Among the prevalent themes in the viability of corporate social responsibility (CSR) in small and medium-sized enterprises (SMEs) includes the potential of internal factors, including limited financial and human resources to inhibit the practice among ventures. Although existing research shows that family-owned firms are adopting the practice in specific parts of the world, such as Malaysia, evidence is available that the above elements can pose challenges in adoption of the exercise among organizations, especially those that operate in less developed and developing nations. Literature also shows that failure of firms to participate in CSR can negatively affect different groups of people worldwide. In the presence of the growing adversities associated with lack of CSR practices among SMEs, it is essential to understand factors that facilitate the trend, attempts that are being made to promote the practice, and policies that have the potential of enhancing socially responsible practices among the ventures.
Groups of People who May be Adversely Affected by the Issue
Failure of SMEs to indulge in CSR can adversely affect people living with disabilities. Research conducted by the European Union shows that the fraction of individuals with disabilities not involved in the labor market is approximately twice that of average EU citizens (Fina & Cera, 2015). Similar results were obtained by Schmidt et al. (2018) whose study revealed that few companies reported hiring workers with disabilities. Hence, such a trend can partially be explained by failure of multinational enterprises, private and public corporate entities, to incorporate disability aspects in their CSR agendas. As Fina and Cera (2015) suggest, hiring people with disabilities is among the several philosophies of CSR. However, a large portion of SMEs may not have the financial capability to provide a conducive working environment for persons with physical and mental impairments. As such, people living with disabilities across the world are among the vulnerable groups that are profoundly affected by the lack of sustainable practices in SMEs.
Children and women are also part of the vulnerable populations that may be affected negatively by unsustainable practices among SMEs. Jamali, Lund-Thomsen, and Jeppesen (2017) aver that some SMEs in developing countries indulge in child labor, forced labor, sexual harassment, and human trafficking. Unlike MNEs, small and medium-sized ventures are less regulated by the legal authority, which implies that they can easily indulge in unethical practices. In addition, their involvement in CSR is often a voluntary practice rather than compliance with established standards (Jorge et al., 2016). Therefore, business owners who disregard the position of women in the workforce can easily exploit their employment rights. In addition, limited human resources in SMEs can compel proprietors to exploit children to work in their ventures. Without social programs established to enlighten women and children about their employment rights, it may be challenging for the vulnerable group to evade the adversities of unethical acts undertaken by small firms.
People living below the poverty index are also among vulnerable populations that may be affected adversely by the incapacity of SMEs to participate in economic, legal, ethical, and philanthropic activities. Recent studies reveal that the current CSR agenda is silent on poverty reduction (Muruviwa, Nekhwevha & Akpan, 2018). While a significant number of SMEs indulges in sustainable practices, the majority of the acts are often aimed at protecting the environment rather than enhancing people’s living standards. For instance, research conducted among SMEs in Southern Brazil revealed that 81.25%, 53.84%, 61. 54% and 46.15% of the ventures were concerned with caring for and protecting the environment, reducing energy consumption, reducing material use, and minimizing water consumption, respectively (Schmidt et al., 2018). From the above information, it is evident that small and medium-sized ventures focus on practices that are within their financial capabilities, and those that require minimum resources, rather than works of charity, which may require significant finances. As such, financial constraints among SMEs is one of the factors that hinder their participation in poverty reduction initiatives, which in turn adversely affects people living below the poverty margin.
In addition to affecting people living in the poverty threshold, the identified issue may also impact disenfranchised groups across the world. In this context, disenfranchised persons refer to minority groups that are perceived as less powerful compared to their counterparts. For instance, in the United States, Native Indians and African Americans are some of the disenfranchised populations due to the way they were treated historically and in the present days. In particular, African Americans were traded as slaves while American Native Indians were displaced from their native land during the colonial period on the notion that they were a weaker cultural group compared to the Whites. Thus, disenfranchised groups may be treated differently in today’s corporate world. As studies show, SMEs play a vital role in job creation through their labor-intensive processes, accounting for approximately 90% of businesses and 60% of employment globally (Jamali et al., 2017). Undoubtedly, the ventures offer job opportunities to diverse groups, including disenfranchised populations. Therefore, failure of SMEs to indulge in sustainable practices may facilitate progressive discriminative treatment of disenfranchised groups, hence hinder the elevation of their financial, social, and economic position in the society.
While the above issue may have a severe impact on disenfranchised groups, its effect may be minimal on dominant populations. For instance, White Americans are considered dominant groups based on the fact that they account for the largest population in the country. The 2018 statistics revealed that approximately 250.14 million Whites were United States’ residents (“Resident population,” n.d). In addition to being a dominant population, White people often enjoy more privileges compared to minority groups. Devos and Mohamed (2014) note that some of the privileges that European Americans enjoy include hiring recommendations and voting intentions. Therefore, it is evident that the rights and needs of dominant groups, both socially and in the corporate world, are highly addressed compared to those of minority groups. Hence, failure of SMEs to indulge in CSR initiatives, especially acts of philanthropy, may not adversely affect their well-being because a large portion of the dominant groups have job securities and are financially stable.
Cultural Perspective Relative to the Issue, Vulnerable Groups, and Disenfranchised Populations
The ability and willingness of SMEs to indulge in CSR practices can be analyzed through a cultural lens, using Hofstede’s cultural dimension theory. The theory suggests that culture has an impact on the activities and performance of business organizations (Beugelsdijk & Welzel, 2018). This implies that culture of the surrounding environment can influence SME’s decision to indulge in socially responsible practices. With regard to this perception, six dimensions of national culture are used to analyze the activities of corporations, including power distance, individualism/collectivism, masculinity/femininity, uncertainty avoidance, long/short-term orientation, and restraint/indulgence (Beugelsdijk & Welzel, 2018). Determining a country’s score in each dimension can enhance an understanding of the activities of its domestic and multinational corporations.
Hence, to understand the issue of sustainability in my cultural context, the above theory can also be implemented. For instance, United States’ rank on the criteria of individualism and collectivism can help determine the willingness of SMEs to indulge in CSR. Previous research reveals that the United States ranks as individualistic rather than collectivist nation (Fredricks & Tilley, 2014). Therefore, some of the SMEs operating in the country may be highly sensitive to this culture. Under the dimension of individualism, society expects firms to indulge in activities that optimize revenue, benefit immediate families and other people in the corporate world (Beugelsdijk & Welzel, 2018). Unlike individualism, collectivism promotes in-group favoritism, whereby ventures are expected to cater to the needs of specific members of the society, often those that they relate to. In light of this aspect, the national culture of individualism has become a pillar of the management of both large and small firms in the United States, as a significant number of the organizations indulge in social, ethical, economic, and philanthropic acts aimed at enhancing their corporate reputation and meeting the needs of the immediate environment in which they operate.
Similarly, the dimension of femininity and masculinity can be used to evaluate the issue of sustainable practices among SMEs in my cultural context. According to scholars, femininity is based on attributes of caring for others, solidarity, and cooperation (Beugelsdijk & Welzel, 2018). Firms that operate in an environment that embraces a culture of femininity are more likely to promote practices that reflect an emphasis on the qualities mentioned above. On the other hand, masculinity is based on achievement, success, and competition (Beugelsdijk & Welzel, 2018). Firms that operate under this dimension are likely to direct resources into areas that enhance their industrial competitiveness, rather than on initiatives aimed at promoting ethically-oriented practices. Concerning my cultural context, studies show that the United States has a high masculinity score of 62, with most Americans with the mentality of being better than their neighbors and reaching the “American dream” (Garza, Nguyen & McGregor, 2018). Therefore, it may be hypothesized that SMEs, which are increasingly sensitive to the existing culture of masculinity are likely to focus less on socially responsible practices and more on revenue maximization. In such instances, regulatory policies are often established to facilitate compliance of business organizations to CSR initiatives.
Apart from being used to evaluate the differences in behavior among firms, Hofstede’s cultural dimensions theory can also be utilized to analyze the issue of sustainable practices concerning vulnerable and disenfranchised groups in the United States. As mentioned earlier, the country has a high score in individualism, which means that the majority of ventures that operate within its boundaries are obligated to address the needs of their immediate families and those of the corporate society. Therefore, it can be anticipated that the adverse effects of unsustainable practices in the United States are less likely to affect vulnerable and disenfranchised groups compared to nations that embrace a culture of collectivism.
Ethical Issues Involved in Addressing CSR
One of the ethical issues involved in addressing the matter of sustainable practices in SMEs is cultural dimensions. As studies show, “different cultures have their customs of what may be acceptable and unacceptable conduct” (Russell, 2018, p. 95). Therefore, the decision-making process with CSR tools that ought to be integrated into an SME’s business agenda may be inhibited by varying moral imperatives. Cultural dimensions can be drawn from the ethical theory of rights and ethical reasoning, whereby certain practices are considered correct in instances where they are endorsed by a large population (Khalid, Eldakak & Loke, 2017). In such scenarios, firms that indulge in acts that are only recognized by a small portion of the population may be branded as socially irresponsible by the rest of the group that promotes different customs and practices. Therefore, small and medium-sized ventures that operate in a culturally diverse environment may face the dilemma of selecting an initiative that is neutral to the involved parties.
Pressure from shareholders may also be a potential ethical issue in addressing CSR in SMEs. Apart from family-owned businesses, SMEs may also take the form of partnerships, such that the involved parties are entitled to profits and capital gains. In such instances, business partners may demand the SMEs’ management to indulge in practices that generate maximum revenue and profits. In addition, some partners may have a negative perception of CSR practices, especially acts of charity, which may cut back on capital gains. For the above class of shareholders, the deontological theory would be employed in decision making, such that the SME management would possess the duty, obligation, and power to determine their moral responsibility to business partners (Khalid, Eldakak & Loke, 2017). While internal shareholders may regard the firm’s decision to optimize their wealth as ethically right, external stakeholders may perceive such practices as socially irresponsible, especially where the organization fails to participate in initiatives that boost the lives of the community in which it operates.
Decision-Making Processes and Action Plans that have been Tried in SMEs
Today, SMEs have shifted their decision-making processes from unsystematic and informal to Multicriteria Decision Analysis (MCDA). This new approach of decision making constitutes a collection of concepts, methods, and techniques that enable ventures to make decisions in scenarios of conflicting points of view and multiple interests (Rocio, 2016). Scholars also emphasize that MCDA aid decision-makers in evaluating their values and judgments and those of others involved in the process (Rocio, 2016). Unlike before, decision making in SMEs is formal, rigorous, and systematic, which makes it easier for the responsible management to address each issue comprehensively and in multiple perspectives.
In addition to adopting MCDA techniques in decision making, SMEs are also making significant steps to embrace strategic decision-making processes in their plans. Studies show that strategic decision-making was originally adopted by large firms, with high employee capacity and definitive goals, but has at present times incorporated in small firms across the world (Ashraf, Hassan, Ghafoor & Aslam, 2015). Initially, small ventures focused on short-term plans that would enhance their survival in the market, including generating pre-determined revenue within weeks and months. However, long-term goals such as yearly revenue targets are being set by SMEs. Through strategic decision-making processes, small and medium-sized organizations can define their long-term visions and put in place plans to facilitate achievement of the same.
Evidence of Social Responsibility in Decision-Making Processes and Plans
Undoubtedly, current decision-making processes and plans incorporated by SMEs are drivers of socially responsible practices in the organizations. For instance, the adoption of MCDA techniques enables SME’s management to make decisions that are inclusive of the needs of other stakeholders, such as the communities in which they operate. Besides, the new process of decision-making challenges entrepreneurs to evaluate their values against those of other parties to identify areas of conflict and act accordingly. Through the above approach, SMEs can exhibit a unique philosophy of social responsibility, which entails considering the needs of both internal and external stakeholders, which may not be captured in traditional, informal, and unsystematic decision-making processes.
Similarly, strategic decision-making processes facilitate social responsibility among SMEs. As mentioned earlier, a significant fraction of small ventures in the past focused on short and medium-term goals, which would sustain their operations. However, existing strategic decision-making processes have enabled SMEs to be more vigilant about the way their actions affect the immediate environment because the majority of their long-term goals are pillared against a sustainable environment. For instance, for contemporary SMEs to achieve long-term goals of generating yearly revenue, they ought to secure a loyal customer base and to maintain a consistent supply of raw materials that can satisfy demand as it arises. Hence, to achieve this, small ventures are currently indulging in socially responsible acts such as charity work to build on their reputation among members of the public. In addition, some of the ventures are incorporating environment-friendly practices to protect sources of their basic materials. Based on the above information, it is evident that incorporation of strategic decision-making processes in SMEs facilitates social responsibility.
Policies and Practices that Might Lead to Equitable Solutions
Evidence from the above literature shows that SMEs operate in different cultural orientations, which may influence their willingness to participate in CSR. For instance, firms that operate in a culture of masculinity may be unwilling to indulge in social responsibility. In addition, research proves that vulnerable and disenfranchised populations may be adversely affected by the failure of SMEs to indulge in CSR practices. Under those premises, it is important to identify policies and practices that can promote equal participation of SMEs in socially responsible acts.
One of the policies that may be adopted to ensure equitable solutions in the corporate world is the formulation of standard government regulations on CSR practices among small ventures. Research shows that enforcement of a smart mix of voluntary policy measures by governments can promote CSR (Apospori, 2018). An essential aspect of incorporating regulations is to acknowledge that some of the CSR practices are voluntary, thus, their implementation highly depends on the values and attributes of an entrepreneur. As such, proposed government regulations should constitute the right combination of voluntary and obligatory measures to curb resistance among businesses and to promote equitable involvement in socially responsible practices.
Conclusion
Overall, the above literature confirms that failure of SMEs to indulge in the corporate socially responsible practices has adverse effects on people with disabilities, children, women, and individuals living below the poverty margin. Studies also show that an environment’s cultural orientation has a direct influence on the willingness of SMEs to indulge in CSR. Some of the practices are currently being implemented to control the above issue include adoption of MCDA decision-making techniques and strategic decision-making processes. The development of standard smart mix voluntary policy measures by governments also has the potential to promote equal participation of SMEs in CSR.
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