SME-SR: Bringing Corporate Social Responsibility to SMEs

 SMEs & CSR - a pertinent link.

Small Medium Enterprises (SMEs) and their role tend to be overlooked when it comes to the concept of CSR and its relevance to  smaller business entities. This is at times to the fact that SMEs like CSR can be a diverse and nebulous concept to pin down. This article explores why, explaining the link between SME-SR and community outcomes.

Regardless of the precise definition of SMEs, the truth is in fact that they form the backbone of several national economies - including ours. New Zealand is a prime example of a country built on small businesses.  SMEs comprise over 97% of enterprises in the country, employing over 584,000 people (30% of the workforce) and contributing 28% of New Zealand's GDP (MBIE, 2018). Thus; SMEs are an integral part of the New Zealand economy, the question we should ask is how do CSR practices apply and compliment the small businesses?

In a nutshell, the CSR model can be adopted and implemented within SMEs quite successfully; as long as CSR is not seen an imposed external model but tailored to the specific reality of the small business.

There are 4 fallacies that have given the impression CSR isn’t for small businesses and is a ‘big business’ model.

  1. The first fallacy is that large companies are the norm and SMEs are just 'little big companies' (Luthhold, 2010). Hence, any attempts to engage small businesses in CSR can simply be scaled down to 'fit' SMEs (Jenkins, 2004, 2006). This is not the case as the size of SMEs along with sector, legal form, national context, ownership structure and historical development dynamics (Spence, 1999; Spence & Rutherfoord, 2003) does undoubtedly affect the implementation of CSR. 

  2. Secondly, CSR can easily be applied to SMEs as they are one big homogeneous group. This is untrue as the application of CSR is challenging for SMEs are ‘heterogeneous, having qualities, pertaining to size, resources, management style and personal relationships’ (Williamson et al, 2006) which results in very unique outcomes. 

  3. Thirdly, conventional approaches to CSR are rooted in the assumption that only large companies are the norm; and hence the concept has been tailored only for them (Jenkins, 2004). The reality is that SMEs understand CSR really well but in a different terminological sense. Their language is more community driven and based around ideas of responsible business behaviour.

  4. The final fallacy exists around the fact that SMEs are not aware of CSR, which is untrue as to most of them corporate social responsibility is nothing new and have been practicing it with an ‘intuitive attitude’ for a long time (Fassin, 2008).  This is especially the case in New Zealand. However, studies have shown (Jenkins; 2006; Russo & Perinni, 2009; Spence; 2004) that SMEs do engage in responsible practices but in a less formal, implicit, indefinable and less measurable way’.

In short, SME’s with their focus on wide social impact and inclusion of stakeholder concerns and the current CSR narrative (emphasis on business-society interface) share a lot of common ground when it comes to compatibility.

All of this, presents a strong case for why CSR models can be applied to SMEs and not just big companies.

As long as they reflect the SMEs specific reality (local context), CSR initiatives can be harmonious, valuable and beneficial for small businesses. Small business can use CSR as a strategic tool to take advantage of market liberalisation and develop business globally; and with their combined entrepreneurial nature to drive innovation in different ways (Hoivik & Shanker, 2011).  For some, being responsible is not an external thing but emerges out of the internal motivation and moral ethos of the owner and employees. SMEs also pragmatically recognise that CSR needs to be mutually beneficial to the firm and stakeholders if it were to succeed in a business context (Jenkin, 2006)

To conclude, SMEs have tremendous potential to make an impact through the employment they generate, the business practices they choose to adopt, the sectors in which they operate and their impact on innovation and diversification in the economy (ITC, 2019). It is true that society seeks greater commitment from MNCs when it comes to CSR, whereas SMEs tend to escape the scrutiny of stakeholders somewhat.

Nonetheless, it does not undermine the importance of SMEs when it comes to being socially responsible actors. This section seeks to highlight the contribution of SMEs not only to the national economy but also their potential in spearheading CSR initiatives in New Zealand. This is achievable due to their unique organisational traits; organic ties with the local community; the idea of giving something back; and an all embracing view that concerns business impacts towards all stakeholders and the wider society.