Corporate Social Responsibility in Small and Medium Enterprises

The Literature Review

The importance of Corporate Social Responsibility (CSR) has been increasing rapidly over the past few years (Crawford and Scaletta, 2005) although meaning of the term CSR remains a subject of much debate (Roberts, 2003; Hopkins, 2003). The reason behind the debate is that the beliefs and attitudes on the nature of CSR have varied over time (Hill et al. , 2003).

However, according to European Commission’s Green Paper on CSR (2001), CSR is a concept whereby the companies integrate social and environmental concerns in their daily business operations and in their interaction with their stakeholders on a voluntary basis. On the other hand, CSR can also be understood as the business contribution to sustainable development (EC, 2002). Regardless the definitions, CSR is all about effectively managing the relationships that can affect the business and taking responsibility for the consequences that running the business has on society (Mallen Baker, 2008).

Again, the arguments so far shows that all organizations have an impact on society and the environment through their operations, products and services and through their interaction with key stakeholders and therefore CSR is important in all firms, large and small (Williams, 2005; Hopkins, 2003; Roche, 2002). But it seems that less research have been made regarding the engagement of CSR in SME (Vyakarnam et al. , 1997; Schaper and Savery, 2004; Perrini et al. , 2006; Spence et al. , 2000).

This literature review has been prepared with the aim of clarifying the engagement of CSR in SMEs. Small and Medium Enterprises as defined by DTI and EU are those organizations with a turnover of under 40 million Euros (? 27 million) and either has employees below 250 or over 25% owner-managed is proven to be important both numerically and economically since the last couple of decades (Jenkins H. , 2004). According to the research conducted by UNIDO (2002), SMEs make up over 90 per cent of businesses worldwide and account for between 50 and 60 per cent of employment.

Similarly, a recent research suggests that SMEs (Small & Medium Enterprises) in the UK may make a social contribution worth up to ? 3bn each year – about ten times that of large corporations (BITC, 2002) which proves their equal importance like companies. *Unlike in large organizations, the ownership and management of small organizations seems to be more closely related (Spence and Rutherfoord, 2001). Thus, control remains in the hands of one of the owners, potentially enabling him or her to make personal choices about the allocation of resources (Spence, 1999).

As described by Burns, 2001 small businesses are like social entities that revolve around personal relationships, which are often short of cash, likely to operate in a single market, who find it difficult to diversify business risk and are vulnerable to the loss of customers. Thus, in SMEs, the acceptance of CSR is largely a factor of the personal attitudes of the owner/manager (Hopkins, 2003; Perez-Sanchez, 2003). Improved image and reputation. Improved trust and understanding. Better market position. More business. Increased employee motivation. Increased attractiveness to potential recruits.

Cost savings and increased efficiency. Risk management The overwhelming motivating factor for SMEs to engage in CSR is not external pressure but an internal drive to ‘doing the right thing’ or ‘putting something back’ or showing ‘entrepreneurial spirit’(Jenkins H. , 2001). *However, from the viewpoint of SMEs, CSR means to pay attention toward social and environmental responsibility (Southwell, 2004). Similarly, Grayson (2005) suggests that, researchers and practitioners should recognize that lots of small firms are already doing things that benefits society, but those are not described as CSR.

Another important element in the field of CSR research is stakeholder theory. There is an inherent acceptance that all business has stakeholders and appropriate management of which can help reduce risk and improve all companies’ social responsibility (European Commission and Observatory of European SMEs, 2002; Irwin, 2002). However, stakeholder research has tended to focus on “corporation” or large company. But the nature of stakeholder relationship for SMEs may not be drastically different (Jenkins, 2004).

Stakeholder relationships for an SME may be based on a more informal, trusting basis and characterized by intuitive and personal engagement with less of a gap between the relative power and influence of company and stakeholder; whilst large companies are far more likely to engage in carefully planned, formal strategic stakeholder management (Jenkins, 2004). Thus, SMEs approach to CSR is likely to influence according to the way they manage their key stakeholder.

Work Cited

1. Brussels, 2001, Green Paper for Promoting a European Framework for Corporate Social Responsibility, Commission of the European Communities, COM (2001)366 final, p. 6. Burns, P. 2001, Entrepreneurs hip and Small Business, Hampshire: Palgrave.
2. Business in the Community (BITC), 2002, “_Engaging SMEs in community and social issues_”. Cohen, A. P. , 1985, The_ Symbolic Construction of Community, _London: Routledge.
3. EC and Observatory of European SMEs, (2002), ‘‘_European SMEs and Social and Environmental Responsibility_”, No. 4, Enterprise publication, p. 12.
4. Fuller, T. : 2003, ‘Small Business Futures in Society’, Futures 35 (4), 297-304.
5. Hill, R. , Stephens, D. and Smith, I. (2003), ‘‘Corporate social responsibility: an examination of individual firm behaviour’’, Business and Society Review, Vol. 08 No. 3, pp. 339-64.
6. Irwin, D. , 2002, Encouraging Responsible Business, Small Business Service, London.
7. Jenkins, H. (2004), “A Critique of Convectional CSR Theory: An SME Perspective”, Journal of General Management, Vol. 29 No. 4. Pp. 37-57.
8. Mallen Baker, (2008), “Arguments against corporate social responsibility – redoubled”, Business Respect, 26 October, Issue Number 139.
9. Perez-Sanchez, D. (2003), ‘‘Implementing environmental management in SMEs’’, Corporate Social Responsibility and Environmental Management, Vol. 10 No. 2, pp. 67-77.
10. Perrini, F. , Russo, A. and Tencati, A. 2006), ‘‘SMEs and CSR theory: evidence and implications from an Italian perspective’’, Journal of Business Ethics, Vol. 67 No. 3, pp. 305-16.
11. Roberts, S. (2003), ‘‘Supply chain specific? Understanding the patchy success of ethical sourcing initiatives’’, Journal of Business Ethics, Vol. 44 Nos 2/3, pp. 159-70.
12. Roche, J. (2002), ‘‘CSR and SMEs: chalk and cheese? ’’, Ethical Corporation, Vol. 9, pp. 18-19.
13. Sarbutts, N. (2003), ‘‘Can SMEs ‘do’ CSR? A practitioner’s view of the ways small and medium sized enterprises are able to manage reputation through corporate social responsibility’’, Journal of Communication Management, Vol. No. 4, pp. 340-7.
14. Schaper, M. and Savery, L. (2004), ‘‘Entrepreneurship and philanthropy: the case of small Australian firms’’, Journal of Development Entrepreneurship, Vol. 9 No. 3, pp. 239-50.
15. Southwell, c. : 2004, ‘Engaging SMEs in community and Social Issues’, in L. J. Spencer, A. Habisch and R. Schimidpeter (eds. ), Responsibility and Social Capital: The world of small and medium sized enterprises (Palgrave MacMillan, Hampshire), pp. 96-111.
16. Spence, L. (1999), ‘‘Does size matter? The state of the art in small business ethics’’, _Business Ethics: A European Review_, Vol. No. 3, pp. 163-72.
17. Spence, L. and Lozano, J. (2000), ‘‘Communicating about ethics with small firms: experiences from the UK and Spain’’, Journal of Business Ethics, Vol. 27 Nos 1/2, pp. 43-53.
18. Spence, L. and Rutherfoord, R. (2001), ‘‘Social responsibility, profit maximisation and the small firm owner-manager’’, Journal of Small Business and Enterprise Development, Vol. 8 No. 2, pp. 126-39.
19. Tilley, F. , P. Hooper and L. Walley: 2003, “Sustainability and Competitiveness: Are there Mutual Advantages for SMEs? ”, in O. Jones and F. Tilley (eds. ,_ Competitive Advantage in SMEs: Organising for Innovation and Change,_ pp. 71-84.
20. Vives, A. (2006), ‘‘Social and environmental responsibility in small and medium enterprises in Latin America’’, Journal of Corporate Citizenship, Vol. 21, pp. 39-50.
21. Vyakarnam, S. , Bailey, A. , Myers, A. and Burnett, D. (1997), ‘‘Towards an understanding of ethical behaviour in small firms’’, Journal of Business Ethics, Vol. 16 No. 15, pp. 1625-36.
22. Williams, A. (2005), ‘‘Consumer social responsibility? ’’, Consumer Policy Review, Vol. 15 No. 2, pp. 34-5.