CSRD: SMEs and CSR

1. CSRD: SMEs and CSR 11 October 2010

2. Introduction • Summary – Codes of Conduct and workers • SMEs and CSR * Understanding SMEs * Importance of SMEs & CSR issues • The Business Case (?) • CSR as a means of exclusion • Exam/evaluation requirements

3. Summary: Codes of Conduct & Workers • Codes of conduct • Ethical guidelines for company behaviour • Self-regulation, Private Authority • A means to respond to ’sweatshop critique’, image, branding • Company claims: Fulfilment of Codes = Proper working conditions • Few investigations, little knowledge (ETI + Nelson et al) • IA: Some improvements to some (outcome rights) • The limited improvements often counteracted by ’market development’ (pressure to deliver, lowering of prices, • Increasing informalisation, absence of proper government policies

4. SMEs and CSR Perceptions: • SMEs don’t care about CSR • SMEs lack resources to do CSR • SMEs are main polluters

5. SMEs and CSR • Understanding SMEs (Jenkins (2004)) • Norms, models, thinking, agendas derived from large companies • SMEs are little big companies • SMEs are alike – homogenous • SMEs don’t care about CSR • Impacts SMEs policies (which are insufficient etc)

6. SMEs and CSR • Understanding SMEs (Jenkins (2004)) • All myths! • Situation among SMEs is different • Need to understand SMEs and their situation What is a Small and Medium-sized Enterprise (SME)?

7. SMEs and CSR • Understanding SMEs (Jenkins (2004)) • SMEs are many different things – heterogeneous • Quote (by Wilkinson): ‘..if what constitutes ‘smallness’ is contextual and possibly subjective and interpretational, then we need to examine what factors combine to explain patterns of ‘small’ business behaviour ...’

8. Understanding SMEs & CSR

9. Understanding SMEs and CSR • Vives (2006): • Know little about practices • SMEs do numerous CSR practices • (Often) informally • Practices differ * Medium-sized more than small * More internal than external and environmental • Role of culture (religious values and norms)

10. Understanding SMEs and CSR • Vives (2006): • Why such practices? • SMEs Different Motives * Profits, Making Products, Helping Others • Commitment of Founder/Owner highly influential • Context matters • Age (old vs. young), market, sector matter

11. SMEs and CSR • Importance of SMEs and CSR: • Given that SMEs constitute 90% or more of all enterprises in an economy • What are the implications for CSR in development? • Why is it important to investigate CSR-issues relating to SMEs?

12. Importance of SMEs and CSR • Implications for CSRD? • Most/all cases investigated will include SMEs • Involve environmental issues (Kasur), working conditions (safety and health, wages and freedom of association etc), and • Employment and growth (poverty and economic development)

13. Importance of SMEs and CSR • Why is it important to investigate CSR-issues related to SMEs? • Possibilities for spreading ‘good practices’, win-win situations etc • Reveal problems of ‘win-win’, disclose power, conflicts, exclusion etc, understanding obstacles • View of Southern Voices (SMEs) – key to poverty and economic development

14. The Business Case • Luetkenhorst 2004: • SMEs majority of firms (+90%) • Key to economic development, growth and employment (30-50% of output and 50-60% of employment) • Labour intensive • Important to social cohesion (reduce poverty, ensure more equality) • Innovative • Make economies more resilient • Produce in niche markets, flexible • Foster economic cohesion

15. The Business Case • Luetkenhorst 2004: • Three types of SMEs A: In supply chains, B: Own export, C: Nationally oriented Note: States that type A is the interesting category!? • Support SMEs (linkages, capacity development) • Use PPPs • Exploit the win-win options!

16. The Business Case • Luetkenhorst 2004: The Business case: • Cost savings • Enhanced staff loyalty • Improved government relations • Innovation and learning • Enhanced reputation • Consumer response

17. The Lack of Business Case • Jenkins 2004: • Few stakeholders (mainly customers) • Risk, reputation and consumer pressure limited * No brands, little public awareness and contact * But consumer pressure at large firms going to SMEs! • Limited employee motivation & management time • CSR = costs & no extra markets • Limited profits & financial resources • No enforcement of regulation – why go beyond?

18. CSR a means of exclusion • Fox (2004): • SMEs heterogeneous • Most SMEs are micro firms in the informal (service) sector • Little interest in tools and framework from large firms • SMEs in value chains – concerns only a minority of SMEs! * Either engage and implement codes etc – some do * Or not engage – others do • Supply chains (GVCs) are ‘rationalised’ = exclusion • The agenda needs to be changed!

19. Making sense of CSR to SMEs • Fox 2004: • SMEs and CSR linked to the Sustainable Development agenda • BOP, Clusters and linkages, Business support & institutions • Make existing CSR-incentives relevant to SMEs • Assist in the transition (from informal to formal) • Make CSR more relevant * SMEs do carry out CSR practices (informally) * Provide appropriate incentives

20. SMEs and CSR: Summing up • Business Case versus CSR as a means of exclusion? • The business case is there – however in most cases not realised • Need to understand SMEs and their situation(s) • Focus on SMEs advantages (if engaged: quick to change & flexible, set strategies regardless of shareholder pressure, existing practices (though ad-hoc and informal) scaled up) • Beyond Large firms’ agenda (set conditions, define rules of the game, down-ward pressure in GVCs) • CSR (Codes of conduct, fulfilment of standards and requirements) intends to raise standards, but becomes a means of exclusion

21. Business Case versus CSR as a means of exclusion? Promoting the SMEs case: • The role of governments and international organisations key • (National) Governments to outline relevant industrialisation policies and (local governments) to implement programs (support to SMEs, incentives etc) • International organisations to assist, e.g. Voice the concerns regarding GVCs (market development) • Relate to Reed & Reed: What type of development?

22. Exam/evaluation requirements • Essay exam: • Written • Max. 10 pages • Assessed by course teachers and internal examiners • Evaluation criteria: • Learning objectives • Knowledge on the course curriculum

23. Exam/evaluation requirements • Evaluation criteria (Learning objectives): • Understanding CSRD Concepts • Strengths and Weaknesses • Cultural and Social Contexts • Implications • Firm Profitability • Workers’ Conditions • Environmental Conditions

24. Exam/evaluation requirements • Evaluation criteria: • Knowledge of the curriculum: • Relate to most if not all lectures and many/most of the texts • Essay – clear structure: E.g. (short) Abstract, Clear Line of Argument, Substantiated by Evidence, Sufficient Use of References, Solid Conclusions, Future Implications

25. Exam/evaluation requirements • Examples of former essay titles: Three types • 1. The topic/curriculum related • 2. The cross-cutting • 3. The case/example based

26. Next session (week 44) Challenges to Ethical Trade and Fair Trade in South Asia: Child Labour and Caste-Based Discrimination Barrientos and Smith (2005). Fair Trade and Ethical Trade – Are the Moves Towards Convergence? Nicholls (2005). Thriving in A Hostile Environment – Fair Trade’s Role as a Positive Market Mechanism for Disadvantaged Producers The Economist (2006). Voting with Your Trolley – Can You Really Change the World by Just Buying Certain Foods? National Campaign on Dalit Rights (2008). Dismantling Decent-based Discrimination – Report on Dalits’ Access to Rights Khan (2007). Representational Approaches Matter