentality assumes maximum performance from employees working under adequate conditions. Therefore, a reduction in KPI targets in response to negative market developments is not to be expected in this company. As the accountant stated: “The indicators remain as they are set, no changes are made.” While it is necessary to consider the very limited sample of respondents encountered by the researchers and the subjective dimension of this finding, the employees of the company PV expressed unexpectedly positive attitudes toward their employer.

This paper addresses several challenges. First, given the paucity of studies focusing on the application of management accounting methods in transition economies (Albu and Mustata, 2013; Khan, 2016; Uddin et al., 2021), it provides new insights into the use of NFIs in this globally significant and neglected group of countries. Second, as previous research has often focused narrowly on NFIs themselves while underestimating the factors influencing their implementation (Choong, 2013; Dobrovič, Lambovská et al., 2018), this paper examines the role of contingency variables in NFIs-related decisions. Third, in light of the current wave of criticism of ESG reporting (Sætra, 2024; Hu, 2024), it provides insights into redesigning existing standards.

The findings of the study confirm the frequently mentioned skepticism regarding the implementation of Western management accounting standards in transition economies (Alawattage et al., 2017; Tsamenyi et al., 2017), as less than one fifth of the sample of 136 companies reported that NFIs are part of their performance management. Moreover, in the case of these more “advanced” entities, it was found − entirely in line with the findings of Uddin et al. (2021) − that the implementation of NFIs takes on highly specific consequences. In this context, the paper demonstrates that there seems to be a distinct “Eastern” interpretation of NFIs, in which the distinction between financial and NFIs tends to blur in the eyes of companies from transition economies.

However, as our case study has shown, the corporate sector can address the lingering challenges of economic transformation naturally and without external intervention. Based on the experience of the company PV, we can highlight the initiating role of foreign corporations that establish subsidiaries in transitional economies. However, merely applying the rules of a foreign company to the local context would not be sufficient. In addition to the obligation to implement a standard package of KPIs, PV was assigned a manager from the headquarters, who had prior extensive experience with this system. As a result, he understood what organizational changes were necessary to implement the system effectively − for example, introducing regular monthly meetings to evaluate and discuss performance outcomes. Thus, a top-down directive was complemented by an educational component, which enabled Czech employees not only to adopt but also to understand the previously unfamiliar system. From a theoretical perspective, these findings confirm the relevance of one contingent variable − organizational culture − the impact of which has been highlighted by numerous authors (Otley, 2016; Martin, 2020). However, its role in the transitional economies has far received minimal attention.

Other contingency variables were assessed through Pearson’s Chi-square test. The research confirmed, fully in line with theoretical assumptions (Agyei-Mensah, 2017; Nazari and Jamshidinavid, 2019), the position of size as one of the key variables. For the second determinant, it emerged that the result is significantly influenced not only by its operationalization but also by the period in which the given factor is tested. The influence of the external environment was assessed based on the respondents’ subjective perceptions during a period of prolonged economic expansion, which likely affected the resulting neutrality of this factor. However, in the case study, representatives of the PV company stated that they implemented the KPIs between 2009 and 2010, during the global economic crisis, as a response to developments in the external environment. This finding fully aligns with theoretical assumptions suggesting that NFIs offer more strategic information during times of uncertainty (Alves and Lourenço, 2022; Pavelková et al., 2018).

Overall, the paper revealed that in the period prior to the introduction of the EU directive on ESG reporting, the awareness of NFIs among the surveyed companies was lower, but not zero or negligible. The case study even showed that company PV was already undertaking a variety of sustainability-related activities on a voluntary basis in 2019. According to its established organizational culture, the management of this corporation viewed employees as collaborators with whom the company shares its profits, which aligns with the essence of stakeholder theory (Schaltegger et al., 2019; Osadchy et al., 2018). This finding could not confirm the validity of this theory in the selected sample, but rather only its occurrence, even in the absence of regulation. This “behind-the-scenes” look has its limitations, and generalizing these findings should be done with the caution. However, at the very least, it calls into question the need for regulation at a time when NFIs were gradually gaining ground – and most importantly – when these were decisions made by the companies themselves. Furthermore, “conscious” companies did not receive any advantage in the form of a head start in implementing sustainable principles or NFIs. The CSRD directive introduced reporting with a breadth and depth that exceeded previous informal standards (Traxler et al., 2023; Sætra, 2024).

The authors generally believe that even a slow, spontaneous process would have been much more beneficial for the corporate sector than a sudden leap forward through regulation. What companies in transitional economies lack is more freedom and space to explore innovative practices, including those that have long been standard in Western economies. It can be assumed that regulation tends to hinder this spontaneous process, and the current uncertainty surrounding the so-called Omnibus (European Commission, 2025) further deepens the divide in how companies relate to NFIs and, more broadly, to sustainability. However, even repealing the CSRD would have a devastating effect on the general perception of this topic, as it would shift companies’ focus to the sunk costs they have already invested in this area.

A certain limitation of this study is connected with the timeliness of the data, as the questionnaire survey was carried out before the spread of the COVID-19 pandemic. However, a thematic area is not affected by seasonal influences and usually changes in longer cycles. The second limiting factor arose from the smaller sample of companies participating in the survey. Nevertheless, a comparison with compatible studies shows that a lower rate of return is quite common, e.g. the widely cited study by Libby and Lindsay (2010). In this context, it can be found from Dillmann (2000) that achieving a significant response rate is a typical and challenging problem of surveys implemented in questionnaires. It is also important to acknowledge the potential limitations of case study. As specifies highly particular case, its primary purpose is to facilitate the understanding of certain phenomena, rather than to enable broad generalizations.

Generally, the authors envision the future of research in case studies, as they have the potential to provide readers with deeper insights into the chosen topic. In the field of NFIs, it would be valuable to explore additional factors that influence the effectiveness of performance measurement systems. For example, the impact of NFIs on internal communication and coordination, or the influence of the length of the reporting period, for which bonuses are awarded, on employee motivation. Additionally, it would be insightful to document the experiences of companies that have already begun implementing the CSRD directive through ESG reporting.