Viability of CSR in SMEs

Abstract

Corporate social responsibility (CSR) is one of the areas that has gained interest among scholars in the past few years due to the evolving nature of the activity. Unlike before, when the practice was solely integrated into large companies, it is presently being slowly embraced by small and medium-sized enterprises (SMEs). The purpose of this research is to determine viability of CSR initiatives in SMEs. The review is based on previous studies conducted in the field of management with regard to CSR in SMEs. Findings indicate that CSR is a viable practice among SMEs. However, there is also evidence that the practice can be impeded by various factors, including lack of – stakeholder buy-in and employees’ support. In addition, findings indicate that ethical issues such as varying cultural customs and pressure from shareholders can arise when addressing the matter of CSR in SMEs. Furthermore, it is observed that failure of SMEs to indulge in CSR can adversely affect vulnerable and disenfranchised populations. As such, it is proposed that government action should be integrated with enhanced business processes that have aspects of CSR to promote an equitable and ethical solution for the needs of vulnerable and disenfranchised groups.

Introduction

Sustainability practices are no longer restricted to large companies because small and medium-sized enterprises (SMEs) are also showing progress in incorporating the practice in their strategic plans. Despite this growth, limited research has been conducted concerning SMEs and sustainable economic development. As a result of this scholarly neglect, SMEs’ leaders are not only less informed about corporate social responsibility (CSR) tools that can work best for their firms, but also on the constraints and success factors that may affect such projects. Pursuing a degree depth in administrative management and business, and communication, I have come to appreciate the duties of managers in ensuring that firm activities do not adversely affect the people and environment in which they operate, as well as how these organizations can communicate their CSR initiatives to stakeholders. Therefore, this research project will provide a comprehensive overview of viability of CSR initiatives in small and medium-sized enterprises.

Themes and Issues in Literature

Existing literature establishes the feasibility of SMEs to indulge in CSR. A study conducted in India, revealed that most SMEs are involved in sustainability practices such as community projects and charity donations (Jain, Vyas & Roy, 2017). Similarly, Mayr (2015) identified that Austrian based SMEs showed promising results of implementing corporate strategies in their plans to strengthen CSR activities. Initially, most of the community-based projects were conducted by large companies that had the monetary capability to fund them. However, it is evident from the above results that SMEs are taking significant steps to ensure that CSR becomes part of their business agenda.

While there is an increasing need for SMEs to indulge in CSR, the preliminary readings indicate that many factors may hinder such initiatives. Nagypál (2014) observes that stakeholders are the determinants of the success of CSR projects. Thus, lack of buy-in from such parties can slow down the implementation of sustainable practices. In addition, Meixner, Pollhammer, and Haas (2015) argue that “limited resources and know-how still hinder the efforts of SMEs in the food sector (p.360). SMEs have scarce sources of financial and human capital, which affect their capability to undertake CSR projects. These constraints can affect disenfranchised populations, especially those in need of social support from firms, and subject SMEs to unethical issues such as unsafe working conditions for employees. Therefore, leaders should identify effective ways of addressing the above challenges.

Several solutions have been recommended on how SMEs can handle the difficulties involved in CSR. Meixer et al. (2015) propose the use of social media to facilitate open dialogues with stakeholders. Hence, both employees’ and customers’ views can be integrated to identify ideal CSR projects. Wickert (2016) also suggests that SMEs should take a political role to address the regulatory gaps that exist in the environment. Through such initiatives, SMEs can exhibit their effort to facilitate sustainability in their operations.

Literature Review

Definition of Corporate Social Responsibility

While no standard-universally accepted definition of CSR is available, scholars agree that the practice stretches beyond the core functions of a business, which is to generate profits for its shareholders. Maria and Murillo (2013) suggest that in the context of developing nations, CSR involves voluntary incorporation of economic, environmental, and social aspects in strategic organizational practices to benefit stakeholders and society. This definition is confirmed by Mayr (2015), who avers that CSR is “associated with integration of ecological and social issues into corporate activities” (p.63). Xue, Yu, and Xu (2019) also acknowledge that CSR, as described by other academicians, involves different levels of responsibilities, including economic, legal, ethical, and philanthropic, but chooses to regard it as an act of treating an institution’s key stakeholders ethically and responsibly. Based on the above information, it is evident that for a firm to qualify as being socially responsible, it must be involved in self-regulated acts. These actions should not only serve the economic interests of the dominant investors who have a direct interest in the firm’s activities, but also that of weak stakeholders, such as the residents of an area, who are indirectly affected by its operations.

Corporate Social Responsibility in Small and Medium-Sized Enterprises

Despite the limited scope of the study of CSR in SMEs, the available literature confirms that the practice can be integrated into small enterprises conveniently. Based on findings from a study conducted in Rajasthan state, India, Jain, Vyas, and Roy (2017) suggest that there is a growing willingness of SMEs to indulge in CSR due to management’s cognition of the practice. For instance, some SMEs are voluntarily participating in acts of environmental sustainability as well as charity work within their vicinities. Unlike before, owners of small businesses have become more informed of their obligation to act for the benefit of their internal and external stakeholders, as was the case for Chinese family-owned SMEs (Xue, Yu & Xu, 2019). Correspondingly, Mayr (2015) argues that the practice is being implemented in Australian-based SMEs successfully, but he mentions that the trend is as a result of the authentic approach used by owner-oriented firms. In addition to recognizing their social responsibility to the society as a whole, SMEs are also aware of the need to incorporate ethical and social practices that suit the stakeholders and environment in which they operate.

Drivers of CSR in SMEs

Among other factors, strategic motivation is regarded as the most dominant driver of CSR in small enterprises. A study conducted by Xue et al. (2019) confirms that most Chinese family-owned SMEs prioritize strategic rather than political motivation to engage in ethical practices. Political motivation is derived from the need to win trust and support from the people in authority, while strategic motivation is associated with practices that can foster the performance of a firm (Xue et al., 2019). Although a large proportion of SMEs lacks social obligation to customers, they may embrace socially responsible practices with the motive of enhancing their reputation, strengthening sustainability, and promoting partnerships (Xue et al., 2019). Similarly, a study conducted among Romanian IT SMEs revealed that nearly all participants regarded the need to build a business reputation as the primary goal of integrating CSR in their business plan (Ceptureanu, 2016). These studies seem to indicate that strategic motivation is a critical factor that influences small enterprises to adopt ethical practices and values within their vicinities.

Factors that Facilitate Successful implementation of CSR in SMEs

Stakeholder participation is considered an essential element that facilitates the implementation of CSR in SMEs. Notably, Potocan, Mulej, and Nedelko (2013) regard employees as the most important stakeholders in successful implementation of ethical and philanthropic practices in small enterprises. In the authors’ view, employees’ ethical perceptions are associated with positive attitude towards social and environmental concerns (Potocan et al., 2013). For instance, employees that prioritize sustainability are more likely to participate in activities that prevent environmental degradation. On the other hand, management that prioritizes economic performance is less likely to engage in CSR. Correspondingly, Bucur (2013) indicates that stakeholders’ participation is essential for identification of critical social concerns; hence, he suggests that stakeholder identification and selection is a prominent step for successful implementation of CSR. Existing literature argues that irrespective of the criteria of selection, stakeholders are the key determinants of the successful implementation of CSR.

Factors that hinder the Viability of CSR in Small and Medium-Sized Enterprises

Although research suggests that CSR can be incorporated into the strategic plan of small business entities, scholars argue that the process of integrating the practice can be hindered by culture. According to Maria and Murillo (2013), the ethos that governs an ethnic group or a business can inhibit the ability of SMEs to work collaboratively and incorporate CSR in their networks successfully. An example is the case of the Democratic Republic of Congo, where individuals and enterprises lack the spirit of cooperation (Maria & Murillo, 2013). Such a culture detriment the capability of SMEs to indulge in both joint and individual acts of CSR because business owners cannot agree on sharing costs to venture into socially responsible practices. Similarly, Mayr (2015) argues that culture, in terms of personal values held by an entrepreneur, determines the successful implementation of CSR in a venture. Given that most SMEs take the form of a sole proprietorship or are family-owned, an entrepreneur who lacks philanthropic values may not indulge in sustainability practices. Thus, culture is a crucial determinant of viability of CSR in SMEs.

Size, limited resources, both financial and human, and knowledge are also regarded as potential hinderances of CSR activities in SMEs. Meixner, Pollhammer, and Haas (2015) suggest that the main factors that hamper CSR tools in SMEs are lack of financial and human resources, as well as limited knowledge on the way to utilize social media to promote CSR activities. Shen, Govindan, and Shankar (2015) also acknowledge that a firm’s size may be correlated to specific barriers in the implementation of CSR. SMEs operate on a small scale and are subject to capital constraints. Given that some CSR activities require adequate financing, it may be difficult for small enterprises to commit to the practice since most of them are grounded on profit-making for survival. Besides, a significant number of sole proprietors, especially in less developed countries are less informed about the practice; thus, it is unlikely for them to integrate it in their strategic plan (Ceptureanu, 2016). Besides, Mayr (2015) asserts that individual resources are strongly related to an authentic approach to CSR. In the face of limited financial and human capital, CSR remains a challenging task for SMEs.

 

Promoting CSR in SMEs

Studies reveal that socially responsible practices can be inculcated in small enterprises through the help of support organizations. Maria and Murillo (2013) regard support organizations as firms that enable individuals to commence, manage, and grow their businesses. According to the authors, such organizations can foster CSR in SMEs through education and training (Maria & Murillo, 2013). By enlightening SME managers, support entities, as is the case of CADICEC situated in the Democratic Republic of Congo, can help small enterprises realize their social responsibility to the society, thus promoting a culture of ethical practices among respective businesses. Shoji (2015) also argues that support from larger organizations can help promote ethical practices in the business environment. However, unlike Maria and Murillo (2013), the author considers the support of international organizations such as the United Nations as being more prominent. Shoji (2015) asserts that “UNGC is soft law, also known as CSR,” which governs activities in firms that operate within its member states (p.40). By educating and providing space for dialogue, the support organizations facilitate ethical practices and values among large and small enterprises.

In addition to supporting SMEs indulge in CSR, scholars also suggest that empowering stakeholders can trigger socially responsible behavior among businesses. Ceptureanu (2016) asserts that dominant stakeholders, who constitute the broader community in which SMEs operate, have limited influence on CSR decisions. Similarly, Amran et al. (2013) believe that the concept of CSR is less recognized among communities located in developing nations, and as a result, stakeholders’ interests are often neglected in the firms’ strategic plans. Amran et al. (2013) go a step further to propose that the behavior can be reversed through government initiatives aimed at enlightening and empowering the society into becoming legitimate and powerful stakeholders. Most local communities have limited information about their rights concerning ventures’ operations; thus, their expectations about the extent to which firms should inculcate ethical practices are impeded. Besides, Amran et al. (2013) argue that the communities that live within the vicinity of the firm’s operation are more aware of the social, economic, and environmental problems that face them. Therefore, by equipping such groups with knowledge and skills, they can feasibly understand their rights and influence SMEs to promote socially responsible behaviors.

Academicians also believe that making CSR reporting a requirement can foster values and ethics within SMEs. For Bucur (2013), CSR reporting, “is a starting point in the dialogues with the business partners” (p.73). Often, small enterprises fail to indulge in social and philanthropic activities because they lack a proper channel of recording and sharing their goals with members of the community, which is contrary to large corporations that publish their annual reports, which contain sustainability accounts. Chiu (2010) believes that CSR reports are credible sources of information, which can aid the determination of CSR performance impressionistically rather than rigorously. However, he highlights that standard CSR reporting can be challenging, especially in cases of unregulated ethical issues (Chiu, 2010). Chiu’s argument appears to be valid, given that CSR activities vary across industries, thus regulating the task may be difficult. Besides, CSR ought to be a voluntary practice, whereby SMEs can self-regulate by setting social and environmental standards that align with their financial performance and business objectives.

Research also suggests that online platforms can be used to promote CSR practices in SMEs. According to Meixer et al. (2015), social media is a state-of-the-art type of communication that can help small enterprises to develop real interaction with stakeholders without incurring high costs. Fortunately, online platforms, such as Twitter and Facebook, are free tools of communication that SMEs can use to communicate their actions to a larger population. Ali, Bicho, and Jimenez-Zarco (2015) also affirm that social media is a transparent and helpful tool that can help shape stakeholders’ behavior. Through social media, firms can easily influence all stakeholders, including employees, to interact with the local community responsibly and ethically. Besides, frequent updates of a SMEs’ social practices, such as charities and sustainable environmental acts, on their social media pages is a transparent way of showing the extent to which the business is involved in ethically oriented practices. Therefore, the platform can be used by members of the community as an open space of dialogue, in which they can share issues that affect them, and monitor the effort that the SMEs make in meeting their needs.

Diversity and Ethics

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.

Proposed Solutions

As observed from previous studies, integrating CSR in SMEs’ business plans has been a viable yet challenging task, especially because of the multiple potential internal and external factors that may impede the practice, including limited resources and lack of support from stakeholders. In addition, it is evident that failure of SMEs to indulge in CSR may adversely affect vulnerable and disenfranchised groups as a significant fraction of the global population depends on the ventures for employment and other economic support (Jamali et al., 2017). Besides, the failure of such firms to participate in environmentally sustainable practices can put surrounding communities at the risk of environmental hazards, including climate change, air and water pollution, and natural disasters. In the presence of the above adversities, it is important to develop a solution that can promote equitable and ethical satisfaction of the needs of vulnerable and disenfranchised groups across the world.

Potential Solutions

One of the possible solutions for promoting CSR activities among SMEs is through government action. Studies show that in the past few years, administrations have attempted to inject CSR activities in SMEs (Mullerat, 2010). As mentioned earlier, the majority of SMEs are family-owned business, thus, participation in CSR depends on the proprietors’ values. Thus, to eliminate such limitations, governments can introduce mandatory regulations to ensure that CSR is a compulsory practice among small and medium-sized ventures. Besides, it is proven that external pressure on environmental responsibility is an important driver of CSR practices among SMEs (Saez-Martinez, Diaz-Garcia & Gonzalez-Moreno, 2016). Therefore, by introducing penalties, either financial or non-financial, for non-compliance, firms may feel compelled to embrace socially responsible practices. Fortunately, the above solution has been tested in various parts of the world, including the United Kingdom, which means that it can be implemented in other countries as well to ensure that SMEs participate in CSR to serve the needs of vulnerable and disenfranchised communities. In the UK, for instance, the Small Business Consortium created a booklet that guides SMEs owners on the way to increase their profitability while indulging in environmentally sustainable practices (“Better business Journey,” n.d). Given that the regulations established in such government publications are standard for all SMEs, they can easily facilitate equitable and ethical CSR practices.

In addition to enforcing mandatory regulations, governments can also foster CSR practices among SMEs by offering diverse forms of financial and managerial support. Research conducted in Malaysia showed that some of the factors that encourage SMEs to indulge in CSR are supported by the government (Norbit, Nawawi & Salin, 2017). As discussed earlier, the majority of the SMEs face financial constraints, which may limit their involvement in sustainable practices. However, scholars suggest that by offering help in the form of tax incentives, administrations can encourage SMEs to be responsive to environmental issues (Saez-Martinez et al., 2016). Generally, a tax incentive is offered with the aim of encouraging investment and may take the form of investment allowance and loss relief, among others (Uwaoma & Ordu, 2016). Putting it in the context of CSR, tax incentives can be issued against capital investments that are aimed at boosting the living standards of the communities in which SMEs operate.

Non-Government Organizations (NGOs) can also launch activist campaigns to trigger CSR practices among SMEs. Studies reveal that NGOs have the power to influence ventures to indulge in environmentally sustainable practices and increase environmental disclosure based on the fact that “they are regarded as important stakeholders, representatives of key stakeholders’ groups and most trusted institutions” (Asfaw & Mengesha, 2017, p.1). NGO’s position in the corporate world can be capitalized on to drive SMEs to embrace socially responsible practices. UNEP, for instance, has been developing reports on involvement of SMEs in environmental pollution, through their use of obsolete technology and proposing urgent plans to improve on resource efficiency among the ventures (“Pre-SME,” n.d). This is one of the many approaches in which world organizations can drive small scale ventures to embrace CSR practices. Besides, NGOs can also offer financial and managerial assistance to SMEs that operate in underdeveloped countries to enhance their capability to support the communities that live in the areas in which they operate, as is the case of CADICEC in the Democratic Republic of Congo (Maria & Murillo, 2013). Therefore, the intervention of NGOs can play a pivotal role of promoting CSR among corporations in an attempt to address the needs of vulnerable and disenfranchised populations across the world.

An alternative solution to promote successful CSR practices among SMEs is granting small entities the autonomy to enhance their business practices to conform to CSR aspects. Among the areas that SMEs can address include stakeholder dialogue. As suggested by Ansong and Issac (2017), stakeholder engagement is a key component of corporate social responsibility. Given the dynamism of CSR tools, it is critical for SMEs to involve different stakeholders, including employees, shareholders, and members of the public in open communication to select an initiative that benefits the most vulnerable and disenfranchised groups.

While the above proposed solutions have the potential to promote CSR practices among SMEs, majority of them lack an ethical and equitable approach that can address the needs of vulnerable and disenfranchised groups. For instance, government action in form of mandatory regulation may trigger negative response among SMEs, forcing them to indulge in the practice halfheartedly. For instance, Saez-Martinez et al. (2016) aver that some mandatory regulations are associated with high fines upon non-compliance, which can be too high for SME’s resources. Besides, Mullerat (2010) observes that those who oppose mandatory regulation claim that the practice is damaging to the competitiveness of firms. Just Like other large businesses, SMEs operate with the aim of generating revenue and profits for sustainability in their respective industries. Therefore, introducing mandatory regulations that subject them to additional operational costs may not be an effective approach of encouraging SME managers to indulge in practices that foster a sustainable environment.

Sole intervention of NGOs in activist campaigns may also fail to yield the expected CSR practices. As noted by Graafland (2017), majority of the activists’ campaigns work best among large companies that are visible and easy targets for non-governmental organizations. Unlike large firms, SMEs mainly operate in small-scale, with some having a workforce of less than fifty employees (Farsi & Toghraee, 2014). In addition, the ventures generate relatively lower income compared to multinationals; thus, their financial statements may not trigger interest among environmental NGOs. Besides, NGOs may not be in a position to target all the SMEs that operate in a country, as some are either too small in scale, or situated in inaccessible areas. In such instances, biasness may arise, as NGOs may primarily focus on SMEs that are visible and within their reach; hence, facilitating inequitable solution for the needs of all groups residing in a nation. Therefore, while NGOs may play a pivotal role of offering financial and managerial support to SMEs that wish to indulge in CSR practices, these organizations may not trigger uniform participation of ventures in socially responsible activities.

Furthermore, creating an environment where SMEs have the autonomy to select independent CSR initiatives may not be an equitable solution for handling the needs of vulnerable and disenfranchised populations. As literature shows, the cultural orientation of a region can influence the activities of a business organization (Beugelsdijk & Welzel, 2018). For instance, SMEs that operate in a cultural context of high masculinity may dismiss CSR practices. The same case may apply for firms that operate in a cultural dimension of individualism. In fact, research shows that organizations that operate in such a cultural context are likely to promote in-group favoritism by meeting the needs of the people they identify with (Beugelsdijk & Welzel, 2018). For example, an SME may choose to cater for the needs of Asian-American employees working in its facility on the notion that the venture is either owned or run by an Asian-American employer. Additionally, SMEs may select CSR initiatives that are within their financial capability and remain silent on practices that are vital to the surrounding community as has been the scenario of poverty reduction (Muruviwa, Nekhwevha & Akpan, 2018). Considering the above information, it is evident that allowing SMEs to select independent approaches to CSR may not be a viable solution.

Formulation of the Most Equitable Solution

Based on analysis of existing literature, it is clear that the most viable solution should address the issue of CSR in SMEs. It should also promote equitable provision for the needs of all stakeholders, including vulnerable and disenfranchised groups. The solution should address the internal and external factors that may limit SMEs from indulging in CSR practices. In addition, it ought to be a neutral resolution in the sense that it should not trigger a negative reaction from small-scale entities, as may be the case of mandatory government regulation.

One of the solutions that meet the above criteria is the integration of favorable government actions with an enhanced business approach that constitutes CSR aspects. Notably, government actions should be aimed at improving the capability of SMEs to adopt CSR practices rather than subjecting them to huge penalties for failure to comply. In reference to previous proposals, government intervention may take the form of tax incentives to encourage managers to be responsive to environmental matters (Saez-Martinez et al., 2016). For instance, when filing returns, SMEs should be granted tax relief on expenses incurred during participation in CSR initiatives such as donations to charitable works, providing a conducive working environment for people with disabilities, and promoting environmentally sustainable practices. Education may also be offered by government agencies on the multiple CSR tools that SMEs can choose from. In addition, administrators should establish policies that define the rights of each employee within an occupational context in order to prevent in-group favoritism. Uniform government incentives and employment standards may be a viable solution for encouraging SMEs to indulge in CSR initiatives.

The above action plan should be integrated within an enhanced business approach that constitutes of CSR aspects. Arguably, SMEs can only participate in CSR wholeheartedly if the effort comes from within the organization. Besides, the management of such entities possesses knowledge about the financial capability of the venture to indulge in CSR. Therefore, for government actions such as incentives and employment policies to work effectively, there ought to be aspects of CSR within SMEs’ business plan. For instance, the existing organizational processes should make provisions for stakeholder involvement in dialogues. Such a culture would be a pillar for progressive CSR practices within an organization in the presence of government intervention. To illustrate, an SME that promotes open dialogues with members of the public, workers, and shareholders can quickly gather information about their needs and interest in the firm. Hence, with support from the government through tax incentives, and regulation of internal operations through standard policies, such a firm may be willing to adopt equitable socially responsible practices that would serve the needs of vulnerable and disenfranchised populations.

Conclusion

The above research findings prove that SMEs can successfully integrate corporate social responsibility into their business agenda. In fact, existing literature shows that some of the SMEs in Austria and Malaysia participate in acts of charity within the communities in which they operate. However, the results also indicate that successful involvement of SMEs in CSR is determined by multiple internal and external factors, including employees’ attitudes and perceptions towards the practice. Other scholars also believe that SMEs’ clients are the key determinants of successful CSR initiatives. In a scenario where the above factors act as constraints, SMEs may fail to indulge in socially responsible practices, an issue that may have adverse effects on vulnerable and disenfranchised groups, such as women, children, people living with disabilities, minority groups, and individuals living in poverty.

The research findings also show that several ethical issues are involved in trying to address the issue of CSR in SMEs. Notably, there are concerns over varying customs across various cultures, which may put ventures in a dilemma of the best approach to CSR. Based on the literature, some of the most prevalent ethical issues may arise in scenarios where the opinion of the largest fraction of a population determines the best CSR initiative. In addition, concerns over varying perspectives among different stakeholders are evident, which may subject SMEs to an ethical dilemma when selecting the most critical needs that ought to be addressed.

In the face of the above challenges, several potential solutions that can promote equitable and ethical satisfaction of the needs of vulnerable and disenfranchised populations have been proposed. Recommendations made encourage governments across the world to intervene in the issue by introducing mandatory regulations for SMEs to participate in CSR. In addition, it is suggested that administrators ought to offer tax incentives in order to encourage managers to be responsive to environmental issues. Other proposed solutions include the intervention of NGOs through activist campaigns and the creation of an environment where SMEs can develop independent CSR initiatives. However, an in-depth analysis of these solutions shows that they may not facilitate equitable satisfaction of the needs of the involved stakeholders. Therefore, a mix between government action and enhanced business processes is viewed as the most equitable solution to promote CSR practices among SMEs.

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