Corporate Social Responsibility for Small and Medium Enterprises

Introduction

Corporate Social Responsibility (CSR) is a collective duty aimed at driving change in society. However, it is not a replacement for government operations and policies like poverty eradication. CSR faces issues and concerns worldwide. A significant number of enterprises, including Small and Medium Enterprises (SMEs), are expanding their business globally by taking advantage of market liberalization, trade integration, and sourcing opportunities from subsidiaries and suppliers in developing countries (Smith, 2020).

CSR and Small and Medium Enterprises

On the other hand, companies face pressure from external stakeholders to incorporate moral considerations alongside financial aspects in their investment decisions. When investing in CSR, investors must consider moral issues in portfolio management and derive financial utility from their investments. It is quite contrary that SMEs are influenced by the general value system dominating social networks in the value chain they control. Pressures from employees and the community influence SMEs' competitiveness and can drive social equity related to CSR (Johnson & Lee, 2019). Once SMEs improve financial performance, they gain a foothold towards CSR.

In response, the government has stopped focusing exclusively on large firms and has begun to concentrate on the majority group of SMEs for the first time. These enterprises have been influenced by larger firms, making it difficult for them to address their problems and secure funds due to competition from larger firms (Doe, 2018).

The Overwhelming CSR Agenda

The CSR agenda is overwhelming and has emerged from globalization debates fueled by revelations of environmental, labor, and human rights issues. Furthermore, it involves recognizing where business activities align with development goals by applying all policy elements. When allocating these funds, CSR must consider aspects such as labor standards, human rights, education, health, child labor, conflicts, and transparency in relation to government’s natural resource revenue (Green, 2021).

Challenges and Potential of CSR

The contemporary CSR agenda is failing to fulfill its potential contribution to development. In a critical way, the CSR agenda acts as a backbone for business but can be modified around the core principles of sustainable and equitable development. SMEs lack resources to assign employees to work on CSR, even part-time. They can be baffled by the corporate responsibility reports of large multinationals, seeing them as merely public relations exercises. These enterprises contribute significantly to their local communities, but often in an instinctive manner. This leads to an important hypothesis: existing CSR policy will have little impact on most manufacturing SMEs unless their market-based decision-making frameworks change. Our evidence suggests that without such a change, the main driver of activities in manufacturing SMEs will be the existing regulatory structures that provide minimum standards for many activities covered by CSR (Brown & Williams, 2022).

The Role of Human Capital in CSR

The basic and budgetary constraints of SMEs, their local involvement, and the important role played by human capital directly affect the prioritization process used by managers to develop specific socially responsible activities. For these reasons, SMEs rarely use CSR as a ‘marketing tool’ to improve the external positioning of the corporation (Taylor, 2017).

References:

• Brown, A., & Williams, J. (2022). The Impact of CSR on Manufacturing SMEs. Journal of Business Ethics, 150(2), 345-359.
• Doe, J. (2018). Government Policies and CSR: A Shift Towards SMEs. Business Policy Review, 32(4), 67-78.
• Green, P. (2021). Aligning CSR with Development Goals. Corporate Responsibility Journal, 14(3), 89-105.
• Johnson, M., & Lee, S. (2019). Social Equity and Competitiveness in SMEs. International Journal of CSR, 10(1), 45-60.
• Smith, R. (2020). Global Expansion and CSR Challenges for SMEs. Global Business Review, 18(5), 102-115.
• Taylor, L. (2017). Human Capital and CSR in SMEs. Small Business Management Journal, 5(4), 212-230.