The Importance of Corporate Social Responsibility for SMEs

Small to medium-sized business (fewer than 250 employees) account for about 90% of businesses worldwide and are responsible for 50-60% of employment. As such, they play a fundamental role in society and can potentially have a huge impact on social welfare.

I find it surprising, therefore, that corporate social responsibility (CSR) initiatives, so far, have tended to focus on large companies and multinationals. As SMEs have stakeholders and an impact on society, the concept of CSR is just as valid for small companies, as for large companies.

Many SMEs may be doing CSR in some way or form, but don’t call it “CSR” as such. For example, they may provide excellent goods and services; they may be great employers, engaging with their employees and other stakeholders; they may be alert to health and safety issues in the workplace and for customers, or they may be attempting to operate sustainably and minimise their use of natural resources. All of these things are examples of socially responsible behaviour but are not labelled as such by many small and medium sized businesses.

Staffing is often a critical element in the success of a small business. It is true in any business but employees in a small business are often a critical resource for the business’s success and prosperity. As such, many small and medium-sized businesses place emphasis on increasing employee skills and work on motivating and building staff morale. Much of SMEs’ social, community and environmental initiatives are therefore driven by, or focused on employee engagement and development.

Some of the barriers for SMEs in becoming involved in corporate social responsibility include; 

• the cost of implementing CSR activities when survival is often the greatest economic imperative;
• time and resource constraints which may mean a lack of affordable external support and resources; 
• a lack of awareness of the business benefits with no/little understanding of the business case for small and medium-sized enterprises; 
• the fact that existing CSR tools and guidelines are mainly geared towards large business;

On the other hand, there are a number of things which could encourage CSR in small business. Most importantly there is the ability to attract and retain valued employees. A characteristic of small businesses is that their success is largely dependent on a handful of key employees. Other things include the ability to develop unique selling propositions and competitive benefits through their products and services; cost and efficiency savings and enhanced reputation. 

One of the problems that SMEs face when seeking to address CSR issues is that many of the tools are designed for big business. Initiatives aimed at encouraging SME involvement in CSR need to be easily accessible and relevant. The advice needs to be tailored to them with easy-to-use tools and case studies that make it real and provide encouragement to SMEs. If small businesses can see examples of specific initiatives that have increased profitability and improved the business they will be more likely themselves to adopt CSR strategies. I think charities could work with channels known and trusted by SMEs such as industry associations to ensure that information, guidance and partnerships are available.