Benefits & burdens of CSR for SMEs.

• Author: Freisleben, Gerald
• Position: Corporate Social Responsibility - Small and medium sized enterprises

Corporate social responsibility policies--long in place at multinational corporations--are assuming a larger role at more and more small- and midsized enterprises. But the SMEs still face resource and operational challenges.

When a Nasdaq-listed manufacturer of filtration and hydraulic systems made the short list of finalists for a contract with a leading global aerospace company, it represented a transformative moment in the smaller company's life cycle. The prospective sub-contractor had a lot to offer, including superior technology, the ability to meet tight just-in-time delivery cycles and high-level security clearances from the Department of Defense.

But the company's prospects were very nearly derailed by a form the aerospace-and-defense contractor required of all of its suppliers and subcontractors, asking potential suppliers to document their corporate social responsibility programs and initiatives and sign a pledge to adhere to the CSR standards and practices of the global enterprise.

For the hydraulics manufacturer, it was jarring news. Like many small- and mid-sized enterprises, it had focused throughout its existence on building its business through product innovation and market opportunities, but had done virtually nothing regarding formalizing its corporate citizenship policies. The company eventually won a substantial portion of the contract, along with a one-year waiver on implementing CSR requirements.

The key lesson is that CSR policies, long in place at multinational corporations, are finding their way into smaller enterprises--often with global corporations acting as the drivers. With more multinational customers imposing CSR requirements across their supply chains, the demands on SMEs will escalate to not only put in place citizenship initiatives, but to document, measure and report those efforts.

CSR by Definition

Adding to the CSR conundrum is a lack of consensus on exactly what it is. At the most fundamental level, CSR encompasses going beyond what is required of an enterprise from legal and regulatory standpoints.

It challenges the corporation to take a role--often previously occupied by the public sector--in educating, interacting appropriately with stakeholders and minimizing social and environmental harm, to name just some areas.

CSR is about the company having an ethos or set of values--sometimes expressed in the vision, mission and goals of the organization--and managing business practices to produce an overall positive impact on society.

Historically the province of large global enterprises, CSR's rise has coincided with activist calls for transparency and accountability following corporate scandals and environmental accidents over the past decade or two.

Skeptics often deride CSR as "window dressing" or a "flavor of the month" fix implemented by the public relations or marketing staffs of multinationals; and not intrinsically linked to business practices.

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