Corporate Social Responsibility (CSR) is a continuous commitment to contribute to economic development while improving the quality of life of the workforce, their families, and the society. CSR is founded on voluntary actions. Thus, organizations are required to integrate social, environmental, ethical, human rights and consumer concerns to their operations and vital strategy in partnership with stakeholders. Small and medium-sized enterprises (SMEs) are organizations that have less than 250 individuals and their turnover is not more than 50 million euro. Additionally, their balance sheet is less than 4 million euro (Jenkins 22).CSR is a significant element for SMEs in improving their competitiveness.CSR has shifted from ideology to business reality as the spread impacts of business decisions on the social and physical environment, both negative and positive,progressively become evident to the broader community(Castka 141).
Despite the fact that Small and Medium-sized enterprises (SMEs) are the most common form of business in the world, several studies on CSR have concentrated on large companies. The business organization of any kind is considered a formation of society whose existence depends on the same society. The society obliges certainduties or commitments on business organizations to accomplish. Therefore, CSR entails a multifacetedvariety of activities that a business enterprise is anticipated to assume to fulfil the interest of multi-stakeholders and sustain a harmonious relationship with the community where the business is situated (Inyang 123).Since SMEs operate in numerous settings and experiential investigations on CSR in SMEs are very few, the aim of this research is to fill the investigation gap and deeply discuss the challenges and benefits of CSR initiatives by SMEs.
Organizations have been compelled to participate in activities of CSR and have agreed that their obligations to the society are beyond manufacturing goods and services for profit. CSR as a trade ethic impacts the social, political, and economic world of business. Organizations are encouraged to engage in CSR for economic and moral purposes (Moyeen and Courvisanos 365). Essentially, consumers’ positive response and advantages of CSR, such as decreased business risk and improved stakeholder relations have enticed many organizations to CSR. It enhances the reputation of an organization, which is a valuable asset in the current business environment. Investing in CSR by marketing an organization’s sustainability creates value for organizations and their stakeholders. Studies on CSR are currently focusing more on SMEs because they account for 99% of all businesses and form a large portion of the economy and industry. CSR practices in SMEs vary from those in large organizations. This is because of SMEs uniqueness like owner management, strong connection with business partners and the local community, and lack of resources and backup to implement CSR (Moyeen and Courvisanos 367).
Smaller organizations involve in CSR to distinguish themselves from others and pursue visibility to enable them access resources. However, middle-sized organizations are less motivated compared to small and large organizations. This is because middle-sized organizations undergo high pressure-resistance to resource-access due to less visibility by enlarging. Challenges for small organizations’ engagement in CSR can be addressed by understanding the advantages of CSR, for example, enhanced reputation, a professional image and high confidence and loyalty. These factors alsopromote an organization’s sustainability through establishing a stable workforce and enhanced relation with financial institutions (Moyeen and Courvisanos 370).
Benefits of CSR Initiatives by SMEs
Several studies have recognized various benefits that SMEs obtain from the adoption and implementation of CSR programs. The involvement of SMEs in CSR is vital in the economy because these businesses assist in creating employment opportunities, drive economic growth, enhance the growth of the private sector, and offer an opportunity for fair distribution of income in the society (Inyang 128).
SMEs are in a better position to benefit from SCR as compared to large organizations. This is because SMEs are flatter and quicker and therefore able to manage reputation and risks since they have a very short decision process. Another benefit is that business systems like ISO 9001: 2000 can function as CSR integration tools. When SMEs adopt CSR, the determination to attain stakeholders expectations are implemented in the CSR agenda making them to benefit from stakeholder satisfaction, business improvement, and development of competitive advantage (Jenkins 24). Other benefits include improved image and reputation, higher profits, better market position and high employee motivation.
In addition, SMEs are closely connected to their stakeholders, which enhance stakeholder management for SMEs. Moreover, since SMEs are flexible, they respond the needs of stakeholders promptly and implement stakeholder policy.On resource-based perception, SMEs have benefits of concern for local basis and flexibility and can overrule profitability to assume principle –based initiatives.
SMEs closeness to local communities facilitates CSR activities because they understand local issues and it is easier for them to establish appropriate solutions. Additionally, the size of SMEs makes it possible for them to come up with faster and more flexible decisions that assist in introducing SCR and modifying its execution in accordance with the present situation. Moreover, operating a business on a local scale denotes being closer to potential consumers. Thus, information concerning practices of an enterprise disseminates quickly among them, mostly by word-of-mouth. Information can also be transmitted through local media coverage. Therefore, CSR activities assist in improving an organization’s publicity while minimizing market costs and differentiating it from its rivals(Raynard and Forstater 3).
The advantage of being a responsible entrepreneur for SMEs is improved reputation among other organizations, which may result in business opportunities. This is because CSR conscious enterprises can entice others who share similar values and lead to increased trust between them. This can be significant for organizations that are ready to expand globally.
Another benefit of CSR initiatives by SMEs is reduced costs because of more effectual production management. This may entail activities like minimizing water usage, initiating energy efficient tools, and recycling waste materials.Additionally, CSR activities concerning supporting employees’ wellbeing and improving their workplace can enhance their contentment, creativity, and loyalty towards an organization. Thus, because SMEs normally hire local community members, their good practices in this area are highly evident among them. This may also lead to enhanced reputation of an organization, which promotes customer trust and loyalty (Jenkins 27).
It is clear that SCR functions as a medium for business improvement and establishment a competitive advantage for SMEs. CSR is a model that operates businesses profitably but in a socially and environmentally responsible manner to attain business sustainability and stakeholder satisfaction (Castka 148).
Challenges of CSR Initiatives by SMEs
Various challenges related to adoption and implementation of CSR by SMEs have been recognized in the study. SMEs barriers to CSR include their view towards CSR since they believe that CSR is out of concern with SMEs and is intended for large corporations.Low perception of CSR in SMEs is because of the term ‘corporate’, which isolates smaller organizations. Therefore, SMEs define CSR imprecisely. In addition, SMEs are not in a position to implement CSR agendas similar to large organizations due to the challenge of survival and viability of their business (Moyeen and Courvisanos 382).
Additionally, there is a challenge of limited resources (financial, human, and limited time). For example, organizations require more financial resources to introduce CSR tools like ISO system andcommunication that is more active by offering lecturers. Moreover, some SMEs do not know that CSR activities are fairly cheaper and in some cases lead to significant savings in the long- term (Efficiency improvements).The human resource challenge is also entailed in financial challenge since many funds are needed to hire additional employees.
Another challenge is that since many advantages of CSR are intangible, it is difficult for SMEs tomeasureand quantify them, making it challenging forthem to involve in CSR. In addition, it is difficult toacquire employees to be involved in implanting CSR culture in an organization because it required additional funds.
Improper language is also a barrier for SMEs to engage in CSR. Additionally, lack of appropriate service for CSR in the community and proper information concerning CSR is a challenge. Normally, SMEs have the need of accessing a support service of information for CSR but most of them feel that it is not enough or are not aware of how to access it.SMEs also fear conducting CSR wrongly or poorly. Moreover, short-term business planning is handled with time and resources restraints as challenges. In supply chain and procurement, SMEs feel CSR as anobstacle when competing with other organizations. Therefore, assistance in setting and meeting CSR procurement is needed in regional CSR spread in SMEs (Moyeen and Courvisanos 382). Moreover, the challenges can be overcome through learning from others, communicating and celebrating best practices, and increasing the evidence base and demonstrating the link between CSR and competitiveness
A variety of resource restraints challenges emanated from a short-term attitude towards CSR and the environmental policy, which is created by the lack of human and financial resources and time constraints. Another challenge is lack of knowledgebecause few SMEs are aware of the concept of CSR. Nevertheless, some organizations conduct activities that can be categorized s SCR but they are not aware. In addition, some of them tend to be aware, but they lack information about where to start the procedure of enacting some form of CSR program.
Promotion is another problem whereby the major challenge is ways of approaching the unaware organizations and making them interested in CSR. Promotion of CSR has been conducted at a national level and SMEs that are interested in adopting CSR are few. Therefore, the promotion efforts should target those who lack knowledge or are not aware that they have already adopted CSR practices. Additionally, it is important to let SMEs know that CSR is not intended for large organizations alone and can result in various benefits(Raynard and Forstater 14).
Implementation of CRS by SMEs has been difficult with lack of time and resources being the main barriers as well as limited and distorted mannerin which CSR has been welcomed. Efforts should be made to educate stakeholders concerning elements of CSR, especially establishing partnerships of customer groups with initiatives that operate for ecological and sustainable growth(Moyeen and Courvisanos 384).
Issuesand Future Prospect
High Focus On Product Responsibility
The main areas of controversy are shifting from side effects, for example, the manner in which organizations handle their employees or the coefficient of the production procedures towards whether goods and services and their marketing strategies are good. Contemporary issues are Genetically Modified goods, AIDS drugs, animal rights, tobacco and junk food and arms production (Raynard and Forstater 19).
Emergence of Sustainability Approaches
Social, environmental, and economic methodologies have merged into one that focusses on general sustainability. Several initiatives, such as the Global Reporting initiative and the Sigma Project are key in the growth of combined approaches of CSR. Normandy, a practical overlap exists between social and environmental issues, such as in the case health and safety of workers. Nevertheless, conflict can arise between social and environmental imperatives. For organizations, the management and standards for social, environmental, and economic impact need to be incorporated. This would lead to efficiency benefits and high performance(Raynard and Forstater 19).
Increased Concentration On The Quality Of CSR Management
Withincreased comprehension of good practice and pursuance of clear connection between social and financial performance, there is a high concentration on the quality of the management of CSR instead of whether an organization does it at all. CSR standards and quality management methods are joining and have taken on the features of each other.
Corporate Influence As An Increasingly High Profile Issue
Politicallobbying continues to be spectral and detached from more high profile social and environmental obligations. In most organizations, they are controlled by different departments, which seem to pursue separate agendas, with an organization, for instance, backing fair trade while retaining its membership to the industry body with a protectionist lobbying agenda. Due high shift of CSR into essential business, inconsistencies will become more evident and the need for openness and policy consistency more persistent.
CSR has been conspicuous against a backdrop of comparative economic stability and growth. Nevertheless, the tendency of global economic cycles denotes that this pattern of growth will at slow down some periodand probably go into recession. If any recession is compounded by global insecurity due to increased conflict, the further development of CSR will be highly challenged, specially its strength to go beyond being a charitable add-on tofocus ona business strategy(Raynard and Forstater 19).
A lot of academic literature on CSR, which focuses on organizations’responsibilitiesto the society, concentrates on large corporate organizations. Little research is presently available to enhance the comprehension of benefits of CSR in SME’s. Therefore, it is important to modify the measure utilized for promotion of CSR to the reality of local enterprises.Nevertheless, recent knowledge about the major impacts of SME’s on economic development of countries has started shifting the research pendulum. SME’s are encouraged by internal and external drivers and influences to adopt CSR along the dimensions of community development, environmental management, and supply chain.
Despite the advantages arising from CSR, which include enhanced community relations, employee loyalty, and satisfaction to business growth and profitability, SMEs face various challenges in adopting and implementing CSR initiatives. The main challenges of insufficient resources and lack of training and support services can be addressed easily by increasing resources, training programs, and development of formalized SMEs-oriented tools to guide the adoption and implementation, and government intervention strategies to establish incentives and support services for SMEs involvement in CSR.
SMEs have a competitive advantage over their larger multi-national rivals since they function near communities they help. Therefore, enhancements in their tactics to CSR issues would perfect their competitiveness besides enabling them to be more effectual and resistant to fluctuating market conditions.
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