Seminar Paper on

CORPORATE SOCIAL RESPONSIBILITY

PERCEPTION OF SMEs

Presented by:

Deepak Kumar Singla M.B.A.

(Reg. No. 03109222001)

Research Guide:

Dr. Kamlesh Khosla M.Com., M.A.(Eco.), Ph.D.

Centre for Off Campus Education & Research

School of Distance and Continuing Education
Dravidian University, Kuppam (A.P.)
Introduction:
Historically, the main aim of the business entities was to earn profits, without caring about

the other aspects, they used to exploit the natural resources, environment and the work

force to earn more and more profits. But with the passage to time the business world had

started to realize their responsibility towards the society and the environment within which

it operates. They now accept the fact that their very existence is possible with the existence

of the society, because it is the society from where they take inputs for their business and it

is the society itself where they deliver their outputs. Corporate social responsibility is not a

new thing to India, but with time it has evolved from charity/ donation to a business

strategy, where the companies plan and implement the CSR programs to gain a better

image for their company and products than their competitors.

Defining Corporate Social Responsibility:

Many researchers have made an attempt to define the Social Responsibility of the business

enterprise, but till date no consensus has been reached on any common or standard

definition of this term. Basically, there are two schools of thought for Corporate Social

responsibility, one argue that the businesses make profits while operating in the society and

using the resources of the society, so it is obligatory for them to utilize some of their profits

for the society. The second school of thoughts advocates that the objective of the business

is to maximize profits within legal framework and should concentrate towards their goal

only and the welfare of the society is government’s role.

There is no single agreed upon definition, globally, to the term ‘Corporate Social

Responsibility’. Many academicians and management expects have given their views on

Corporate Social Responsibilty, but the most accepted and exhaustive definition is the one

given by the World Business Council for Sustainable Development which states, “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
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as of the local community and society at large”. The European Commission considers CSR

as “Being socially responsible means not only fulfilling legal expectations, but also going

beyond compliance and investing more into human capital, the environment and relations

with stakeholders.”

Hence, CSR means that the business organization should

• Behave ethically towards its stakeholders.

• Contribute to economic development.

• Improve quality of life of its workers and their families.

• Engage in the development of local community and society.

• Have concern about the environment.

• Act continuously and not as a one time action.

Dimensions of Corporate Social Responsibility:

The Commission of the European Communities in 2001 identified two main dimensions of

CSR in its publication ‘The Green Paper’:

1. Internal Dimensions – relating to practices internal to the company.

2. External Dimensions – relating to the external stakeholders of the company.

1. Internal Dimension:
Internal Dimensions relates to the practices that are internal to the company, which need to

be modified to incorporate CSR practices. The various components of the internal

dimensions of CSR may be depicted by the following figure.

INTERNAL DIMENSIONS

Human Work Safety & Adaptation to Management of

Resource Health Change Environmental
Management Measures Impact

Figure1: Components of Internal Dimensions

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 a. Human Resources Management
The implementation of CSR, successfully, in any organization can be done through proper

management of its own work force. The internal dimension of CSR in relation to Human

resources management includes employee empowerment, job security, better information

flow, profit sharing & share ownership schemes, training & orientation programs etc.

Company should have recruitment policies so as to give proper representation and equal

employment avenues to minorities, women, and long-term unemployed. The recruitment

policies should also framed to attract fresh talent by providing them opportunities for

acquiring practical training. Majority of the efforts of SME sector in relation to the internal

CSR activities are concentrated in this field. Some of the initiatives taken by them include

Interest free loans to workers, fair & timely payment of wages, gifts/bonus on festivals,

fixed work timings, payment of leave encashment & overtime etc.

b. Work Safety and Health Measures

Worker safety and labour health are having a direct impact on productivity and efficiency

of the labour force. Most of the countries are having their own set of labour laws, which are

to be complied with by all the industries. The companies are adopting a proactive approach

to this issue and trying to provide more safety and health facilities to its workers and their

families, which in turn attracts more talents to the company and also reduces employee

turnover. In SME sector, as the scale of operation are comparatively smaller, so the

productivity of the company is directly related to its work force. The managements of

SMEs are taking many steps in this regard to ensure that there is no absenteeism in the

factory due to ill health or accident of the workers. They are providing first aid boxes, fire

extinguishers in their premises, proper cleanliness is maintained in the production area,

monetary assistance is provided for medical care as and when required, provisions for

adequate lighting & fresh air, gloves & mask etc.

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 c. Adaptation to Change
In current dynamic business scenario, the process of mergers and acquisitions can’t be

ruled out to consolidated and expand the business. Sometimes, workforce is downsized, as

a cost cutting measure by the firms, but they should have a humane approach towards the

workers before considering the retrenchment. The company could consider some other

alternatives like training the worker in some other work or adjustment in some other

department. According to the Green Paper (2001) by the Commission of the European

Communities “Restructuring in a socially responsible manner means to balance and take

into consideration the interests and concerns of all those who are affected by the changes

and decisions. In practice the process is often as important as the substance to the success

of restructuring. In particular this involves seeking the participation and involvement of

those affected through open information and consultation. Furthermore, restructuring needs

to be well prepared by identifying major risks, calculating all the costs, direct and indirect,

associated with alternative strategies and policies, and evaluating all of the alternatives

which would reduce the need for redundancies.”

d. Management of Environmental Impacts

This aspect of CSR is very important and have long bearing effects on the company, its

surroundings, its image and society. Optimal use of resources and reducing environmentally

damaging effluents can reduce the environmental impact. This will also enable the firms to

save considerably in energy bills and pollution costs. Many companies are realising to the fact

that early compliance with accepted standards will provide strategic advantages in the long run

even though they may be cost inefficient in the near future. SME sector is ignorant to this

sector to some extent. Generally they don’t have in-house facilities for recycling the waste or

its disposal, but they are having separate storage facilities for waste and periodically it is being

sold to our units for re-cycling it. Sometimes the SMEs also arrange for collective waste

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disposal facilities and effluent treatment plants, which result in cost saving and utilization of

full capacity of the facility.

2. External Dimensions:
External Dimensions relates to the practices concerning the external stakeholders of the

company viz. consumers, suppliers, community, government etc. With the development of

international standards for business practices due to globlisation, these dimensions have

acquired a new importance as a strategic tool. The various components of the external

dimensions of CSR are shown in the figure below.

EXTERNAL
DIMENSIONS

Local Business Human

Communities Partners Rights

Figure2: Components of External Dimensions

a. Local Communities
The development of good relations with the local community is relevant for all companies

in general and particularly for non-local companies. These relations are being increasingly

used by the companies to support the integration of their subsidiaries into various markets.

Good understanding of the local community and their social customs is an asset which can

be utilized by the companies to gain strategic advantage in the areas they operate. This is

more relevant for the SME sector because of the availability of cheaper labour from the

local communities and it also results into lesser labour problems. Companies would find it

in their interest to substitute capital substitution with labour and reap the cost benefits.

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 b. Business Partners
Building long term relationships with suppliers and customers with a sound ethical

foundation will enable companies to meet customer expectations better by offering the

products as per their requirement at the desired price. The effect of corporate social

responsibility activities will not remain limited to the company itself, but will also touch

upon their economic partners and their CSR practices will be judged taking into account

the practices of their partners and suppliers throughout the supply chain. Companies in the

developing markets take on additional CSR responsibilities because of the existence of

outsourcing opportunities in the form of suppliers and outsourcing agents. Also as part of

their social responsibility companies are expected to provide high quality products and

services, which meet customer expectations in a manner reflecting the company’s concern

for the environment and the local conditions. Thus, consumer based business strategies of

SMEs would enable them to build long lasting relationships with consumers based on trust.

c. Human Rights
Amnesty International states: “Companies have a direct responsibility to ensure the

protection of human rights in their own operations. They also have a responsibility to use

their influence to mitigate the violation of human rights by governments, the forces of law

and order or opposition groups in the countries in which they operate.” According to

Robbins (2000), “Companies operating in countries where human rights are regularly

violated may experience a climate of civil instability and corruption that makes for uneasy

relations with government officials, employees, local communities and shareholders.” The

Caux Round Table Principles state that companies have a responsibility to respect human

rights and democratic institutions; and promote them wherever practical.

The operations of companies should not impinge on the land rights of the local community.

The company needs to make sure that people are not forcibly removed from their homes

and their livelihoods are not endangered. There is the growing need to develop proper
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consultative processes with local groups protesting against projects or operations in which

they are involved. Firms also need to build confidence in the local community that people

participating in peaceful protests against company operations are not intimidated, arrested

or in any other way threatened. Also, companies can take steps to ensure forced labour is

not used in their own, or their suppliers’ operations. Companies need to ensure that human

rights principles are withheld in all their operations and related activities.

CONCLUSIONS:
Corporate Social Responsibility is not just a buzz word in management studies, it is indeed

a very important aspect of corporate reality. It is closely linked with the principle of

sustainable development. Corporate social responsibility is fundamentally a philosophy or

a vision regarding the relationship between business and the society. It is a voluntary role

and contributions that a business organization makes towards a better social and

environmental development, apart from its investment for its own development. As far as

SMEs are concerned they recognize CSR with the internal dimensions and are making

majority of their contribution towards it. Their focus is mainly on the labour welfare and

health care and they are lesser concerned about the external dimensions like environment

due to high cost of pollution control devices and also lack of government control. In case of

external dimensions there contributions are mostly confined to making donations to

charitable institutions, NGOs and religious organizations.

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 References

United Nations. 1987. Our Common Future, Brussels: “Report of the World
commission on Environment and Development.”
(http://www.un.org/documents/ga/res/42/ares42-187.htm) General Assembly resolution
42/187, 11 December 1987.

Bernadette Dsilva, Corporate Social Responsibility in India - An Empirical Research

CSR Perceptions and Activities of Small and Medium Enterprises (SMEs) in seven
geographical clusters, A Survey Report, published by United Nations Industrial
Development organization.

EU Green Paper (2001), Promoting a European Framework for Corporate Social

Responsibility, Brussels, Commission of the European Communities, Retrieved on 22 Sept.
2010 from http://eur-lex.europa.eu/LexUriServ/site/en/com/2001/com2001_0366en01.pdf

Corporate Social Responsibility: Implications for Small and Medium Enterprises in

Developing Countries, 2002, United Nations Industrial Development Organization,
Retrieved on 22 Sept. 2010 from http://www.unido.org/fileadmin/user_media/Publications/
Pub_free/Corporate_social_responsibility.pdf

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 SEMINAR
PRESENTATION SLIDES
CORPORATE SOCIAL RESPONSIBILITY
PERCEPTION OF SMEs

Paper Presentation By:

Deepak Kumar Singla
(Reg. No. 03109222001)
Sub.: Management
 Corporate Social Responsibility – Perception of SMEs

Defining Corporate Social Responsibility:

“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”
World Business Council for Sustainable Development

CSR means that the business organization should

• Behave ethically towards its stakeholders.

• Contribute to economic development.
• Improve quality of life of its workers and their families.
• Engage in the development of local community and
society.
• Have concern about the environment.
• Act continuously and not as a one time action.
 Corporate Social Responsibility – Perception of SMEs

Dimensions of Corporate Social Responsibility

DIMENSIONS OF CSR

INTERNAL DIMENSIONS EXTERNAL DIMENSIONS

1. Human Resource Management

1. Local Communities
2. Work Safety & Health Measures
2. Business Partners
3. Adaptation to Change
3. Human Rights
4. Management of Environmental Impact
 Corporate Social Responsibility – Perception of SMEs

Internal Dimensions of Corporate Social Responsibility

INTERNAL DIMENSIONS

Human Resource Work Safety & Health Adaptation to Change Management of

Management Measures Environmental Impact

1. Employee 1. Cleanliness 1. Alternate Training 1. Proper storage of

Empowerment
hazardous material
2. First Aid Box 2. Absorb within the
2. Job Security
organization 2. Disposal of waste
3. Training programs 3. Fire Extinguishers
3. Humane approach 3. Effluent Treatment
4. Fixed work Timings 4. Medical Care towards Plant
retrenchment
5. Leave Encashment 5. Adequate lighting 4. Air pollution etc.

6. Equal opportunities 6. Fresh Air

to women, minorities
etc.
 Corporate Social Responsibility – Perception of SMEs

External Dimensions of Corporate Social Responsibility

EXTERNAL
DIMENSIONS

Local Communities Business Partners Human Rights

1. Good relations 1. Relations with 1. Human Rights

Suppliers protection
2. Social customs
2. Relations with 2. Anti-corruption
3. Social service Customers

3. Agents etc.
 Corporate Social Responsibility – Perception of SMEs

Conclusions

• CSR is fundamentally a Philosophy or a vision regarding relationship

between business & society.

• It is voluntary role.

• SMEs, mostly recognize CSR with internal dimensions.

• They are lesser concerned with external dimensions due to lack of

government control and associated high cost.

• SME, usually make contribution by way of donations to charitable

institutions, NGOs and religious organizations.

Thanks
Deepak Kumar Singla