Why CSR might matter to SMEs
So, apart from what the SMEs can do themselves, what can other stakeholders do? They can do a lot. First of all, many SMEs will only undertake some of the above-mentioned practices if they are assured that government has ensured that other firms meet the minimum requirement.
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This is also to level the playing field. While some feel that the government is not useful for these matters and this is something to be left to the small businesses and the private sector, experience shows differently. Lots of good examples show that when government intervenes and ensures a level playing field, it has a lot of positive effects.
The key issue is to ensure enforcement of the legislation. However, if this enforcement only leads small businesses to pay more taxes, more licenses and more fees, they will resist this; they need to see something in return. The benefits could be that the small firms get some advice when they pay taxes and fees, which in turn improves their operations.
This could be in the field of waste handling. So the small businesses pay for waste collection, but in return either the government (effluent/waste control) officer or a consultant paid by government will go to the business, assess the situation and give advice on how to reduce the waste they generate.
Applying pressure
Of course, we see problems with enforcement in many developing countries, including Ghana, so yes, we need to assess how this situation can be changed for the better. While donor agencies have tried to assist governments in upgrading capacity, with some success in some cases, there is the need for the governments to provide more funds to fulfil their responsibilities. Industries, associations, businesses and civil society, including individuals, need to pressurise the government to do this. Only through such pressure will result in change.
Industrial associations can also be an important actor in this field. This means that the associations would have a fair representation among the businesses that they seek to represent and therefore they will provide quality services to their members.
Such services could obviously be good advice on how to undertake the responsible business practices mentioned above – simply because it makes good business sense.
So, industrial associations have an important role to play, also in terms of spreading the good examples among their members and lobbying the government to either have proper legislation and/or support schemes in place as well as undertaking enforcement of the legislation.
Unfortunately, industrial associations are often weak in many developing countries, including in many countries on the African Continent. The reasons are many: One being lack of representation; another that the services to the members are too poor and a third is that many associations are working more as a personal instruments for individuals to pursue political careers rather than doing something for their members.
So, yes, CSR is probably not the most appropriate term to use when we talk about responsible business practices among SMEs, but such practices certainly are relevant also to small businesses. How can we then move forward with the spread of such practices?
It is therefore important to start small, e.g. with a well-defined geographical area and one or two industries. When experiences have been gained, adjustments can be made, and the initiative can be rolled out to more areas and more industries.
Again, new knowledge needs to recorded, adjustments made and yet again, improved initiatives can be taken further – both for the benefits of the small firms, employees and society at large.
There are many good reasons why additional emphasis should be placed on this, but we often see government, industries and other stakeholders shying away from this because they do not believe in the benefits. This will hopefully not be the case in Ghana in the years to come.
CSR Policy discussion
Several routes are possible. The ongoing discussion of a CSR policy in Ghana could be one instrument, but it will be important for such a policy to reflect key issues as:
a) the differences between industries and that different practices are found among firms from different industries so a policy needs to be rather general and provide for industry-specific elements to be drawn in e.g. cocoa, mining, agriculture, fisheries and so on.
b) practices differ among small businesses.
We don’t yet fully know why but we know that while the smallest firms have the fewest responsible practices, the small ones have and the medium-sized even more and
c) the market of the firms matters. If firms engage in exports or have international customers, they have a higher likelihood of having more responsible practices in place, compared to small firms which solely sell in the domestic market. One reason being that the local customers do not ask for specific product features similar to what international customers might do.
Soeren Jeppesen is an Associate Professor and SME expert at the Copenhagen Business School and writes for the Centre for Sustainability and Enterprise Development (CSED) at the same school. CSED is a training, research and advocacy centre that specialises in marketing; communications, sustainability and social responsibility.
Soeren can be reached at [email protected] and the CSED can be reached at [email protected]