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BUSI48070: Applied / Consultancy Project

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Literature Review
1ST SEPTEMBER, 2014

Nottingham Business School

MSc Accounting & Finance

Question: To what extent Corporate Social Responsibility (CSR) affect the
company performance in particular on the Small and Medium-Sized
Companies? Evidence from developing countries:

Supervisor:

Sue Alcock

Student Name: Nadhim Mohammed Ameen Taha

Student Number: N0539313
Submission Date: 1st September, 2015

Word Counts: 3300

Introduction:
Over the past decades, Corporate Social Responsibility (CSR) has gained
prominence in the academic literature (Bakker et al., 2005).However,
despite the fact that CSR can be applied to all types of companies,
regardless of their sector or size, mostly it has been investigated on large
company level l (Dell Br'o and Junquera, 2003 Hillary, 2000A, Observatory
small businesses European and medium 0.2002; Spence, 1999; Werner
and Spence, 2004).Also, it is viewed as a vital concept that businesses of
all types and sizes need to understand and address (Charitoudi,
Sariannidis & Giannarakis, 2011: 20).
It has been argued that all organizations have an impact on society and
the environment through their operations, products and services and
through their interaction with key stakeholders and therefore CSR is
important in all firms, large and small (Williams, 2005; Roche, 2002).
However, the literature on CSR has traditionally focused attention on
larger firms. While articles have been calling for research on CSR in small
and medium enterprises (SMEs) since the 1990s, the work to date has
been limited and there is a considerable amount of research needed
(Lapointe et al., 2004; Spence et al., 2003)(article 9)
The European Commission defined CSR in 2006 as A concept whereby
companies integrate social and environmental concerns in their business
operations and in their interaction with their stakeholders on a voluntary
basis. (article 31).

Proponents of this requirement argue that companies play a vital role in society and
therefore should contribute to growth in social issues. Opponents to these demands hold
that privately run companies should not be held responsible for activities that should
primarily be the domain of public agencies and private initiatives.

Role of Corporate Social Responsibility (CSR) in Small and Medium

Enterprises (SMEs) has attracted significant interest and attention in
recent years. The purpose of this paper is to build some relevant model
which will help to explore the impact of CSR on SMEs(article 25).
Specifically, the role of CSR relative to the endorsement of SMEs in
developing countries is a field of research that continues under enquired.
In

this

context,

CSR

may

be

understood

as

the

integration

of

environmental, economic, and communal concerns into core strategies of

SMEs and their voluntary involvement in actions that are likely to promote
stakeholders and society more than the narrow financial interest of the
firm (Lund-Thomsen, 2004).Hence the reason of the study is to make
certain whether the SMEs are cognizant of and actually practicing the CSR
notion for their endurance. In spite of the growing significance of the
SMEs, there is a lack of comprehending in relation to CSR in SMEs and
therefore the purpose of this study is elevating the existing body of
knowledge by responding the following question.
European Commission (EU, 2009) defines SME just as a business having
fewer than 250 workers and lower than 55 million euro turnover and a
balance sheet of under 43 million euro. The United States small business
Administration (SBA 2009) includes no meaning for SMEs (article 25).
CSR has been proposed as combining the economic success of a business with the
inclusion of social and environmental considerations into its operations, so satisfying
customers demands, while also managing the expectations of other people, such as
employees, suppliers and the community (European Commission, 2004: 2)

(article 26).

Small and medium-sized enterprises (SMEs) account for more than 90%
of the worlds enterprises and 50-60% of employment. Their contribution
to national and regional economic development and GDP growth is wellrecognized (Morsing & Perrini 2009, Srinivasan & Bolar, Under Review). In
fact, SMEs are thought to have enhanced local productive capacities,
fostered innovation and entrepreneurship, and attracted foreign direct
investment in both developed and developing countries (Raynard and
Forstater 2002). However, whereas SMEs account for more than 60% of

employment in developing countries, and although they are sometimes

portrayed as key vehicles in the struggle against poverty in Southern
contexts, (Luetkenhorst 2004), there is still a critical lack of knowledge
about to the extent to which these firms may contribute to achievement of
broader objectives of sustainable and equitable development (Fox, 2005).
In fact, when it comes to their role in promoting corporate social
responsibility (CSR) in developing countries, the verdict is still out there in
terms of the extent to which SMEs engage in CSR, and whether their CSR
involvement makes any difference to the profitability of firms, workers,
and the environment in the South (Jamali et al., 2009; Sachdeva & Panfil,
2008)(article 27).
SME engagement in CSR has only recently emerged in mainstream
academic research (Tilley, 2000; Spence and Rutherfoord, 2003; Castka et
al., 2004; Jenkins, 2006; Morsing and Perrini, 2009; Murillo and Lozano,
2006).(article 29).
2. Definitions of CSR by SMEs
Some empirical researches have been conducted to examine the
perception of SMEs about the CSR concept. Sweeney (2007) found a
variety of definitions of CSR provided by Irish SMEs. It would appear to be
true that the term means something, but not always the same thing, to
just about everybody (Zenisek, 1979). However,while there was no
universally accepted definition, in line with the literature arguing CSR can
be most practically explained by reference to stakeholder theory (Vos,
2003), the firms involved in this research tended to define CSR by
reference to their responsibility to a variety of stakeholders. The wider
community was often cited as an important stakeholder.
In the beginning, involvement was mostly restricted to larger companies. However, although
CSR was traditionally seen as the province of big business, because the SME business sector
is such a significant sector worldwide in terms of the economic, environmental and social
impact it makes, attention has been turned to discussion and analysis of the principles and
practices in small and medium size businesses with the result that this sector no longer finds
itself outside the CSR movement (Spence, 1999; Spence et al., 2003, 2004; Jenkins, 2004,
2009; Murillo & Lozano, 2009). Since SMEs are not just smaller versions of larger scale
businesses (Jenkins, 2004) special attention needs to be paid to the specific ways in which
they implement CSR measures, how these differ from practices in larger firms and how this

explains different perceptions and behaviours in between the two in relation to sustainable
development Article 10
2. CSR within SMEs: Definition and Practices

From the SME point of view, we thought it important to start by setting out how CSR is
defined by researchers and managing directors, especially since the majority of the latter
claim to subscribe to CSR (Saulquin & Schier, 2007; Berger-Douce, 2008).
Taking the results of a UK-wide study of socially responsible SMEs, Jenkins (2009)
pointed out that for businesses considered to be exemplary in this area CSR was seen as an
all-embracing idea that concerns having an awareness of the impact of the business, and
wanting to have a positive impact on a wide range of stakeholders through the business
decisions that are made. Directors of SMEs in this survey dont see CSR as an external addon but more as an integral part of the way they manage their firm.
In the same way, Blombck and Wigren (2009) believe that commitment of a company to
CSR relates to a firms operational activities, such as the introduction of measures which
respect the environment, and can embrace the social by involvement in the community and
by maintaining good working relations with local actors (local sponsorship of events for
e.g).
http://oconnorandkelly.ie/csr-in-smes-and-large-companies/
CSR can be considered a tool to stimulate development due to the
positive relationship between business strategy and social
performance(article 14)
Corporate social responsibility is becoming a significant activity to businesses. There are a lot
of theoretical studies examining corporate social responsibilitys effect on companys
operations(article 24)
There is a large number of diverse and contradictory studiesof how social responsibility exercises influence over
the company's financial performance. Nevertheless,common conclusions about the relation of CSR and
performance results of the company havent been receivedyet:some works deduced that it is a strictly positive
correlation among these factors. Other researches revealed exceptionally negative relation.

Raynard and Forstater (2002) assess the impact of CSR on small and
medium enterprises (SMEs), and they found that SMEs have more
opportunities than risks when carrying out CSR activities. In this sense,
they held that the relationship between enterprises and civil society has

radically changed, with the new focus being environmental and social
issues, rather than corruption.

There are basic CSR issues that all SMEs have a responsibility for,
amongst them the creation of a good working environment where
diversity is encouraged, the fair distribution of wealth in am community,
and the protection of the environment. SMEs are often portrayed badly in
relation to such basic responsibilities (Bacon et al., 1996; Gibb, 2000;
Hillary, 2000). However, as this paper demonstrates, this is not
necessarily the case, and there are companies in the U.K. who have
decided to embrace the concepts of CSR and sustainability and who
exemplify good practice (article 11)

There is a vast academic literature on CSR given the high ranking that this
issue has created in theoretical and managerial discussions (Lindgreen
and Swaen, 2010). The review below concentrates on the two aspects that
impact on the study being conducted. (article 16) one is. Others
.

Corporate Social Responsibility (CSR)

in Small and Medium-Sized
Enterprises: A Developing Country
Perspective
A number of authors have indicated that SMEs are rarely engaged in
formal CSR practices and that they encounter more challenges than their
larger counterparts in implementing in CSR strategies (Lepoutre and

Heene, 2006). This lack of engagement is largely attributed to the lack of

awareness of the SMEs about the significance of their engagement in CSR
(Tilley, 2000; Hitchens et al., 2005). Small businesses generally view that
they lack time, resources and support necessary to engage in more
thoroughgoing CSR activities (Tilley, 2000; Jenkins, 2006; Sweeney, 2007)
(article 17). Empirically, the size of enterprise has been identified as a
barrier for SMEs to engage in CSR practices (Murphy et al., 1992;
Brammer and Millington, 2006). Nevertheless, a number of researchers
suggest that this barrier may not prevent SMEs from engaging in CSR
activities (Castka et al., 2004; Vives, 2006), and that SMEs may actually
benefit significantly from doing so. The major benefits that SMEs actually
realise from engaging in CSR may include good image, trust and
reputation, improved market position, enhanced employee motivation,
risk management, and cost savings (Jenkins, 2006). Some authors,
however, view that business benefits are not the deciding factor for SMEs
to engage in CSR, it is rather the values andattitudes of owner/managers
that largely drive CSR among SMEs (Hopkins, 2003; Spence et al., 2003;
Spence and Rutherfoord, 2003; Jenkins, 2006).
Integration of CSR is considered important for any size of business
organisation, and this can influence society and the environment through
the firms relationship with stakeholders, delivery of products and
services, and the way business is conducted. Despite recognition of the
importance of CSR in SMEs, practice seems to be rather weak. For
example, a survey by KPMG (2009) shows that 38 per cent of businesses
in Australia have taken steps to reduce carbon emission or energy output
and only 17 per cent of them are SMEs (article 17).
Small and medium-sized enterprises are by far the most common form of
private business in both developed and developing economies. There are
many varied definitions, but a standard one is the European Union
version, which defines SMEs as having fewer than 250 employees. They
account for 99% of all enterprises, which means 23 million firms (article
18).

There are a number of characteristics of social responsibility in small

business that make them distinctive from the rather dominant view of CSR
that takes a corporate perspective (in this point please seearticle 18).
Furthermore, employees are very important stakeholders in small firms. A
key characteristic of small business social responsibility is responding to
their preferences in terms of charitable support and giving, and indeed
focusing efforts on ensuring the maintenance of the livelihoods of
employees, managers, and owners (Spence 2000)
In contrast small businesses are sometimes assumed to perform poorly in
terms of social responsibility and business ethics (Jenkins 2006). A
possible reason for the lack of awareness of social responsibility
approaches by small firms is the conflation with the notion of
entrepreneurship.
CSR practices in SMEs can be categorised into internal, external and
environmental responsibilities. The internal responsibility concerns the
responsible practices that relate to health and safety and the general
welfare of workers. Examples include job participation, training, fairness,
work-life balance, education and corporate governance practices such as
independent audits.External responsibility refers to the business support
provided to the social and cultural activities in the community and to
issues

related

to

the

development

of

the

community.

Finally,

environmental responsibility comprises those business practices that are

geared towards minimising the negative impacts of the firms operations
such as waste reduction, recycling, and energy and water efficiency;
monitoring and re-using of by-products; and preserving natural resources
(Vives, 2006) (article 19).
While the significant economic contribution of SMEs in the developing
countries is acknowledged and well understood, their responsible business
practices have not been widely studied (Jamali, 2007). Nevertheless,
much of the abundant CSR research, models and frameworks originating
from

western country contexts may well be inapplicable to the reality in

developing countries in terms of values, culture and religious beliefs
(Fox,2004; Helg, 2007).
Yet one could claim that the need for the development of frameworks is
pronounced because in the developing countries the stakes are extremely
high in terms of environmental and social challenges, fight against
corruption, poverty alleviation and employment generation. In other
words, there are gaps in social provision and governance where there is a
lack of institutions providing social goods. Under these conditions, SMEs
are inclined to come under heightened expectations to fill those gaps
(Baughn, Bodie, & McIntosh, 2007; Luken, 2006); however, there is still
inadequate knowledge and understanding of the topic, and that situation
merits academic attention (Verheugen & Commission, 2005).
The nature of the CSR activities reflects the reality of the SME sector as
embedded in their cultural and social context in the Egyptian
environment.
strong rationale for the engagement of SMEs with CSR. Such a
conceptionencompasses a relationship dimension, which is an essential
element forSMEs survival mainly because it is through these on-going
personalrelationships that people fulfil their social motives. For instance,
one actormay choose to stay in a firm because of an attachment to the
environmentand culture that the firm operates in, despite his ability to
gain economicadvantages elsewhere, whereas another without such
personal ties may notconsider the surrounding community in making
career moves (Nahapiet &Ghoshal, 1998)
In the context of the SME, it can for example provide a favourable
atmosphere that increases employees loyalty and attachment to the
companies they belong to (article 19).
A crucial note is that developing strong social ties and interactions is
essential for SMEs to generate beneficial and productive resources. Those
interactions occur in terms of exchanging information and resources,
recognising

business

opportunities,

and

influencing

the

potential

performance of the enterprise. That type of social capital encourages

cooperative behaviour and in turn responsibility-sharing among SMEs
(Liao & Welsch,2005). We can further argue that because SMEs are
seeking such cooperativebehaviour, CSR practices could be one of the
most effective networkstructures that fulfil this cooperative behaviour.
Hence the motivation todiffuse CSR practices among those SMEs.
Accordingly, the structure in which these relationships exist and the way it
influences the SMEs ownermanagers CSR engagement will be explored
at a macro-environmental level of analysis.
Thus, for a culture of CSR to fully take root, social responsibility could
perhaps be conceptualised as a national obligation, and SMEs might be
educated and guided to be able to identify the areas in which they can
deploy greatest impact and resources for development (i.e. human and
labour rights) due to their proximity and their direct relationships to the
community. Thus, at the macro level, we find this an opportunity for policy
makers to expand their efforts to promote the take up of mainstream CSR
by SMEs, that stems from the strong tradition of giving back with no
expectation of return in a more structured and strategic manner (article
19).
Small and Medium Enterprises in developing countries are critical to the
development process(article 20).
It is now beginning to be integrated with other CSR issues by some large
companies. One important element of this includes actively supporting
SMEs through business links and social investment, as well as influence on
the public policy agenda. This means taking a more holistic approach to
CSR where linkages at different levels of business operations are part of
an overall strategy for the support of SMEs.
This is an emerging CSR issue for TNCs that are beginning to recognize
that forming trading links and development partnerships, which help SMEs
gain access to markets, finance, training, physical infrastructure and

business support services can be one of the key ways that they can have
a positive impact on poverty.
Others are working more broadly in conflict resolution, basic healthcare
and education - these initiatives while not aimed specifically at SMEs help
to create favourable conditions in which small businesses can grow and
flourish.
The ways in which CSR affects SMEs as outlined in Section 4, have the
potential for creating positive social, environmental but also importantly
economic benefits; benefits that go beyond the SME itself, to include
wider local and national communities in developing countries. However,
there are also concerns that CSR will be a veil behind which TNCs may
hide as they rationalise their suppliers or pass on costs for monitoring and
auditing social and environmental performance; burdens that would
increase poverty levels and not lead to positive development.
The key concern most often voiced by both developing country
governments and industrialists is that CSR standards are a mechanism for
retaining jobs, trade and investment in developed countries at the
expense of developing economies, which tend to compete through lower
labour costs and less stringent environmental regulations. This has been
most controversial in relation to moves to make CSR standards
mandatory, or link them to trade agreements. However, as shown above,
the boundary between voluntary and mandatory standards is becoming
increasingly blurred and in some sectors CSR criteria are becoming
industry standards.
For SMEs these costs can be prohibitively expensive in relation to their
smaller outputs leading either to the SMEs themselves deciding that they
cannot afford to be certified or to the larger companies rationalizing their
supply chains to a smaller number of large suppliers that are easier to
monitor.

For

many

companies

this

has

been

the

first

stage

in

implementing an ethical sourcing policy, and is part of a wider trend of

companies building closer links with strategic suppliers.
Pressure for greater CSR whether focusing on environmental, consumer or
human rights issues often shares the common underlying concern that
corporate influence is too great. By many critics, the corporate sector is
charged with unaccountable power and influence, cultural imperialism,
bleeding local economies dry and using the mobility of capital to force an
international race to the bottom.
It is easier for large companies with their developed systems and
economies of scale to deal with the demands for formal monitoring and
standards. SMEs do not have the financial and human resources to invest
heavily in CSR activities unless they bring immediate tangible benefits.
Large companies have more complex networks of relationships, which CSR
can help to strengthen, manage and understand. In SMEs these
relationships are more often invested in the personal interaction of the
entrepreneur.
CSR is the human face of globalization and as such eases the entry of
global companies into the home markets, high streets and sectors where
SMEs have dominated.
Clearly SMEs will have to join the CSR fold, if the small business sector is
not to become the loophole in which polluting, exploitative industries
flourish. However, many of the concerns underlying calls for more CSR by
TNCs do not apply to SMEs, which lack the power to influence
governments, dictate standards or move between countries in search of
lighter regulation. On the other hand, SMEs generally have a greater
understanding of local cultural and political contexts, more links with local
civil society and a greater commitment to operating in a specific area
Better alignment with current and emerging consumer concerns
and access to new markets CSR can help companies gain specific
contracts ortrading relationships with TNCs or companies in Northern

markets andcommunicate directly with consumers through environmental

and sociallabels. However, export-oriented CSR can only succeed if it is
matched by product quality and service, which meet international market
standards.
Operational cost savings These derive from environmental efficiency
measures such as waste reduction and energy efficiency, reductions in
absenteeism and staff turnover.
Improvements in productivity and quality - Greater efficiency and
better management encouraged by CSR can help companies to improve
the quality and productivity of their output.
Learning and innovation - CSR can help companies find new ways to
work, develop skills, manage risks, seize opportunities and solve
problems.
However a pick-and-mix bag of business benefits does not provide a
compelling case that these benefits will be significant for every company,
or in fact that they will not distract attention and resources away from
other more pressing issues and lead to financial ruin. In the case of SMEs
in developing countries, upgrading the quality of their technology,
management and marketing are likely to be equally pressing priorities.
Overall, there seems to be a general awareness of CSR as a business
issue, and that it is of relevance to SMEs. Many of the main CSR issues are
seen to be important, in particular environmental concerns (pollution and
waste), transparency and accountability. Although there is a low level of
awareness of emerging international initiatives such as the UN Global
Compact, a number of national and industry-specific initiatives are under
way, in particular concerning codes of conduct. There is a general concern
about the threats CSR may pose in creating a barrier to markets and the
burden of compliance and monitoring. However, there were perceived to
be a number of opportunities presented by CSR, including access to

markets and better alignment to consumer concerns. In all, there seems

to be a perception that CSR issues pose both threats and opportunities
that will require a heightened awareness and careful management among
industry associations and individual companies alike.
If CSR is truly going to become a strategic force in contributing to
international development and eliminating the negative externalities of
business, it must help to develop effective and viable approaches to Small
Business Responsibility. It is crucial that:
CSR supports the role of SMEs in development, and does not serve as a
tool to undermine and disadvantage them.
SMEs are not able to undercut universal CSR standards and become a
blind-spot in which exploitative and environmental destructive practises
flourish.
Thus, the challenges are to reduce the barriers and threats while
strengthening the opportunities and drivers in order to ensure that CSR
has a wide and positive impact on SMEs.
Integrate tools to improve social and environmental impact with
tools to improve quality management. This is beginning to happen at
the cutting edge of CSRdevelopment in the North with the move from
separate consideration of social,environmental and economic issues
towards sustainability management and theincreasing importance given
to the business case. However, social and environmentalpressure on
suppliers tends to be piecemeal and unrelated to the business case.
Develop a framework of Small Business Responsibility to
understand and promote the positive social impact of SMEs, and in
particular how to value, communicate, reward and improve the silent
social responsibility, which already prevails in many SMEs. This would
integrate global supply chain pressures and linkages with business case
benefits and local accountability and the importance of SMEs in
development (article 20).

Corporate social responsibility in SMEs is a subject that has not gained

much research attention until very recently, despite their large
representation among total businesses. As defined for this study, SMEs
have fewer than 500 employees; they are still quite heterogeneous in
terms of company characteristics. Thus a company with less than 10
employees may have very different resources and organizational culture
compared to a company that employs close to 500 people (article 21).
It has been claimed that SMEs are not just small versions of larger
corporations and need to have a different kind of approach into CSR
(Kechiche & Soparnot, 2012). So far the academic literature and
promotion of CSR by different advocacy agencies has been concentrating
on formal aspects of CSR and sustainability such as reporting or official
programs for companies. These might be suitable for large corporations,
but for small and medium-sized companies, formal programs and
reporting requirements might just create an extra burden - thus making
CSR harder to implement (Fassin, 2008). SMEs often face the problem of
concentrating their scarce resources as efficiently as possible, which
undermines the importance of CSR and sustainability research in this field,
because by gaining more knowledge about the issues the implementation
could be more effective (article 21).
See article 22 and page 5 for structure I think it is useful!!!!!!!!!!!
See the bottom page 8 in the same article; you will see an important
point???
See top page 9 also you will see important point
Please see article 22 from page 5 to 14, it is very important for my topic!!!
Corporate social responsibility (CSR) can build reputation and lead to societal
and competitive advantage, which can be especially useful for small and
medium sized enterprises (SME) with limited resources (article 23).
SMEs can strategically use CSR activities in order to develop a competitive
advantage through differentiation by a creating societal advantage.

During the recent years, small and medium sized enterprises have taken an
increased number of initiatives aiming at engaging in CSR (Jenkins, 2006).
CSR in SMEs is less formal and more intuitive than in larger enterprises, but
that does not make it less valuable (European Commission, 2007).
SMEs face challenges when implementing CSR activities, which can be
transformed into opportunities. However, SMEs have difficulty to identify key
stakeholder issues (Jenkins, 2006), which is a vital part of transforming CSR
activities to an economic advantage.
The SMEs which participated in the current study engaged in CSR activities
without an intended strategy but rather with an emergent strategy, which
emerged because of the changes of the external environment. Therefore, the
SMEs did not fully exploit the opportunities of using their CSR activities to
enhance their competitive advantage (article 23).
The rising social awareness and activities leading to commercial
achievements of companies using applications like cause-related marketing,
sponsorships, charitable donations, codes of ethics, health and protection
practices, environmentalism, and support for employee volunteering (article
25).
According to Sarbutts (2003), SMEs are at better position to take advantage
of CSR practices than larger enterprises, as they're flatter and additionally
potentially faster on the feet, less fixated by earnings and price ratios,
furthermore SMEs are more likely to look up for qualities like integrity and
honesty. There's thus much subjective and empirical evidence pointing to on
adeptness and peculiarities of SMEs in the perspective of CSR.
SMEs seem to be involving in a range of social economic and environmental
practices but don't usually use the term CSR to categorize this. In certain
SMEs often have excellent economic and social impacts in their local
community which are not commonly acknowledged in CSR terms.
Advantages of CSR
CSR has the potential to bring significance benefits not only to the
stakeholders receiving the goodwill, but also to the businesses participating
in CSR. Although its commonly acknowledged that many of these
advantages are intangible, vague, and impressionistic (Jenkins, 2006;
Worthington, et al., 2006), they're reported by company holders to be
beneficial to the enterprises a few ways. These kinds of benefits may proceed
as drivers of CSR involvement in SMEs, or they may simply be positive
outcome that result from participating in CSR.

Employee Dimension
One of many most significant advantages of CSR for SMEs is it will surely
have positive impact on employees and this benefits both the employee as
well as the business. In a study of CSR commitment by ethnic business
owners in a UNITED KINGDOM, ordinary reference was made toward positive
influence that CSR has on worker health and pleasure (Worthington, et al.,
2006)
These found that the main benefits of CSR for SMEs are internal such like
better working environment, greater productivity, staff being tangled up in all
companys objectives, and decreased staff turnover rates (Murillo & Lozano,
2006). Jenkins (2006) revealed that not only CSR have the potential to make
current staff much more motivated, but that it also has the capacity to boost
the attractiveness of business to prospective recruits.
Social Dimension
Numerous investigations report that CSR can increase a businesss standing (small business in the
Community, 2002; Jenkins, 2006; Tencati, et al., 2004). Vyakarnam (1997, cited in Murillo &
Lozano, 2006) states undertaking CSR activities results in a more professional image, and this
can lead to an boost in trust and commitment from stakeholders. It has also been recognized it
CSR can offer an aggressive advantage for SMEs through offering a more famous profile and
market positioning (Jenkins, 2006; Murillo & Lozano, 2006; Perrini, 2006). Other benefits
encompass better word of mouth and public relations, which could next induce expanded sales
and income (Worthington, et al., 2006). Even in the 1980s it was accepted that doing the socially
accountable thing amounts to profit maximization eventually (Wilson, 1980, p. 23). It is a
commonly held belief that enterprise can only be thriving in a wholesome community Wilson,
1980). For this cause, numerous authors cited community welfare, encompassing a more stable
workforce, education and community development, as a benefit of CSR (Business in the
Community, 2002; Murillo & Lozano, 2006; Perrini, 2006). These are not just benefits for the
society, but also, in the long run enterprises will recognize the benefits as they will have a more
highly skilled workforce and a more flourishing community to function in (Business in the
Community, 2002). [16][32][33][34][35]
Environmental Dimension
CSR is path to come sustainable development. Environmental concern and
sustainable development is a key pillar of the business communal
responsibility. Environmental and ecological issues have been an crucial topic
of discussion for the past 30 years in the industry world. The knowledge and
matters inside the dimensions have progressed across countryside of
changing enterprise realities. In 1983 the UN established World Commission
on Environment and Development (UNWCED) to deal with the growing
anxieties about the accelerating worsening to the human environment and

natural resources and also the consequences concerning this worsening for
social and economic development. Development that encounters the desires
of present without compromising the proficiency of future generations to
rendezvous their own requirements (Porter and Kramer, 2007:81) CSR
activities in discipline of the defense of the environment focus on designing
environmentally amicable items or production processes, efficient usage of
resources, decrease in waste and contamination applying an ecologic
evaluation on the suppliers in relation to their environmental standards,
informing stakeholders on environmental matters. [36]
Economic Dimension
Initially and most important social responsibility of enterprise is economic in
nature. Before anything else, the business organization may be the
fundamental economic product within our society. As such it has a task to
produce goods and solutions that society wants and to sell consumers at a
reasonable margin. All other business functions are predicated on this basic
assumption. Facts for this affirmative CSR premium are on the rise. Visionary
CSR businesses will surely have a premium of at minimum 5% over nonvisionary companies.for a well-managed CSR program people will be eager to
pay extra in the information that the products they bought had not become
manufactured by slave labor, had respected the natural environment, that
the technological system to make product had been acquired without
corruption payments, and that the
Businesses can apply CSR and corporate sustainability to build point
advantages for the final outcome. Including, operational advantages can be
accomplished through limiting energy and materials like input factors for
manufacturing.
Framework
The influence of CSR was measured using the four dimensions of stakeholder concept as
proposed in the literature.

Figure please go to see the figure in page 6

In developing nationsSMEs are not appropriately implementing CSR practices.
Owners and managers are not in good health of training and education.
Therefore they are not implementing the CSR practices accordingly (article
25).
Jamali, D., P. L. Thomsen and S. Jeppesen. SMEs and CSR in Developing Countries: Advancing
Academic and Policy-Oriented Knowledge, Business & Society Special Issue, Call for Papers.

Jeppesen, S., B. Kothuis and A. Ngoctran. (2012). Corporate Social Responsibility and
Competitiveness for SMEs in Developing Countries: South Africa and Vietnam, AFD
/November 2012.

Sen, S. (2011). Corporate social responsibility in small and medium enterprises: application of
stakeholder theory and social capital theory Southern Cross UniversityePublications@SCU

(article 25).
One area where businesses can be directly affected (both positively and
negatively) is in their supply strategy and in particular, their sourcing and
procurement decisions. While the European Commission has indicated a
need to investigate the nature, extent and impact of CSR buyer
requirements on SME suppliers, There is also a need for more research
into when and how SMEs themselves make CSR requirements ontheir
suppliers, and how this can best be encouraged bearing in mind the
capacities of SMEs (European Commission, 2007: 30).(article 26)
Finally, SMEs are more resource challenged and often CSR type activities
will fall to the owner-manager to undertake alongside a multitude of other
tasks. Similarly, three main reasons cited as barriers to SMEs doing CSR,
were: A lack of government support and encouragement, a strong
societal pressure to focus on monetary benefits, and a lack of resources
and support within the companies (Studer et al., 2005: 3).Yet, despite
these inherent disadvantages, it has optimistically been suggested that,
SMEs, being flatter and potentially quicker on their feet are better
placed than major corporates to take advantage of the fact that society
and the media revere qualities such as honesty, integrity and the ability to
say sorry (Sarbutts, 2003: 340).2 It has additionally been suggested that
SMEs generally have: a greater understanding of local cultural and
political contexts; more links with local civil society; and a greater
commitment to operating in a specific area.
The questionnaire explores how SMEs are affected by CSR criteria being
applied in the procurement processes of clients. The majority of
respondents felt that including social and environmental requirements as
preconditions to supply would increase their motivation to engage in CSR
(82 per cent for environmental criteria and 55 per cent for social criteria).
However, a quarter would be discouraged from tendering and 12 per cent
thought that such criteria would be counterproductive.
Williamson et al. (2006b) conducted an enquiry among 31 manufacturing
SMEs and demonstrated that business performance (that is, an emphasis
on cost reductions and efficiency) and regulation considerations drive
behaviour. However, a study of a non-manufacturing sector, restaurants,
by Revell and Blackburn (2004a: 2) discovered, The environment was
clearly a low priority for most restaurateurs, who claimed to be too busy
coping with daily business pressures to contemplate environmental
issues. Hence, SME owner-managers have little incentive to improve

their environmental performance while they remain unconvinced that

environmental management is good for business (Revell and Blackburn,
2004a: 3), in terms of either reducing costs or winning customers. Market
demands (basically through subcontracting relationships) or the strategic
choice to obtain competitive advantage, have also been identified as
important reasons for SMEs to engage in environmentally responsible
activities (European Commission, 2002: 7).
In her review of the literature, Spence (2007) identifies the following
issues relating to business ethics and CSR:
seeking assurance that the object SME is compliant with CSR
standards;
fairness of treatment of the supplier when negotiating such things as
terms and conditions, and the use of power in supplier relationships;
scepticism regarding the perceived benefits to SMEs, even when a
partnership approach is taken;
the assumption by large firms that formal standards are a relevant
measure of CSR in SMEs; and that
(large company) social responsibility and ethics policies should seek
an open and honest partnership with SMEs rather than attempt
exploitation or short-term gain.
However, it has been suggested that smaller companies also have a
valuable role to play even if it is accepted that large businesses and
primary suppliers need to help the SME community (HM Revenue &
Customs, 2006: 21).7 Interestingly however, Williamson et al. (2006a: 4)
found scant evidence of suppliers working collaboratively to solve
environmental problems.
A questionnaire-based study undertaken by Merritt (1998: 90) of
(predominantly) SMEs in the found that, market forces (as supply chain
pressure) have, as yet, had little or no significant impact on SME
behaviour.
Similarly, it has been claimed that, CSR is likely to become an
increasingly important business issue for many SMEs in future. This is
partly because of the increasing take-up of ethical codes of practice by
their large customers, which is creating a pressure for demonstrably
responsible behaviour back down the supply chain (Department of Trade
and Industry, 2002a: 31). (article 26)

Both in developed and developing country contexts SME involvement in

CSR has been seen as more ad hoc in nature, less institutionalized and not
involving specific CSR departments and/or the production of social and
environmental sustainability reports as one might expect in large firms
(Jamali et al., 2009).(article 27)
One example of how our understanding of the relationship between SMEs
and CSR is still limited is the use of management tools for promoting CSR
in SMEs in developing countries. In the last decade, we have seen a
proliferation of tools to support the adoption and implementationof
responsible practices, sometimes written and tailored specifically for SMEs
which have been applied in both developed and developing country
contexts3 (Luken and Stares 2005, Mandl 2007). These include CSR
implementation guides, self-assessment tools, best practice case studies,
and e-learning courses which are often adapted from CSR management
tools developed for large firms such as the Global Reporting Initiative
guidelines and the European Commission Strategy on CSR (Vives 2011).
However, very few, if any academic studies, have analyzed the potential
relevance and applicability of these management tools in the context of
developing countries.
( for question two)In fact, the relationship between SMEs and CSR remains
poorly understood which is sometimes related to the conceptual
vagueness of both these terms. In relation to SMEs, a variety of definitions
have been proposed which focus on issues such as number of employees
working in the enterprise, annual turnover, ownership types, and formal
versus informal economy status (Jamali et al., 2009).
For example, whereas many developing countries have relatively
advanced, environmental and social laws, these are often not
implemented either due to a lack of capacity on the state or their
implementation simply not prioritized by national governments that tend
to be more concerned with the promotion of economic development within
their borders than environmental or social protection (Prieto-Carron et al.
2006). In India for example, the central government has traditionally not
taken a strong lead in the enforcement of environmental laws within the
country. Environmental enforcement has more been led through the
countrys judicial system. For instance, in cases, where polluting industries
such as leather and/or textile companies have polluted local environments
(Tewari & Pillai 2005). However, whereas Indian courts at various levels
have directed local authorities to (at least temporarily) close down
polluting companies, these orders have often not been executed by local
enforcement agencies (Kennedy 2006).

However, whereas the development and use of these tools may be wellintended, they cannot in themselves provide technical fixes to complex
social and environmental problems in the context of developing countries
(Lund-Thomsen 2004). Instead issues such as poor working conditions and
the emission of environmental pollution at local production sites where
SMEs operate in the developing world may be a result of much broader
structural forces in the broader institutional environments of developing
country firms operating at local, regional, national, and international levels
(Lund-Thomsen 2005). For example, the location of pollution-intensive
industries such as textile or leather manufacturing in countries such as
India, Pakistan, and Bangladesh must be analyzed in a larger historical
context.
Similarly, the national institutional context of developing countries may
play an important role in affecting the environmental and social impacts
that SMEs have in developing countries.
This literature has highlighted how the CSR challenges faced by SMEs in
developing countries are often not those directly confronted by larger
firms. In fact, SMEs are often portrayed as less frequently making use of
CSR instruments than larger firms, less prone to use the term CSR, not
having official CSR departments, or engage in publicly available CSR
reporting (Spence and Lozano 2000, Jenkins 2004, Murillo and Lozano
2006, Morsing and Perrini 2006).(article 27).
In this context, formal engagement, networking within and across sectors,
volunteerism

and

giving

to

charity

provide

an

extremely

fruitful

opportunity to invest in social capital, cultivating close relationships within

the social and business environment. It is in this way that SMEs are able to
establish mutual help relationships, functional to stability and survival in
increasingly competitive market arenas. But the involvement in corporate
social

responsibility

may

also

enhance

reputation

and

stimulate

confidence and loyalty, with relevant returns in terms of workforce

stability and better relationships with financial institutions, suppliers and
partners (Vyakarnam et al. 1997). Finally, CSR in SMEs means the
possibility to pursue employees health and safety, to improve work
climate and productivity, and to provide a source for differentiation and
visibility in increasingly complex and dynamic markets (Spence & Lozano
2000, Murillo & Lozano 2006).(article 28).

A recent study by colleagues in the Nordic Centre for Corporate

Responsibility explored how Nordic SMEs have created innovations related
to their CSR engagement (Hockerts et al. 2008). One of the findings
indicates that these Nordic SMEs perceived CSR as a business opportunity
to create a new platform for competitiveness.
However, the general perception among European SMEs seems to be that
CSR represents a new burden and a threat. Many SMEs fear that they may
not be able to meet the social and environmental requirements of buyers
and supply chains without losing their competitive edge in national and
international markets (Maloni &Brown 2006).
Many SMEs are driven to integrate CSR because of the personal beliefs
and values of the founders, whoare often also the owner-manager, and
employees(Vallentin & Morsing 2008). This will be most obvious in cooperatives and other social enterprises where the core purpose of the
business may be a social goal; but it holds true for many other SMEs too
(Perrini 2006b).
it appears that stakeholder pressure rather than a pro-active CSR
engagement is still the most frequent encouragement for many SMEs to
improve their social initiatives. However, the immediate benefits of CSR
engagement for the SME itself may even surprise the SME, such as for
example financial savings (e.g. reduction in water, electricity and raw
material consumption), environmental improvements (e.g. reduction in
solid waste generation and improvement in waste water quantity/quality),
social improvements (e.g. risk reduction, improvement in working/health
conditions) and product improvements (e.g. better quality, increased
yield, reduced rejects) in the participating companies (Luken & Stares
2005: 50) (article 28).
Drivers of CSR in SMEs
Second, the stakeholder driven stream of CSR research focuses on how businesses meet the
expectations of their stakeholders (Massoud, 2010). The literature on SMEs depicts
stakeholder theory as a viable explanatory theory for SME CSR activity (Fernandez et al.,
2007; Graafland et al., 2003; Jenkins, 2004; Jenkins, 2006; Kusyk and Lozano,

2007;Lepoutre and Heene, 2006; Murillo and Lozano, 2006; Perrini, 2006; Spence, 2007;
Sweeney, 2007; Vives, 2006). Like large firms, SMEs also must consider the needs of
important stakeholders.
Internal stakeholders and the local community usually receive more attention from SMEs
(Jenkins, 2004; Murillo and Lozano, 2006; Spence, 2007; Vives, 2006). Investing in
employees can positively affect employee morale (Jenkins, 2004, 2006). Additionally, SMEs
often view their relationship with the local community as reciprocal (Massoud, 2010). For
example, CSR potentially leads to improved reputation, an ability to attract and retain good
employees, fairer treatment by suppliers, better access to credit from investors and banks who
value socially responsible investments (Jenkins, 2004; Miller and Besser, 2000) (article
29).
Third, the institutional environment and stakeholder pressure influence SMEs; however, the
most frequently cited factor regarding CSR and SMEs is the owners themselves. Owners
possess a significant level of controlover how they operate their business. Their values and
beliefs often translate into actual practices and influence the organizations culture (Besser
and Miller, 2001; Fernandez et al., 2007; Jenkins, 2006; Kusyk and Lozano, 2007; Lepoutre
and Heene, 2006; Longo et al., 2005; Miller and Besser, 2000; Murillo and Lozano, 2006;
Spence, 2007; Spence and Rutherfoord, 2003; Sweeney, 2007; Vives, 2006).
Empirical studies have found other drivers of CSR in SMEs. For example, Longo et al.
(2005) found that companies adopt a socially responsible behavior only for ethical reasons. This
is in line with the findings ofJenkin (2006) that the majority used moral and ethical arguments

to justify why CSR was important to them. Companies spoke of it being the right thing to
do, pride, feeling good, everybody has a responsibility to do what they can, self-worth,
integrity, wellbeing and satisfaction. Other motives include: to increase market share, to
improve company image, to improve relationship with employees, and to improve relations
with the community (Longo et al., 2005). In the study of Williamson et al. (2006), main
drivers are business performance and regulation

5. Barriers to SME CSR

The small business often lacks resources and bargaining power (Lepoutre and Heene, 2006),
and financial resource limitations are cited as a significant constraint on SMEs (Kusyk and
Lozano, 2007; Lepoutre and Heene, 2006; Sweeney, 2007). A focus on the short term can
mean long-term investment projects in CSR are not of immediate concern (Thompson and
Smith, 1991; Carlisle and Faulkner, 2004; Spence, 1999). In many cases, SMEs must
emphasize survival over voluntary initiatives that go beyond compliance (Jenkins, 2004). A
lack of power also hampers the CSR options available to SMEs.
6. Activities of CSR in SMEs
In general the management of CSR in SMEs is described as an ad hoc issue, e.g., someone
rings up and asks us for something (Jenkin, 2006). In an empirical study of Sweeney (2007),
no SMEs had a person appointed to manage CSR. The responsibility of CSR in SMEs tended
to rest with the owner/ manager or another senior manager of the firm (article 29).
SMEs are very different from the larger businesses for which most of the
concepts and methodologies of CSR have been developed. SMEs have
very different stakeholders. In particular, many are family-owned firms, or
are privately held by a small group of shareholders, particularly in
emerging economies. This close relationship between management and
ownership makes it easier to align the objectives of both. Thus, SME
activities

may

reflect

the

values,

character,

attitudes,

education,

background and the like of the owner/entrepreneur. This will have a direct
impact on the firms corporate responsibility (article 30).

Also, there is more and more awareness that CSR activities are not only
merely of charitable nature, but that they also contribute to a positive
image

of

the

company,

to

increased

employee

and

customer

satisfaction as well as to other soft factors that need to be taken into

account when measuring business success. These developments
consequently lead to the question: Is it possible to measure the impact
of CSR activities on business performance; and if so, how?
Measurement of Business Performance through selected indicators shows
the management if expectations are met and gives vital information about
necessary adjustments to the business processes that need to be made.
The figure shows that both, normative definitions and descriptive

measurements of Business Performance must be made. Normative

definitions of Business Performance are described within the framework of
Business Strategies. They include approaches such as Total Quality
Management

(TQM)

and

Management

by-strategies.

Descriptive

approaches to Business Performance often focus on selecting indicators in

order to show the status quo of the business processes. However, newer
developments in Business Strategies, such as the Baldridge Performance
Excellence Program and the EFQM model, include the descriptive
components already in its strategy model. (article 31).

Performance Measurement Systems were described in 1995 as the set of

metrics used to quantify both the efficiency and effectiveness of
actionsii. The measurement process can be done in an automated way
using information technology. Often large companies have the financial#
ability and adequate human resources to purchase and to implement
necessary IT equipment, such as software programs like SAS or ORACLE.

But SMEs frequently lack these possibilities even though they would like to
implement some kind of performance management. For this reason it is
inevitable to equip SMEs with easily-understandable systems that contain
indicators that are not too difficult to measure.

Business associations by and large have criticized this prospect, largely due to an
increased load of reporting duties that would exceed the capacities especially of SMEs.
For instance, the Association of German Chambers of Industry and Commerce stated
repeatedly that, particularly in SMEs, CSR is a widely spread concern on the management
level and that the voluntary approach would lead to best results.
Concerning SMEs, the commission states that for most small and medium-sized
enterprises, especially micro-enterprises, the CSR process is likely to remain informal and
intuitive.
However, the categorization is rather arbitrary and, for the sake of SMEs, the stakeholder
concept should be adapted to the individual circumstances of the company. Since budgets,
personnel, and available time for strategic evaluation are usually limited, SMEs should
identify key stakeholders and should cater their CSR approaches to an easily
comprehensible scope of stakeholders.
Donaldson (1990) went a step further: According to him, managers were not only to
engage in CSR activities because of strategic reasoning, but rather because of the
existence of a moral mandate for them to act responsibly, without regard to the effects
on the company. However, he also stated that there is a Business Case for CSR (article
31).
In the history of development economics, CSR has been thought of as a
key factor in attaining economic goals and wealth generation (Garriga &
Mele, 2004). Therefore, many studies attempted to find a global link
between CSR and firm performance (e.g. Alafi & Hasoneh, 2012; Galbreath
& Shum, 2012; Lin, Yang, & Liou, 2009; Luo & Bhattacharya, 2006;
Margolis et al., 2008; Orlitzky et al., 2003; Rettab, Brik, & Mellahi, 2009;
Shen & Chang, 2008; Van Beurden & Gssling, 2008). For example,
empirical findings by some (e.g. Alafi & Hasoneh, 2012; Galbreath &
Shum, 2012; Luo & Bhattacharya, 2006; Margolis et al., 2008; Shen &
Chang, 2008) researchers showed a positive association between CSR and
firm performance. Orlitzky et al.'s (2003) findings further support the idea

presented by Garriga and Mele (2004). Their study,which involved a

review of all 52 earlier surveys about the correlation between CSR and
company performance, showed that more socially responsible companies
had stronger economic results. Later, survey data was adopted from 280
companies in UAE by Rettab et al. (2009) to examine the connection
between CSR operations and company performance; the outcome
indicated that CSR has a positive association with all three determinants
of company performance: monetary performance, personnel commitment,
and corporate integrity. The impact of CSR on firm performance among
1000 Taiwanese cases was also examined and a positive association
between CSR and monetary performance was identified (Lin et al., 2009).
Galbreath (2008) also found strong positive links between CSR and
organizational benefits among Australian firms. Consistentwith previous
studies, after examining 34 previews studies on CSR and firm performance
linkage by Van Beurden and Gssling (2008), it was found that 68% of
studies demonstrated a positive association. Lastly, the positive and
strong relevance of CSR and firm performance was clearly supported by
Alafi and Hasoneh's (2012) findings which had been done based on
Housing Banks in Jordan (article 2).
Factoring in this evidence, research findings suggest that CSR, customer
satisfaction, reputation, and competitive advantage have a positive effect
on firm performance either directly or indirectly. However, available
evidence justifies the main axis research in this study which is the
probable mediating role that customer satisfaction, reputation, and finally
competitive advantage might have on the relationship between CSR and
firm performance.
Since CSR is an environment-oriented approach to product/process quality
development that supports design teams in developing new products and
processes in a structured way based on further ecological protection and
assessment of customers' needs and expectations, it could be argued that
CSR could not have a direct effect on firm performance, but is fully
mediated

by

customer

satisfaction,

reputation,

and

competitive

advantage. Therefore, given the previous discussions it is hypothesized

that:
H3. In the mediated relationship between CSR and firm performance,
competitive advantage and reputation act as the mediating factors via
improving customer satisfaction (article 2).
Corporate social responsibility (CSR) is viewed as a vital concept that
businesses of all types and sizes need to understand and address
(Charitoudi,

Sariannidis

&

Giannarakis,

2011:

20).

As

global

competitiveness continues to follow momentous trends, CSR is proposed

as

an

effective

strategy

for

invigorating

the

operations

and

competitiveness of SMEs (Porter & Kramer, 2006:79). CSR has become

increasingly important to the competitiveness of small and medium-sized
enterprises (SMEs). CSR has progressively gained acceptance and
prominence both as a business tool and as a contribution to social
progress (Olanrewaju, 2012:18). A positive relationship between the CSR
activities of SMEs and their enhanced competitiveness exists, at least if a
long-term perspective is adopted (European Competitiveness Report,
2008:106; Mandl & Dorr, 2007:2). To remain competitive, business
managers must determine how their businesses can become socially
responsible,

ecologically

sustainable

and

economically

competitive

(Orlitzky, Siegel & Waldman, 2011:7). Both business and society gain
when a business actively strives to be socially responsible (Olanrewaju,
2012:21) (article 6).
Despite the widespread practical and academic interest in CSR and its
impact on the competitiveness of SMEs, few theoretical and empirical
contributions

exist

(European

Competitiveness

Report,

2008:106,

Mlovics, 2009:222). Quantitative and qualitative research with respect to

CSR in SMEs is limited, especially in developing countries (Liu & Fong,
2010:34). In the light of the perceived positive effects of CSR practices on
SMEs, a closer examination of the relationship between CSR factors and
the competitiveness of SMEs is therefore crucial.
Like their larger counterparts, SMEs cannot operate their businesses
without employees, customers and community support. It is argued that

SMEs

act

responsibly

because

their

legitimacy

with

immediate

stakeholders is at stake (Jamali, Zanhour & Keshishian, 2009:357). Carroll

(1999) suggests that SMEs could implement CSR policies successfully and
this would directly affect their competitiveness. SMEs have stakeholder
relationships that are similar to (Jenkins, 2006a) and stronger than
(Perrini, 2006) those of large companies. This implies that SMEs have
stakeholders in the common range with large companies and the purpose
of stakeholder management is similar, their main concern being to reduce
their risk by managing stakeholders (Jenkins, 2006a). Furthermore, SMEs
are closer to stakeholders like community and their employees (Perrini,
2006). In line with the existing literature (Vaaland, Heide & Gronhaug,
2008), CSR is viewed as being implemented through stakeholder theory,
where the main stakeholders include the environment, the community,
customers and employees. CSR involves working in partnership with local
communities,
relationships

making
with

socially

employees,

sensitive
customers

investments,
and

their

developing

families,

and

involvement in activities that promote environmental conservation and

sustainability (Maimunah, 2009:2). Based on previous research (Kramer,
Pfitzer & Lee, 2005:24; Mandl & Dorr, 2007:16; UNIDO, 2008:3 and Szabo
2008:21) and for the purposes of this study, some categories of CSR
factors, which also apply to SMEs, have been taken to include workforceoriented CSR factors, society-oriented CSR factors, market-oriented CSR
factors, and environmentally oriented CSR factors. These factors can
individually or collectively lead to the increased competitiveness of SMEs
in the long term in terms of increased sales volume, growth rate, market
share and profitability (Jamaludin & Hasun, 2007:6; Mandl & Dorr,
2007:49; Salavou & Avlonitis, 2008:976). The proposed hypothesised
model, illustrated in Figure 1, illustrates the relationships between the
selected

CSR

factors

competitiveness as the

as

independent

variables

and

increased

In Figure 1 (the hypothesised model), the CSR factors (Workforceoriented, Society-oriented, Market-oriented and Environmentally oriented
CSR activities) impact on Increased competitiveness (the dependent
variable), which could be measured by profitability, market share, sales
volume and growth rate.
Apart from the direct financial impact, businesses indicated that
workforce-oriented CSR activities have a positive impact in relation to
their reputation and ability to attract and retain employees. This outcome
of CSR activities has a positive influence on the long-term competitiveness
of SMEs. Article 6

It has been argued that all organizations have an impact on society and the environment
through their operations, products and services and through their interaction with key
stakeholders and therefore CSR is important in all firms, large and small (Williams, 2005;

Roche, 2002). However, the literature on CSR has traditionally focused attention on larger
firms. While articles have been calling for research on CSR in small and medium enterprises
(SMEs) since the 1990s, the work to date has been limited and there is a considerable amount
of research needed (Lapointe et al., 2004; Spence et al., 2003). In fact, Massoud (2010)
conducted a search in Business Source Premier spanning the literature from 1980 to 2008 and
found fewer than fifteen articles in peer reviewed journals specifically on SME CSR (article
9).
On the other hand, there is an important lack of research on the impact of CSR tool on SMEs.
A review of the literature revealed only a few studies, which took into consideration this topic
as part of their wider research objectives. One is that of Jenkins (2006) on small business
champions for CSR. The impact of CSR implementation on SMEs identified by the author
include improved image and reputation, improved trust and understanding, more profit, better
market position, more business, increased employee motivation, increased attractiveness to
potential recruits, cost savings and increased efficiency, risk management and benefited
company culture. The others are that of Sweeney (2007) on the barriers and opportunities
experienced by SMEs when undertaking CSR, Sarbutt (2003) on the way SMEs manage their
reputation through CSR, and Perez-Sanchez (2003) on the implementation of CSR in SMEs.
These studies share the common findings that thanks to CSR, they get closer to their
stakeholders and build relationship easier.
Its principal objective is to encourage the adopting SMEs be aware of the need to integrate
CSR issues at the strategic level rather than to implement them.
Despite the difficulty in putting in action Global Performance of the SMEs, the method does
have positive influence on the adopting firms. 66% of the respondents consider it as a
differentiation factor. Table 1 below presents in details different impacts of Global
Performance on the adopting SMEs. From the table, one can see that impacts of the Global
Performance process mentioned by the adopting SMEs are found mainly at the social and
economic level, while the environmental and social aspects remain largely untouched.
The economic impacts are clearly confirmed by the SME entrepreneur-owners. They
represent an important impact, since a considerable improvement of service quality is
obtained in eight out of ten companies and growth is enhanced in the medium or long term.
However, the firms find it difficult to establish a significant relationship between economic
performance and CSR performance.

According to Jenkins (2009), by adopting a CSR strategy, a SME can develop innovative
products and services and thus take advantage of new and emerging markets. Several
academic studies highlight the fact that responsible behavior brings financial advantages such
as a reduction of costs and increased efficiency (Jenkins, 2009; Russo & Tencati, 2009). In
effect, by implementing more careful management practices and measures or using substitute
products which are less harmful to the planet, a SME can reduce wastage and secure a
reduction in costs or outlay (Reynaud & Mathieu, 2005).Article 10
CSR can be a catalyst for increased motivation and productivity amongst a companys
workforce (Saulquin & Schier, 2007; Berger-Douce, 2008). At the same time, awareness and
understanding of the challenges and issues involved in CSR can actually form a very good
basis for competitive differentiation and ultimately contribute towards the improvement of
company image.
There are many advantages for a SME as a result of implementing a CSR strategy. For
instance reduced costs and increased efficiency bring financial advantage. In effect, by
implementing more careful and cost saving measures or introducing products less harmful to
the environment, a SME can reduce waste and develop innovative products and services.
CSR also enables a business to increase the motivation and productivity of its workforce.
Being aware of the challenges of CSR can actually constitute the basis of competitive
advantage for the business and enhance corporate image.