Articles

 

MHCi MONTHLY FEATURE

February 2004

Corporate Social Responsibility and Small and Medium Sized Enterprises Revisited

Ivor Hopkins

Introduction

In this article I comment upon a huge inflow of articles that stemmed from a recent three week e-conference organised by the World Bank Institute (WBI) where the author was one of the moderators.

I am brought up in an enterprising family and our factory closed down because we tried to be responsible and ethical. In my view the small enterprises are too small to be able to effect the larger environment and have to take it as it is

This was the very first posting to the e-conference, which took place in January this year. Was this statement - poignant as it is - to set the tone of the e-conference?

The e-conference elicited over six-hundred postings internationally from academia, business, consultancies and NGOs in response to the WB's question: "Can small be responsible? The possibilities and challenges of CSR among SMEs." The debate was very broad, despite the leading questions raised by the WB. Space was taken up with exploring definitions for both Corporate Social Responsibility (CSR) and the nature and impact of Small to Medium-sized Enterprises (SMEs), particularly in the developing countries, that I have not reflected on in any depth here. In short, it was agreed that SMEs are important drivers of economic activity and CSR was frequently linked to responsible entrepreneurship.

Below, I have highlighted the challenges and possibilities offered by CSR to SMEs and the fact that the challenges are not completely covered by my conclusions, reflects the broadness of the e-conference's content: like CSR, as one eminent commentator pointed out, it was a journey not a static concept.

The Challenges

Throughout the three weeks of the e-conference, a number of challenges facing SMEs were highlighted:

Graft and corruption: these, together with the question about what chance CSR has in a corrupt state, occurred regularly throughout the e-conference. And if the big boys were bad - meaning MNCs - what chance did a small company have?

Individual responsibility / cost - benefit question: moral heroism: who has the time to exert their individual responsibility when the focus is on the short term existence or profitability of one's company? SMEs are frequently only cash flow driven and do not concentrate on a return on investment, which makes any activity that is not profit-focussed a side issue. There is a lack of motivation to engage with responsible behaviour when the costs seem to outweigh the benefits.

Lack of education and information: if an SME is interested in a sustainable business, then there is the impact of competitors to consider (the playing field is not level) as well as a lack of education on CSR and a lack of information on how to turn CSR into a competitive advantage. Labour and environmental standards were underlined as eroding competitive advantage and there was much discussion on how much support in CSR a government should give to SMEs.

Non-standard form of CSR: There was a strong thread that CSR cannot mean the same thing for all SMEs: put another way it was discussed that a non-standard form of CSR is needed for SMEs. This difference on CSR perspective could also lead to a conflict between the values of an SME and the ethics codes of an MNC that buys from it.

 

The Possibilities

 

Teach good management practices: there was much agreement that CSR is fundamentally about personal attitude and that there should be training in responsible entrepreneurship, maybe via local chambers of commerce, to foster this awareness. It was also felt that a paradigm shift in attitude was needed to give the congruence of economic and social profit that would help businesses embed CSR in their operations. Moreover, business schools should include CSR as a component of their syllabuses because they are educating future leaders, the very people who could effect positive change.

Non monetary based CSR: given that CSR is in any case based on good business practice and that SMEs are likely to be more tuned into their local community, it was agreed that CSR does not have to be a cost as there are direct activities that a company can take. Much of the e-conference debate centred on developing countries so this was an area of some interest.

Consumer encouragement: one area for increasing the take up of CSR by SMEs would be to foster consumer action in the buying of ethically produced products and services. This, it is felt, would beat the abuse of certification and endemic corruption.

Government intervention: there was also a broad feeling that, whilst CSR should be a voluntary practice, government intervention in helping to provide a level playing field was necessary. This could occur through, for instance, developing a legal framework to encourage CSR, through tax policy incentives for CSR practices or local economic development strategies.

International campaigns to heighten responsibility and accountability: Towards the end of the e-conference there was some discussion of creating an international fund to help CSR activities but there was tension between the demands of such a scheme and the actualities of an SME, whose concerns are often local and who may be either distrustful or unaware of such initiatives.

 

Conclusions

The e-conference brought very broad discussion, sometimes completely off the subject, but some real thinkers and practitioners offered positive insights and the overall view was that small can and should be responsible.

Positive: the e-conference underlined that SMEs in developing countries are CSR positive. CSR is seen - and can be promoted - as an extension of personal values: as one commentator put it, CSR is the corporate version of personal integrity. SMEs with a clear mission, CSR and good governance have a much clearer compass for their business.

Community involvement is key and the Australian value of showing 'mateship,' of supporting and providing for others in often difficult circumstances, seemed to me to be a perfect way of describing this.

Definitions: as mentioned in the introduction, there was much discussion of what CSR is. One comparison of CSR to Philanthropy particularly pleased me: CSR refers to how you earn and Corporate Philanthropy to how you spend.

CSR as a means: it was continually underlined that CSR needs to be more than just compliance, it needs to be voluntary and it is better to pursue CSR as a means than not at all. There is no point in binding SMEs in red tape when the thing they least want to deal with are bureaucratic hurdles

Best practice: education and the need for obvious measurable benefits were also key subjects and there were several examples of best practice where CSR is part of a successful business. It was felt that such examples are the best way of putting the benefits of CSR across, although it was disappointing that not more actual examples were forthcoming.

Flexibility: SMEs are more flexible than TNCs so the innovations of CSR could be taken up much more easily and quickly

Anti corruption: CSR practices thwart corruption. Corruption was the one topic that really brought out heartfelt cries for help and the e-conference really underlined the fact that the transparency and responsibility inherent in CSR would eventually help to defeat this stain.

Finally, the World Bank should be applauded for their action in facilitating this e-conference as it allowed a broader group of people to comment and interact with each other than is possible at a more normal, real time meeting or conference.

This overview of the three week long World Bank e-conference is a distillation of many interventions and might seem to be obvious in the comments and conclusions I have highlighted. I started this monthly feature with a negative view of ethics in business and I know that there are many out there with the same feeling, that CSR in small to medium enterprises is a waste of time. However, there are also very many people who want to make a difference or have experienced the positive impact that CSR can have on business. The participants in this e-conference - from whatever end of the CSR spectrum they were from, whether learning or practising - revealed a passion for change that is truly inspirational:

O brave new world,

That has such people in 't!

[William Shakespeare, The Tempest]

 

Contributed by Ivor Hopkins, former Senior Partner to MHC International Ltd, who was a moderator to Week 1 of the World Bank e-conference "Can small be responsible?" January 2004