Corporate Social Responsibility

Abstract

In many countries, including the U.S., Small and Medium entities (SMEs) are at the center of the economy. Since, the economy is mainly focused around these companies, it is essential that SMEs incorporate Corporate Social Responsibility (CSR) into their business strategies. However, because CSR has mainly been a focus of multinational corporations (MNCs), the implementation of CSR in SMEs can prove to be difficult, due to the needs of SMEs and the needs of MNCs being vastly different. There will be some challenges and opportunities that arise when implementing CSR in SMEs. This paper examines those challenges and shows how implementing CSR is a necessity to SMEs in today's economy.

History of CSR

Because CSR is a form of business regulation incorporated into the business model, there are many different definitions used to explain its importance and use. For the purpose of this paper, I will identify the most relevant definition. The Garcia-Marza, Marti, & Ballester's (2010) study states that CSR is defined as follows:

Responsibility of an organization for the impacts of its decisions and activities on society and the environment through transparent and ethical behavior that contributes to sustainable development, health, and welfare of society; take into account the expectations of stakeholders; is in compliance with applicable law and consistent with international norms of behavior; and is integrated throughout the organization and practiced is its relationships. (p.168)

CSR is the direct incorporation of public interest into the planning and decision making of a company. The discussion of ethics and the level of knowledge and implementation of CSR in SMEs are related to globalization and consumer increasing demand (Garcia-Marza, Marti, and Ballester, 2010). CSR means not only complying with legal regulations, but also investing into developing human capital, the environment and in building a connection with stakeholders. It is relevant in all types of companies and in all sectors of activity (Kumar & Tiwari, 2011). A number of companies with a good record of being socially responsible show that these activities result in better performance and generate more profit and growth. Research has shown that about one half of the above average performance companies can be attributed to CSR (Ballester, Garcia-Marza, & Marti, 2010).

CSR Implications in SMEs

Although CSR is a concept that has been mainly focused in MNCs, many SMEs have adopted CSR in some form, without calling it CSR. For example, they may have exceptional goods and services, or they may be excellent employers. These are just two examples, but there are many other ways that SMEs have adopted the concept of CSR but don't label it as such (Von Weltzien Høivik & Shankar, 2011). Recruiting and retention are crucial drivers for the success of an SME. Much of SMEs environmental initiatives are focused on employee engagement, causing many SMEs to place an emphasis on training and increasing employee knowledge base and building company morale. SMEs may not call these practices CSR but in all essence that's exactly what they are.

Benefits of Implementing CSR

Up to 95% of the companies in the U.S. are small and medium entities. Given the contribution to the economy as well as other economies worldwide, the achievements of SMEs have a major impact on other entities. Also, CSR issues and concerns are of a global nature. A growing number of businesses worldwide are developing their business as they take advantage of market liberalization, trade integration, and sourcing opportunities from subsidiaries and suppliers (Chen, Tseng, Jim Wu, & Wu, 2010). Another reason why SMEs should implement CSR is the entrepreneurial nature of SMEs (Von Weltzien Høivik & Shankar, 2011). SMEs can utilize CSR in a way that would drive innovation. As a result, the innovations can have a major impact on other businesses including MNCs. According to the case study by Ballester, Garcia-Marza, & Marti, (2010) the following also act as drivers for SMEs to implement CSR:

The ability to attract and retain valued employees, the ability to develop unique selling propositions and competitive benefits through their products and services, cost and efficiency savings, enhanced reputation. (p. 170)

Barriers to implementing CSR

Although there are a number of reasons to implement CSR in SMEs, on the other hand there are some barriers that the company may face when implementing CSR. The barriers or challenges of implementing CSR in SMEs all come from an external source. All SMEs should consider the external factors when making long-term decisions. The major and most crucial barrier is the cost of implementing CSR in an economy as unstable as ours at this time. For SMEs implementing new policies and procedures can be a costly thing. And, at a time when our economy is a volatile as it is, many SMEs just cannot afford to implement new policies and procedures (Holme, 2010). Another barrier is the time and resource limitations. Because of these limitations implementing CSR could mean a lack of affordable external support and resources. Other barriers are a lack of awareness of the business benefits, the pre-existing fact that most CSR tools and guidelines are geared toward MNCs, there is no systematic incentive for SMEs to engage in CSR, and fear of additional regulatory and bureaucratic burdens (Chen, Tseng, Jim-Wu, & Wu, 2010).

One might ask, why would an SME implement CSR when it is obvious that there are so many obstacles to overcome? In order to answer that question, an analysis of the case study Corporate Social Responsibility in Small Shops: An Ethical Proposal was conducted.

CSR in Small and Medium Entities (Case Analysis)

Ballester, R., Garcia-Marza, D., & Marti, C., the project managers of ÉTNOR Foundation (Foundation for Ethics in Business and Organizations), in Valencia, Spain conducted a study with the basic hypothesis that CSR can become one of the distinctive features of small shops as well as an important value in terms of differentiation from their main competitors, namely, big chains and department store (Ballester, Garcia-Marza, & Marti, 2010). The methodology of the study was in 3 phases. Phase one was the initial phase of the study was a conducted with several workgroups meeting in order to get a better understanding of the situation with small