CSR & SMEs
The role of Small-Medium Enterprises (SMEs) is catalytic for the European and national economy. The 25 million euros that resides with SMEs inside the European Union makes up the biggest part of the European market:
- they create new job positions
- they promote innovation
- they support the economy of local communities
Traditionally, SMEs concern themselves with CSR voluntarily, as business owners tend to be motivated by a personal feeling of responsibility. At the same time, experience has shown that to a great extent, SMEs are unaware of the level of impact they have on the environment and society. The involvement of SMEs with CSR has the potential to lead to multiple advantages not only for themselves, but also for their stakeholders, that is, everyone that affects or is affected by the business’ operations, that can eventually give shape to a new form of ‘venture capital’.
These days, the corporate environment is changing swiftly. The owners and key personnel (stakeholders) of SMEs are now required to understand that everything they previously took for granted regarding the natural environment, relations to the individual and to society as well as the role of businesses, is shifting. The principal effort made by SMEs, especially in Greece, given the circumstances, is the everyday struggle to maintain their operations. Therefore, their approach to CSR ought to be adapted to their particular conditions and needs.
There are many factors that have contributed to establishing corporate social responsibility as a contemporary issue, not only for big businesses but also for SMEs, creating a new framework inside which businesses are required to satisfy the mounting expectations of all stakeholders regarding their operations and behavior.
Factors of Development
- Globalization: globalization and the opening up of markets, with the questionable results that accompany them
- Civil Society Development: enhanced citizen consciousness regarding the protection of the natural and social environment
- Urbanization: the growing urbanization of populations, particularly in developing countries
- Knowledge: the knowledge-based society, new technology and information pluralism
- Sustainable Development: implying economic development that is environmentally conscious and socially just
Characteristics of SMEs
- An inhomogeneous whole. SMEs represent a huge spectrum in almost all sectors of economic and corporate activity, while in most cases they operate alongside suppliers, customers and producers of their products and services.
- Limited size. Due to their size, SMEs face more limitations than big companies, such as limitations in human and economic resources.
- Direct contact with local communities. Due to their size, SMEs become more visible than big corporations on a local level and the impact of their operations is more perceptible.
- Contribution to local development. SMEs are being called to contribute to local development and the protection of the natural environment, through the incorporation of a more decent mode of operation, in order to convince shareholders that local communities are wealthier with them rather than without them.
- Participation in supply chains. SMEs are often called by larger businesses-customers to take on CSR initiatives, in order to ensure the continuation of their pre-existing cooperation or to assume new projects. Taking CSR initiatives enables SMEs to utilize the benefits of CSR to their own advantage, both on the level of improving their competitiveness but also on the level of preventing and confronting, in a timely fashion, any institutional requirements that may be put in place in the future.
- Competitiveness and differentiation. SMEs consistently try to differentiate themselves from their competitors. The SMEs that have identified their competitive advantages and their role in local communities can have a long-term outlook, confront risks more directly and take advantage of opportunities.
They ought to support people in the development of a series of basic characteristics:
1. Comprehension of the business’ role
The business ought to be knowledgeable about the broader environment in which it operates and of the impact of its activities on the natural environment and society. That is, it must recognize that it is a significant player itself in society and must strive to have the most positive impact possible through its actions.
For this purpose, it must delegate initially CSR-related issues to an employee, who must
- Know the role of different stakeholders in society and the business’ own role in it
- Be aware of the various social and environmental trends and how each of them are related to and influence the operations of the business
- Take active part in promoting an honest social and environmental concern throughout the entire business structure
- Make decisions regarding the calculation and reporting of the environmental and social impact of the business
- Develop strategies that are in line with market demands that go beyond legal requirements and are in accordance with CSR standards and principles
2. Formation of collaborations and partnerships
The business must support collaborations both in its internal and external environment and must take part in the development of strategic networks and partnerships, contributing to the development of its partners’ abilities to manage CSR issues meaningfully and effectively towards the common good. For example, the suppliers of a company must understand the approach they have adopted towards the environment while employees must apply social and environmental concerns to their everyday duties.
For this purpose, the employee responsible for CSR must:
- Know that it ought to cooperate with others both internally and externally
- Transfer ideas and information accurately and in a way that encourages collaborations
- Take active involvement in work groups consisting of similar employees or higher level executives.
- Take responsibility for the management of procedures that encourage the participation and intermingling of the members of such groups
- Develop business strategies that take into consideration the prospect of cooperation between different departments of the business regarding the implementation of strategic issues.
3. Challenging the traditional mode of operation
The business must be open to new ideas, invite others to adopt new ways of thinking and challenge the traditional mode of operation. The constant re-examination of the role and operations of a business in relation to a sustainable future leads to innovations that improve the life quality of both people themselves and the environment. In this effort, the business can involve external bodies with which it can share mutual concerns about the future
With this goal in mind, executives of the business must:
- Be aware of the necessity that to make the business receptive to new ideas
- Recognize the need to distance the business from familiar modes of operation and direct it towards innovative ones
- Display an investigative way of thinking that inspires new ideas and translates them into action
- Demonstrate a leadership style that can adjust to specific situations, to inspire, to affect and encourage others to perform effectively
4. Construction of relationships with stakeholders
The business must determine who the stakeholders and build relationships with them, participate in consultations and strike the balance between different demands. Stakeholders consist of everyone that can affects or is affected by the business. The business has to recognize the risks and opportunities that stakeholders represent and cooperate with them through meaningful consultations during which it takes their opinions on board.
For this purpose, the executives of a business must:
- Recognize the main stakeholders of the business and respond accordingly
- Know that the business needs to maintain good relationships with a wide variety of stakeholders
- Actively concern themselves with the construction of relationships and communication channels with stakeholders’ representatives
- Systematically take into account the impact that their decisions have on stakeholders
- Reconsider their business strategy and balance the-potentially conflicting- demands of different stakeholder groups
5. Development of a strategic opinion
The business ought to have a strategic opinion about future of entrepreneurship. It must ensure that social and environmental concerns are included in the overall business strategy. The direction must be determined by the leadership of the business and it must involve all employees.
For this purpose, the executives of the business must:
- Recognize the need for the existence of a strategic vision
- Understand the market and its customers, the way the business community operates, the latter’s structures and philosophy and the way in which all of the above and connected to CSR
- Concern themselves actively with the involvement of employees and stakeholders in the development and implementation of the business strategy
- Ensure the incorporation of CSR in business strategy
- Act as ambassadors of CSR and have the ability to effectively communicate the contribution of CSR to the performance of the business strategy
6. Acceptance of diversity
The business must recognize that people are different to each other and must show respect such diversity and adjust its approaches to different situations that are reflected in fair and transparent work practices and general cooperation.
For this purpose, the executives of the business must:
- Recognize the importance of respecting diversity
- Understand the needs of the business regarding the adjustment of its approaches, language and opinions in a way that suits different situations, philosophies and individuals involved
- Concern themselves actively with the creation of a work environment that is fair and can vary in terms of philosophy and ethnicity, gender, religion etc.
- Ensure the advancement of employees to the largest possible extent, provide consistent information about performance, set work goals and check their progress
- Develop business strategies that evaluate employees and corporate partners regardless of gender, race, age, physical ability, sexual orientation etc.
The development of the above characteristics will significantly help with the adoption and application of CSR, through the following steps.
Step 1. Determination of the business’ mission and vision
Ask yourselves whether apart from profit, the mission and vision of your business include the benefits to the individual and the environment. Do your business partners and customers appreciate your business and desire to cooperate with you? Does your personnel think the business is an exceptional workplace? Does the local community consider your business to be a good neighbor?
Evaluate which of the above are important for your business and incorporate it into its mission and vision.
Step 2.Selection of the individual responsible for Corporate Social Responsibility
Delegate to one of your employees or a group of them all CSR issues and personally take charge as a leader of the coordination of CSR activities within the company. The role of the manager of such issues is varied and important. Apart from their specific duties they must determine and involve in the whole process individuals from departments such as Human Resources, Sales and Marketing, Legal, Communication, Quality, Health and Safety, Environmental etc.
Set yourself in charge! The commitment of the business to the implementation of responsible business practices must originate from the owner or director of the company because ultimately that is who will be responsible for the success or failure of the whole process.
Step 3. Setting Priotirities
The incorporation of CSR into the strategies of the business does not mean that all actions must take place together. Depending on the particular position of the business, the sector in which it operates etc., priorities will have to be set. If, for example, a business operates in the excavation industry, then it is very likely that environmental issues should be a priority. On the other hand, a business that operates in the service industry might be more exposed to issues of corruption or bribery.
Priorities are set by work groups that detect and analyze dangerous areas or behaviours that could put the firm’s reputation at risk, and they determine duties and responsibilities. Additionally, the opportunities that CSR creates for innovation, greater effectiveness, higher productivity levels, better access to financial programs etc. need to be examined.
Design a roadmap for CSR that will include short-term priorities and long-term goals.
Step 4. Identification of Stakeholders
The next step concerns all those who are directly or indirectly affected by business operations and who are included within the term ‘stakeholders’. Primary stakeholder groups include: employees, the community, customers and consumers, suppliers, the environment, society more broadly.
It is necessary to design a map for every one of the aforementioned groups in order to depict their relationship to the business. Regular conversation and consultation with stakeholders can truly improve the business’ reputation-with very little cost. Through conversation, mutually beneficial goals can arise, that at a later phase can be incorporated into CSR strategies.
Identify your business’ stakeholders and adopt practices of meaningful discussions with them, in order to discover their own priorities.
Step 5. Determination of a corporate responsibility plan
After determining the priorities and stakeholders, the next step is the determination of a corporate responsibility plan. Depending on the stakeholder group that the program will be addressed to, the latter can include environmental, workplace-related, social or marketplace-related issues, that is, ones related to customers and suppliers. Every corporation ought to identify the actions that suit itself and its stakeholders best, and develop programs, by innovatively utilized their competitive advantages.
Suggestively, we mention:
- Official commitment of the business to sustainable development (that is, development that covers the needs of the present without undermining the capabilities of future generation to cover their own needs
- Constant effort to improve the business’ effectiveness in utilizing all forms of energy and raw materials
- Programs for monitoring the use of energy, water, raw materials and their emissions into the atmosphere
- Systems for environmental management with goals and procedures for evaluating progress. Reduction of negative impact and transfer of good practices to the entire structure and all work spaces as well to key suppliers and customers
- Commitment to the use and production of recycled and recyclable materials, increasing the durability of products and minimizing packaging through effective design
- Counter-balancing carbon dioxide emissions with an equal reduction through, for example, tree-planting and reforestation projects
- existence of policies that safeguard the health and safety of all employees, that are widely known by the latter
- maximization of employee participation in corporate governance and the improvement of the workplace environment
- equal treatment for part-time employees, e.g. in terms of wages, promotion and training
- provision of training opportunities and maximization of promotional opportunities within the structure itself. Training extends to issues of managing one’s personal life, planning for post-retirement life etc.
- Development and imparting of policies that aim at balancing one’s professional and private life, such as flexible working hours, childcare during work hours etc
- Provision of programs for preventative health checks that create a healthy work environment (anti-smoking policies, alcohol and substance-user support etc.)
- Existence of policies that include measurable goals for the promotion of equal opportunities and empowerment of the workforce, which is regularly revised based on their performance
- Existence of policies against biases in the hiring process, wages, training or firing of employees based on gender, race, age, ethnicity, physical ability, sexual orientation or religion. Additionally, existence of policies against harassment and oppression and payment of equal value rewards for similar tasks
- Response to or exceedance of the globally recognized work standards in all areas where the business operates, including the right of forming unions.
- Supervision of the employment practices of key corporate partners, suppliers and distributors and encouragement of their alignment with the business’ policies
- Development and implementation of a Code of Conduct for Suppliers
- Support of organizations that promote the idea of fair trade and conforming with special issues such as human rights
- Knowledge about the place and conditions under which products are produced
- Enhancement of transparency and the traceability of products and raw materials in the messages and broader information available to consumers/customers
- adoption of mechanisms for maximizing and promoting two-way communication and cooperation with local communities
- treatment of the community as an important stakeholder with a policy of regular updating about the functions of the business
- reassurance that potential impacts of current and future business activities are taken into consideration in the decision-making process
- use of supplies and investments to improve the local economy and social development
- existence of social programs that encourage employees to take part in voluntary activities and that support the community through tangible benefits
- focus on at least one crucial issue that the community is concerned with and use of the economic and political weight of the company to deal with it
- provision of voluntary work to local organizations by business owners, management members as well as the whole workforce
- examination of implementing joint marketing campaigns with organizations for social purposes
Step 6. Implementation- Supervision of Implementation- Measurement
Realistically, the implementation process requires the involvement of all employees.
Determination of task force. It is easier to start the process with one guiding team in a sector that has been deemed a priority. The team needs to be made up of employees in different positions of the hierarchy, including individuals that have a general, strategic opinion about the business. Generally, it is a good idea for participants to particularly be individuals with experience in the areas of production, supply, research and development.
The group’s mission: is to formulate –if needed- new policies and procedures and subsequently turn them into practice in the specific area. The team will initially rely on other employees for data collection and for the implementation of improvement practices eventually. It will also have to participate in the stages of applying new practices.
Supervision of Implementation: it is a core element of the entire improvement process, as it ensures the commitment of the company and it safeguards its reliability. Quantitative data, such as reduction of emissions, reduction of the use of raw materials and waste, are easy to measure, however the measurement of qualitative data such as employee satisfaction, is more demanding and there ought to be set in advance some minimum subjective requirements.
Assessment of procedures and results: It is a tool that facilitates learning, encourages discussion and promotes action. Ideally, one assessment a year will help to better understand the circumstantial relationships between CSR practices and achieved results.
Setting goals for improvement: Measuring the results of implementing CSR practices is possible with the use of comparative methods that take into account the conditions and priorities on a national level, the nature of activities (depending on the sector) as well as the utilization of self-assessment tools and constant improvement.
Ensuring assessment. If assessment is managed internally, it is necessary to develop a monitoring tool and instructions for its application, as well set internal inspectors. Alternatively, assessment can be undertaken by an independent, external inspecting body or an independent, external inspector who ensures based on role models that the corrective actions for improvement are taking place.
Step 7. Communication-Publicization
Continuous and professional communication of CSR activities and the way in which the business functions demonstrates that you have taken your social and environmental responsibilities seriously. This enhances your reputation, improves your relationships with stakeholders, motivates your workforce and may facilitate access to new markets and corporate partnerships.
The publication of CSR activities creates value for those who practice it, because information provided assists in decision-making, the improvement of already existing programs etc.
Some businesses use the publication process as an internal communication tool for continuous improvement. Other businesses use it as a means of improving external relationships and their reputation.
What matters most is that publications should not include extravagant wording that lacks in content. In order for added value to be gained, publications ought to be based on an honest commitment to CSR, a willingness to communicate those that have already taken place and a motivation for constant improvement. They should notionally also be connected to the company’s economic data.