SMES Were Motivated To Be Socially Responsible Commerce Essay

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An initial challenge for moderators and participants in the e-conference was to clarify the framework for discussion. As there are differing opinions regarding the most accurate definition, or description, of Corporate Social Responsibility (CSR) and Small and Medium Sized Enterprises (SMEs), it was crucial for participants to establish a consensus regarding the definitions of these terms. CSR was commonly defined by participants as businesses' commitment to sustainable development, and was strongly related to issues such as reducing corruption, incorporating and promoting fair labor standards, increasing environmental protection, promoting community development, and encouraging truth in advertising.

Participants stated that SMEs were motivated to be socially responsible by moral values and financial incentives, but face key challenges in implementing CSR. These include a lack of time and resources, a low margin of error, informal status, ad-hoc management styles, family ownership, and competition with other SMEs. The legalization of informal SMEs and capacity building for social responsibility were considered important ways to support responsible practices among SMEs. The creation of strategic partnerships, government backing of CSR initiatives, a proper legal system and financial support were also mentioned by participants as crucial to promote CSR practice among SMEs

The development of certificates or awards was also mentioned as another way for governments to promote CSR among SMEs. Rewarding good practices instead of imposing compliance regulations could promote the adoption of CSR among SMEs and potentially catalyze a voluntary proactive attitude among SMEs toward CSR. Participants argued that multilateral organizations should increase their efforts to raise awareness for CSR on a global level, reward governments promoting CSR practices in the national private sector, and strengthen the position of SMEs. SME associations, local communities, and business associations are tools that can be used to disseminate and foster CSR knowledge among SMEs. The majority of participants agreed that education regarding CSR issues for SMEs and

their stakeholders was the most important element in the promotion of CSR among SMEs.

2. DEFINITION "CORPORATE SOCIAL RESPONSIBILITY"

Corporate social responsibility (CSR, also called corporate responsibility, corporate citizenship, responsible business and corporate social opportunity]) is a concept whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees, shareholders, communities and other stakeholders, as well as the environment. This obligation is seen to extend beyond the statutory obligation to comply with legislation and sees organizations voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large.

The practice of CSR is subject to much debate and criticism. Proponents argue that there is a strong business case for CSR, in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own immediate, short-term profits. Critics argue that CSR distracts from the fundamental economic role of businesses; others argue that it is nothing more than superficial window-dressing; still others argue that it is an attempt to preempt the role of governments as a watchdog over powerful multinational corporations.

For example the definition of CSR by World Council for Sustainable Development:

"CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the Quality of Life of the workforce and their families as well as of the local community and society at large"

According to Business In The Community's definition, CSR covers:

Workplace issues (such as training and equal opportunities)

Human rights

The business' impact on the community

Reputation, branding and marketing

Ethical investment 

Environment 

Ethics and corporate governance.

3. WORKPLACE ISSUES

CSR begins in the workplace where people spend so much of their time and effort. Providing good workplace policies can lead to business success. This session offers insights from the International Labour Organization (ILO) whose conventions form the basis of many international frameworks for CSR including the UN Global Compact and further examples of good practice from one of the most innovative commercial employment advisers in Malaysia.

Workplace Issues refers to a variety of issues employees and employers face while at work, including labor relations, personal and professional conflict issues, health and safety, and discrimination and harassment. A quality work environment and health & safety are obvious considerations, as is the way in which, if we believe in CSR, we inculcate in our employees, the values which the company holds dear. Ideally, companies should consider all 4 CSR dimensions when crafting their own visions. But that does not mean a company must do everything.

For some companies there will be focal areas or initiatives that do not apply. The important thing is that the company uses the framework to help it identify its choices and priorities. Individual CSR initiatives will depend on the nature of each company's business, its inclinations, and its resources. However, sometimes a company will adopt initiatives that may even have indirect impacts.

4. HUMAN RESOURCES

A CSR program can be seen as an aid to recruitment and retention,[7] particularly within the competitive graduate student market. Potential recruits often ask about a firm's CSR policy during an interview, and having a comprehensive policy can give an advantage. CSR can also help to improve the perception of a company among its staff, particularly when staff can become involved through payroll giving, fundraising activities or community volunteering.

Human rights are relevant to the economic, social and environmental aspects of corporate activity. For example, labour rights requiring companies to pay fair wages affect the economic aspect. Human rights such as the right to non-discrimination are relevant to the social aspect. And the environmental aspects of corporate activity might affect a range of human rights, such as the right to clean drinking water.

So, while the primary responsibility for the enforcement of international human rights standards lies with national governments, there is a growing acceptance that corporations also have an important role to play.

Corporations have come to recognize that part of being a good corporate citizen includes respecting the human rights of those who come into contact with the corporation in some way. This might be direct contact (for example, employees or customers), or indirect contact (for example, workers of suppliers, or people living in areas affected by a corporation's activities).

Corporations are also responding to the fact that many consumers and investors expect corporations to act in a socially responsible manner. The extent to which a company implements a comprehensive CSR program can influence consumer and investor decisions.

Under such initiatives, hundreds of corporations worldwide have publicly committed to uphold specific human rights standards. This illustrates the growing acceptance of the need for corporations to simultaneously protect the interests of their shareholders, employees, customers and the community in which they operate.

5. THE BUSINESS IMPACT ON THE COMMUNITY 

Community contributions are an important component of CSR and recipients benefit hugely from effective programs.

Corporate Social Responsibility refers to recognizing the responsibility of businesses towards the wider community. This way businesses work towards making the community a better place and in return their reputation is enhanced. Examples of Corporate Social Responsibility involve offering goods or services to the members of the society who would otherwise be barred from some of the benefits of the society. For example: Helping disabled consumers and employees by offering them high class access facilities. Corporate Social Responsibility benefits the business by developing the skills and experience of employees. It also motivates the employees as they develop a sense of pride by representing their organization in the community. CSR also helps in building the reputation of the company. Companies like Coco Cola and TESCO are committed towards corporate social responsibilities.

6. POTENTIAL BUSINESS BENEFITS

The scale and nature of the benefits of CSR for an organization can vary depending on the nature of the enterprise, and are difficult to quantify, though there is a large body of literature exhorting business to adopt measures beyond financial ones (e.g., Deming's Fourteen Points, balanced scorecards). Orlizty, Schmidt, and Rynes[5] found a correlation between social/environmental performance and financial performance. However, businesses may not be looking at short-run financial returns when developing their CSR strategy.

The definition of CSR used within an organization can vary from the strict "stakeholder impacts" definition used by many CSR advocates and will often include charitable efforts and volunteering. CSR may be based within the human resources, business development or public relations departments of an organization. Some companies may implement CSR-type values without a clearly defined team or program.

7. REPUTATION BRANDING AND MARKETING

A potential benefit of CSR is that it can improve a company's reputation and branding and this in turn improves the prospects for the company to be more effective in the way that it manages communications and marketing in efforts to attract new customers and increase market share.

In crowded marketplaces, companies strive for a unique selling proposition which can separate them from the competition in the minds of consumers..

CSR can play a role in building customer loyalty based on distinctive ethical values. Several major brands, such as The Co-operative Group and The Body Shop are built on ethical values. Business service organizations can benefit too from building a reputation for integrity and best practice.

CSR as a concept with various tools can help a company to position itself in the marketplace as a company that is more responsible and more sustainable than its competitors.

8. ETHICAL CONSUMERISM

The rise in popularity of ethical consumerism over the last two decades can be linked to the rise of CSR. As global population increases, so does the pressure on limited natural resources required to meet rising consumer demand (Grace and Cohen 2005, 147). Industrialization in many developing countries is booming as a result of technology and globalization. Consumers are becoming more aware of the environmental and social implications of their day-to-day consumer decisions and are beginning to make purchasing decisions related to their environmental and ethical concerns. However, this practice is far from consistent or universal

9. ENVIRONMENT 

Environmental issues are high on the agenda of many CSR programs but companies still have questions about how best to address environmental concerns. How can companies assess their environmental impact? What options are available for companies to engage with environmental groups? What are the challenges in protecting our environmental heritage and how can companies address them?

Customers are becoming increasingly demanding. As awareness of the global scale of environmental problems grows, they are looking for companies to present them with purchasing decisions which can be taken without compromising the future.

10.  ETHICS AND CORPORATE GOVERNANCE

Ethics, essentially, consist of a set of moral guidelines towards conductance of an appropriate behavior. Such behavior conforms to professional standards of conduct. The corporate code of ethics consists of a set of moral principles and values that govern the behavior of the organization with respect to what is right and what is wrong. Corporate Social Responsibility (CSR) spells out an organization's commitment towards society and is a measure of the organization's social responsiveness. There exist four different perspectives of analyzing ethical behavior. They are utilitarian, individualistic, moral and justice. The paper examines the basic principles of ethics and CSR.

This contribution develops a media ethic around three notions, borrowed from the world of business ethics: corporate governance, good governance and corporate social responsibility. Corporate governance focuses on the internal and external mechanisms that help solve the agency problem that exists between owners and controllers of the firm. Here, it is argued that internal mechanisms for corporate governance are useful and important in the world of the media and have so far been relatively neglected by media regulators. Good governance is a much looser term. We propose to reserve this concept for the political side of media regulation (media as the fourth power in a democracy). The basic ideas about what good governance entails for the media can be found in the report written by the Hutchins Commission. Looking for the best possible governance structures that help us implement the basic principles laid out by the Hutchins Commission forms the bulk of media regulation in modern democracies.

11.  DEFINITION "SMALL AND MEDIUM ENTERPRISE"

There is no common definition of small and medium enterprises (SMEs) in Malaysia. Different Agencies define SMEs based on their own criteria, usually benchmarking against annual sales turnover and number of full-time employees or shareholders' funds. In addition, present definitions focus mainly on SMEs in the manufacturing sector.

The establishment and adoption of standard definitions for SMEs will facilitate better identification of SMEs across sectors, thus enabling more effective formulation of SME policies and implementation of SME development programs, and provision of technical and financial assistance. It will also allow better monitoring of SME performance and their contribution to the economy

National SME Development Council announced the official and a standardized definition of SME. This definition is to used across various sectors, and adopted by the government ministries, agencies and financial institutions which are involved in the development program of the Small Medium and Enterprises (SMEs).

11.1 So what is SME?

The definition of SME is based on two criteria, namely:

The number of people the business is employing, or

Annual sales turnover or revenue

Additionally, the definition is applicable for those companies operating in the Primary Agriculture, Manufacturing (including agro-based), Manufacturing-Related Services (MRS) and Services (including Information and Communication Technology).

In short, a business can be called an SME if it meets either one of the 2 criteria above, and is operating in the one of the sectors mentioned. And it's not finished there. Within the SME itself, there are also terms that are used to describe if an SME is a Micro Enterprise, Small Enterprise or Medium Enterprise, and again this depends on the criteria outlined before.

The table below may give a better understanding for definition of SME.

11.2 Criteria based on the number of employees

Primary Agriculture

Manufacturing

Services

Micro

Less than 5 employees

Less than 5 employees

Less than 5 employees

Small

Between 5-19 employees

Between 5-50 employees

Between 5-19 employees

Medium

Between 20-50 employees

Between 51-150 employees

Between 20-50 employees

Note: The Manufacturing includes the Agro-Based Manufacturing and MRS (Manufacturing Related Services), and the Services include ICT (Information and Communication Technology)

11.3 Criteria based on annual turnover

Primary Agriculture

Manufacturing

Services

Micro

Less than RM200 thousands

Less than RM250 thousands

Less than RM200 thousands

Small

Between RM200 thousands and RM1 million

Between RM250 thousands and RM10 million

Between RM200 thousands and RM 1 million

Medium

Between RM1 million and RM5 million

Between RM10 million and RM25 million

Between RM 1 million and RM5 million

Note: The Manufacturing includes the Agro-Based Manufacturing and MRS (Manufacturing Related Services), and the Services include ICT (Information and Communication Technology)

To test of comprehension, answer the following.

A plastic manufacturing company employs 45 employees and has a yearly turnover of RM27 million. Is the company considered an SME? If it is, in what category of enterprise (Micro, Small or Medium) the business falls in?

The answer is:

Yes. It is classified as SME. This is consistent with the general definition that says a manufacturing business is considered an SME if it has less than 150 employees OR has annual sales not exceeding RM25 million. The enterprise is classified as Small Enterprise. Even though the annual sales exceeds the RM25 million, the number of employees still falls within the range of SME, and to be exact, the Small Enterprise category.

11.4 Whether imposition of CSR regulation and legislation on SMEs is unnecessary i.e. should it be made on a voluntary basis?

The proponents of a regulatory approach argue that corporate human rights responsibilities are too important an issue to be left completely in the hands of corporations. The immense economic power that corporations have acquired should be accompanied by corresponding responsibilities. Moreover, as corporations have been accorded important rights, including under investment law and even under human rights law, proponents of the regulatory approach claim that there is no reason why they should not bear duties as well.

Proponents of a voluntary approach, in contrast, argue that there is no need for regulatory intervention since the market itself steers corporations towards responsible behavior. According to the 'business case' on CSR, responsible business behavior is also good economic behavior, since it leads to an increase in profitability. Thus, responsible corporate behavior within a voluntary framework is argued to be a win-win situation for business and society, while regulatory interference would put unnecessary burdens on business without providing any additional benefit.

In practice, legislation may take on different roles in a continuum, from soft to hard norms. It may create several incentives for corporations, including preferential public procurement; regulatory bodies with certain monitoring tasks; requirements for reporting on human rights issues; or civil or criminal remedies against non-complying corporations, among other options. Indeed, regulation may be used to make a voluntary approach more efficient. Seeing regulatory and voluntary initiatives as opposing extremes overlooks the fact that corporations already have several legal responsibilities, for example, corporate responsibility with respect to health and safety norms and working conditions.

On the other hand, the creation of a regulatory framework does not mean that voluntary initiatives are not important. Indeed, the law is only one of a range of factors that influence corporate behavior. In some cases, corporations may be expected to do more than the law literally requires and, at the very least, not take advantage of its loopholes. Voluntary and regulatory approaches should therefore not be seen as mutually exclusive, but rather as complementary.

11.5 Whether imposition of CSR regulation and legislation on SMEs is necessary for the SMEs to comply?

The contribution of smaller firms or of ethnic minority communities and businesses to this emerging debate has remained limited and often uncertain. Little, if anything is known for example of the extent to which the notion of social and environmental responsibility has permeated the ethnic and diasporas communities such as those found in the UK. This has been the motivation behind the Centre for Social Market's development of its international programme on CSR and ethnic minority.

Asian firms and CSR

Prior to discussion of the research findings, it is necessary to examine some aspects of the extensive literature on Asian-owned enterprise to inform the study. Research on Asian firms and the behaviour of their owners suggests that there are various special considerations, which may have a bearing on entrepreneurs' attitudes towards CSR and their willingness and/or capacity to deliver. While there are strong grounds for arguing that Asian business owners are fundamentally similar to entrepreneurs of other origins (including indigenous whites) (Ram et al 2000), there are also certain exceptional characteristics shaping their business attitudes and behaviour. Such possibilities need to be addressed in order to make full sense of the research findings. One issue with a close bearing here is raised by that school of thought which views the "typical" Asian firm as essentially a sweatshop operating on the basis of poverty wages and other forms of exploitation (Mitter 1986, Phizacklea 1990). In apparent confirmation, Ram et al (2001) have researched the ways in which many Asian employers in the restaurant and clothing manufacturing sectors evade the National Minimum Wage and utilise undocumented labour. Particularly in small retailing, there is also extensive use of uncosted unwaged family labour (Jones et al 1994). However it should be noted that such practices arise from the straitened circumstances in which many, perhaps a majority, of

Asian entrepreneurs operate. Over-concentrated in low-profit, hyper-competitive sectors like corner shop retailing, many of these tiny family firms are highly precarious and marginal, with owners themselves compelled to work excessively long hours for the sake of sheer survival. Self-exploitation is as much a feature here as worker exploitation. Whatever the causes, it is clear that such a working environment is hardly conducive even to an awareness of social responsibility, let alone the ability to deliver it. Understandably, the need to work 80 hours a week or more leaves little time or space for ethical considerations, since most business owners are unwilling to think beyond short term survival. Even so, there is some basis for arguing that, wittingly or otherwise, such firms do make a social contribution, one that is unfortunately unsung and unacknowledged. In the first place, they do provide jobs for (mostly) members of their own ethnic communities, who through language problems, lack of qualifications or racism may be excluded from the mainstream labour market. In effect they provide an informal safety net for the economically vulnerable and in some instances they act as de facto apprenticeship schemes for future entrepreneurs. Even less acknowledged is their role as service providers for the local population at large.

Even though these little enterprises are anything but "corporate" and in most cases are not directly motivated by lofty social ambitions, the fact remains that in many localities it is only the Asian shop or post office that stands as the last bastion of service provision for the poor and immobile, many of who are of course not Asian themselves. Moreover, it continues to make this social - and indeed environmental - contribution in the absence of any kind of official support, financial or otherwise. Therefore, there is definitely a necessity for SME's to comply to CSR and legislation as social, ethical and environmental issues were important to these enterprises.

12. CONCLUSION

CSR is a risk management tool that is used to defend company practices in the light of emerging social trends and can be used to explore further the commercial interests of the company, by applying 'best practice'.

For the stakeholder model of the firm to gain more ground, research work and government activity need to concentrate on, and elaborate upon, its legitimacy, accountability and practicability, and provide evidence lending support to the notion that 'CSR is not an activity conducted at the risk of the company owners but, on the contrary, it forms behavior that contributes to a company's and the society's increased welfare'.

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