CSR in small and medium sized business

Small and medium enterprises (SMEs) and micro –enterprises accounts for more than half of the total non-farm employment and GDP in the country. SMEs are in fact the back bone of a developing country like India as it creates dynamic market oriented growth, provides employment to a large workforce and is seen as a major player in alleviating poverty. But when it comes to corporate responsibility, SMEs are considered as minnows. Very little data is available regarding the extent of CSR practices that are being followed by SMEs as corporate social responsibility is primarily regarded as the province of large corporations who have ample resources and fat pockets

All over the world, big companies have gained kudos while doing their bit for the planet. They have the size, the manpower the resources and the reach to make a difference. Corporate Social Responsibility is an increasingly important part of business environment. The benefits businesses acquire include operational cost savings through environmental efficiency measures, enhanced reputation, sharper management of risk, improved capacity to learn and innovate and increased ability to retain and recruit staff.

But why should SMEs pursue corporate social responsibility? SMEs lack the power to influence governments and dictate standards. Moreover, a large number of SMEs are struggling to break even and establish themselves so where do they have the inclination, resources or even time to carry out CSR activities. Moreover, most of the SMEs are run by multi tasking MDs whose reach is more likely to be local than national. Why should he take the initiative to invest in CSR? Is there any visible benefits for smaller companies to invest in CSR

All this does not mean that small companies do not invest in CSR. SMEs generally have a greater understanding of local cultural and political contexts, more links with local civil society and a greater commitment to operating in a specific area. There are a number of SMEs who are involved in CSR activities, but the problems is that the CSR initiatives of SMEs are not structured and streamlined interventions. The CR activities undertaken by them are in a large number of cases dependant on the interest of the owner who is generally the CEO of the company in most cases.

In fact, many of the advantages and mileage large national and multinational corporations derive from CSR like image building, branding and room for lobbying with the government does not apply to SMEs. So many SMEs do not look at CSR as a win-win situation. Few studies carried out on SMEs regarding their perception of CSR points out that following the mandatory government rules regarding minimum wages, pollution, safety measures etc is equivalent to practicing CSR.

For many SMEs it is simply not possible to follow CSR practices due to the fact that they are still trying to establish themselves and fight all odds to survive. In a developing country like India, SMEs encounter a lot of obstacles and difficulties which includes access to finance, counseling, information, skills, technology and markets. As the CEO of an SME puts it “ you cannot go on spending money on unnecessary frills when you are laying off people and morale is at rock bottom ” is how the CEO of an SME reacts to CSR. Some other SME’s put forth the argument that they need to compete, sell more products and struggle to break away from the tag of being an SME. Moreover, SME’s point out to the fact that they are more vulnerable to market oriented reforms and changes in technology which makes their profit lines susceptible to fluctuations.

But many SMEs are aware that they do have responsibilities towards the communities in which they operate. Many of the CEOs of SMEs are members of Rotary or Lions clubs and are indirectly involved in charitable or development activities. But there are a number of NGO’s who are doing commendable work as far as CSR is concerned. In fact as by what case studies say, all of them feel that adhering to rules and being sensitive to their surroundings have helped their business immensely.

All the SMEs who are into CSR activities feels that it helps build a better reputation with the local community and their various stakeholders. They also feel that apart from this, it has helped the company in establishing good labour relations which has led to increased ability to retain and attract better quality staff. Moreover, many of them point out that this feel good factor has led to expansion of customer base bringing in increased returns and business.

In fact, many social scientists who advocate CSR as an integral part of business point out that SME can benefit a lot by adopting CSR practices. The supplement this view by pointing that small businesses have a heightened requirement for good multi-skilled employees, strong personal relationships and successful local engagements which can all be enhanced by adopting CSR practices. The main motivational factors for small business can be listed as follows

• Reputation : enhancing the reputation of the firm’s image locally.
  
• Improved work culture: increased motivation, less staff turnover and the ability because of enhanced reputation to attract better quality staff.
  
• Productivity: gathering innovation for products and efficiencies
  
• Expanding business: expanding the reach of business through increasing customer base.
  
• Corporate responsibility – personal satisfaction from discharging wider responsibilities.

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