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Article Excerpt
The survey reported in this study (which covered over 1,300 firms, included more than 60 questions and was carried out in eight countries) finds that a good number of small and medium enterprises (SMEs) have implemented responsible practices. While those practices are rather traditional in nature and do not spring from the recent concepts of corporate social responsibility, they are nevertheless of similar nature. The survey analyses internal (human resources and the working environment), external (community involvement) and environmental practices (reduction of environmental impact, such as reduction of resource consumption and waste, recycling and the like) and finds that internal practices are the most common. External responsibility activities are less frequent as is concern for environmental issues. Medium-sized firms tend to be more involved in socially responsible activities than smaller firms. Major motivations are religion/ethics, the desire to have a motivated workforce, build relationships and increase profits. To a lesser extent, regulations also play a role. The main obstacles to involvement in external and environmental issues were lack of resources, lack of knowledge and the perception that there is no environmental impact. Many of these results are explained by the characteristics of SMEs, which are discussed in this paper, which concludes with a strategy to foster their involvement.
Corporate social responsibility in small and medium enterprises
SMALL AND MEDIUM ENTERPRISES (SMEs) MAKE UP MORE THAN 90% OF businesses worldwide and account for between 50% and 60% of employment. In Latin America, 95% of firms are SMEs, and account for between 40% and 60% of jobs, depending on the country, and contribute 30-50% of GDP. In the European Union, it is estimated that, as of 2003, more than 20 million SMEs (with up to 250 employees) accounted for over 80 million jobs. In the United States (where small firms are defined as those having fewer than 500 employees), 99.7% of all firms fall into the 'small business' category, account for half the nation's jobs and contribute more than 50% of non-farm GDP.
Because these firms tend to be more labour-intensive than large enterprises, they have a significant impact on employment and, as a result, their corporate social responsibility (CSR) practices have a significant impact on society as whole, even if their contribution to the overall production of goods and services is not as large. In addition, they tend to contribute more to the equitable distribution of income and, because they provide employment and income to the less well-off, they help to provide social cohesion and stability. Together, these reasons make promoting socially responsible SMEs a topic of rising importance.
However, it is first necessary that we understand the special characteristics of small and medium enterprises. SMEs are very different from the larger businesses for which most of the concepts and methodologies of CSR have been developed. SMEs have very different stakeholders. In particular, many are family-owned firms, or are privately held by a small group of shareholders, particularly in emerging economies. This close relationship between management and ownership makes it easier to align the objectives of both. Thus, SME activities may reflect the values, character, attitudes, education, background and the like of the owner/entrepreneur. This will have a direct impact on the firm's corporate responsibility.
The generalised assumption that maximising profits is the main objective of larger firms may not be true for SMEs. Given the assumption of profit maximisation, CSR practices in larger corporations are promoted by appealing to the bottom line (either currently or in the future, tangibly or intangibly). Yet many SMEs may not operate as profit-maximising firms and may, in fact, also have other objectives. This is not to say that SMEs are not concerned with profits. It means that they may be willing to forgo some profits (knowingly or unknowingly) to achieve other objectives, such as producing products that the owners/managers find satisfying to make, giving back to society, helping others who are less fortunate, and other such goals. The point is that 'satisfactory' profits (rather than 'maximum' profits) may be sufficient, and they may be willing to trade off some profit for other goals. (1) This has implications for the strategies used to promote CSR practices in SMES: the business case may be important, but it may not be critical, as they will also react to enlightened self-interest, to social conscience stimuli and altruistic reasons (Quinn 1997). Also, given the resource constraints (time, money and qualified personnel) faced by SMEs, they are more vulnerable to economic conditions and their CSR activities will shift with the economic cycle.
Most SMEs tend to serve local markets and are not exposed to international pressures or incentives. In addition, civil-society organisations will not be very concerned with their actions, preferring to devote their limited resources to the 'big fish': that is, the larger corporations that have a greater impact. Nevertheless, some SMEs sell their products and services internationally and to larger corporations, many of which are concerned about the extent to which their suppliers are socially responsible.
In general, SMEs by their very nature are...
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