Friday, December 10, 2010

Corporate Social Responsibility: A new trend in SMEs?

With increasing awareness about social and environmental issues, stringent regulations, and increasing direct costs of natural resources, the social responsibility among the corporate sector is stronger than ever before. The concept of Corporate Social Responsibility (CSR) is wide encompassing and takes care of social as well as environmental responsiveness of enterprises to attain sustainable development. Companies have realized that contributing to betterment in these areas helps establish the credibility of the industry as a part of the solution rather than the problem.

SMEs are the engine of the India’s economic growth. SMEs constitute more than 90% of the total economy and are in a phase of evolution. The SME segment encourages the innovative spirit and entrepreneurship in the economy that helps in rapid industrial development in the country. Touching our grassroots level directly, it is helping in employment generation and balanced regional development.

Now, the concept of CSR has gone beyond the traditional philanthropic approach and looks into strategic cooperation. However, the SME sector is yet to use CSR as a tool for business fortification. This is mainly because they are forced to prioritize short-term survival over longer-term strategic measures, and they often do not have enough managerial and financial resources to invest in such measures.

Takings from CSR:

- CSR activities helps in bonding employees as a team and binding them better with the SMEs emotionally, which in turn helps reduce attrition and create a dedicated workforce proud of its employer despite its smaller size

- Helps the SMEs build a positive image and encourage the social involvement of employees, which in turn could help develop a sense of loyalty for the organization and thus helps in improving employee efficiency too

- Enhances the functions performed by the human resources team in the SMEs and boosts the morale of employees by involving the humble shop floor staff into the high profile CSR exercise as an equal with many other stakeholders

- It gives employees at all ranks recognition for services, built closer links with customers and in specific cases, helps customers understand issues in association with the SME management team

- In the longer term, SMEs can benefit from CSR-related gains in health management and sanitation, technical innovations, waste management and ongoing education.

- The specific impact, however, often cannot be expressed in hard facts and figures and it can take some time until they become manifested.

- It also is a strategic tool to enhance the competitiveness of SMEs. Generally, CSR may positively influence SMEs' competitiveness in the following ways:

• Higher motivation and loyalty of employees, resulting in a higher creativity and innovativeness
• Better publicity due to the award of prizes and or enhanced word-of-the-mouth
• Better position at the labor market and better networking with business partners and authorities including better access to public funds due to a better company image
• Cost savings and increased profitability due to a more efficient deployment of human and production resources
• Increased turnover/sales due to a competitive advantage derived from the above

What kind of expectation society has from SMEs :

The SME sector is the backbone of any economy, particularly in terms of its contributions towards employment generation and is reliable partners of large organizations to whom they provide products and services.

What kind of partnership SMEs should have outside the organization :

- Organizations like TERI which is developing innovative solutions to energy, environment and social issues for energy-intensive small scale industrial sectors, whereby touching the lives of at least 25,000 workers in about 500 locations across the country

- With organizations which support the Green revolution

- With NGOs which work towards the benefits of the society

- Technological innovation companies which help the SME sector to not only control environmental hazards, but also boost their production

However, there are many SMEs who are adapting CSR activities as a tool to win an award or get publicity. Also, given the lack of time and resources available to small SMEs, it is doubtful how much engagement there is actually at the community level.

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