Resources on Small Businesses and Startups

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While corporate social responsibility (“CSR”) has been a topic of discussion for larger businesses for a long time, relatively little attention was paid to CSR and small businesses. However, as governments have come to realize the importance of small businesses—often referred to as small- and medium-sized enterprises or “MSEs”—to their economies as drivers of employment, research and guidance on management topics for MSEs has become more prevalent. While managers of small businesses rightly have concerns about the costs associated with many CSR projects, and non-governmental organizations have not spent as much time and effort on monitoring CSR among SMEs, more and more SMEs are beginning to appreciate the potential benefits of having some type of CSR initiative, even if it scaled down to fit the size of the firm and the relatively meager resources available. For example, as larger companies have integrated supply chain management into their CSR initiatives SMEs seeking to become supply chain partners have been forced to take a hard look at their efforts with respect to social responsibility, particularly the ways that they treat their workers and the impact of their operations on the environment. Another driver of CSR among SMEs is their dependence on their relationship with the local community. While larger companies operate in numerous locations around the world, SMEs have one primary site and depend heavily on the strength and support of the community surrounding the site. As such, it is incumbent on SMEs to act in a socially responsible manner in their interactions with community members and support community efforts in areas such as education, health, safety and general welfare.

In spite of the above-referenced benefits of embracing CSR, SMEs reasonably complain about finding the time and resources to collect the necessary information, develop and implement CSR strategies and continuously engage with stakeholders. Owners and senior managers of SMEs typically wear a number of different hats already and adding CSR leadership assignments often seems to be just too much. Another problem is that small businesses lack the financial and other resources generally required for many CSR initiatives, operate with less formal management structures and do not have in-house expertise for important activities such as reporting and external monitoring. Fortunately, however, the size and scope of activities of SMEs may actually make it easier to find information and reach out to important stakeholders. For example, since SMEs are already closely linked to their communities and dependent on them for customers, labor and supplies it is generally a small step to extend the relationship into social responsibility projects. In the same vein, SMEs often have higher levels of employee participation in decision making and this facilitates worker engagement of health and safety, product quality and service and implementing eco-friendly manufacturing processes. Small businesses can also create partnerships with other companies and tap into the resources available from outside groups offering advice on standards, monitoring and relevant technologies. In addition, size and informality can actually make it easier for the sustainable entrepreneur to secure the support of everyone in the organization and monitor how the initial CSR objectives are progressing.

The business opportunities associated with CSR have become too important to be ignored by small business owners. A number of studies have provided support for the proposition that a large percentage of consumers, far more than a mere majority, would consider switching from their existing brand to another one associated with a cause that they approve of. The numbers are even higher among millennials, which is important since that group is projected as being responsible for 30% of retail purchases and making up almost half of the workforce by 2020. Surveys also indicate that consumers have extremely high levels of trust in, and loyalty to, brands that have an authentic social cause as their foundation. In addition, a majority of consumers in the general population have used social media to engage around a CSR-related cause. In fact, social media and other technology tools have made it easier for consumers and others to investigate and evaluate a company’s CSR practices and widely report issues and problems that they may encounter. Companies cannot ignore CSR and risk swift and drastic damage to their reputations as well as potential legal problems if they fail to put safeguards in place and proactively integrate social responsibility into all aspects of their operations and their relationships with suppliers and the communities in which they operate.

While small businesses operate under resource constraints that make it impractical for them to implement comprehensive CSR initiatives on the scope of those that have been adopted by larger companies, they nonetheless can begin by referring to the same authoritative international instruments such as the Organisation for Economic Co-operation and Development (“OECD”) Guidelines for Multinational Enterprises and the UN Global Compact Principles, each of which are intended to be applicable to organizations of all sizes. Governments and business associations have also created and published guides and other resources relating to a wide range of SME management topics including the use of environmental management systems by SMEs and adopting the management systems framework of the International Standards Organization to the SME context. Other resources tailored to the particular needs of small businesses seeking to implement a CSR initiative include the “Introduction to Corporate Social Responsibility for Small & Medium-Sized Enterprises” available online from the European Commission with links to other European Union publications and tools on CSR and SMEs; and the CSR handbook for SMEs developed by the Caux Round Table (www.cauxroundtable.org), an international network of principled business leaders working to promote moral capitalism.

Small businesses vary widely and include businesses that have been in existence for a long period of time and are looking to transition toward more sustainability as well as entirely new businesses launched by sustainable entrepreneurs looking to integrate profitability and environmental and social responsibility into the business models in a balanced manner from the very beginning. While each type of small business must address its own unique set of challenges when establishing and implementing a CSR framework, the steps to be taken are actually very similar to those suggested for larger organizations: assessment of the company’s current situation with respect to environmental and social responsibility including engagement with each of the company’s key stakeholders; development of options for potential CSR-related actions; development of a strategic plan and related governance mechanisms; preparation and implementation of a CSR-related business plan; creation of reporting and verification processes to measure progress; and evaluation of the company’s CSR-related initiatives to identify methods for improvement.

Even when conducted on a modest scale, the various steps for establishing and implementing a CSR framework can be daunting; however, commentators have suggested that most small businesses can certain modest steps to move their CSR initiatives and programs forward:

While it is probably impractical to appoint a full-time CSR executive, small companies should at least designate one senior employee to monitor CSR activities and collect information that can be used to develop new CSR initiatives and report activities to stakeholders (the designated employee’s existing duties and performance metrics should be rearranged to accommodate the CSR-related activities).
A modest budget should be set up to cover anticipated CSR activities and key people in other departments (e.g., human resources, customer service, marketing and public relations, manufacturing etc.) should be asked to submit ideas for CSR projects and informed that they will be expected to work with the designated CSR employee on projects from time-to-time.
Even if the company has not yet adopted one of the international CSR instruments, information regarding its CSR activities should be posted on the company’s website and should include both successes and areas that have been targeted for improvement.
Information on CSR activities can also be communicated to customers, suppliers and other business partners and community members by adding new sections to the company’s brochures and pamphlets and posting pictures of activities that can be viewed by visitors to the company’s facilities.
Information about the company’s CSR activities can be placed into local newspapers, a relatively easy and low cost public relations effort that has high impact among current and prospective employees, local customers and community members.
Staff briefings on CSR activities should be held on a regular basis and small businesses should also invite business partners and community members to events at the company’s facilities which showcase some of the things that the company is doing with respect to CSR.
CSR should be placed on the agenda for all discussions with key customers, suppliers and other business partners in order to gather their input and ideas on things that the company can do in the CSR area and get feedback on current initiatives.
The company’s website should report on the activities of employees who are volunteering with the support of the company in charitable activities focused on making a difference in cleaning up the environment. Internally, CSR activities can be publicized in a newsletter that discusses the benefits of a recycling program.

As to what should be included in the CSR initiatives of a small business, attention should be paid to the concerns of the company’s key stakeholders that are identified during the engagement process. Stakeholder engagement allows small business owners to unearth and focus on material CSR issues such as the following:

Employee health and safety: Ensuring our employees work in a safe environment, which meets or exceeds relevant regulatory expectations, addresses health and safety concerns as they arise and mitigates opportunities for reoccurrence of incidents
Product quality and safety to customers: Choosing materials from quality sources, complying with current “good manufacturing practice”, and delivering fit-for-purpose, safe products to customers that adhere to, or exceed strict regulatory standards in all jurisdictions served by the company
Corruption and bribery: Business must be conducted with transparency, and free from unethical persuasion in every aspect of the company’s business from identifying product sources, through development of new products, transactions with regulatory bodies and sale to customers
Ethical purchasing and human rights in the supply chain: Responsibility to partners to ensure our product line is free from human rights concerns such as forced labor and trafficking, unsafe labor standards and unfair treatment
Compliance: Responsibility to drive compliance with legal and regulatory requirements applicable to our global business including training programs, continuous improvement and striving for best-practice
Resource use and waste management: Includes energy usage during manufacture and logistics, water usage and waste as a by-product of manufacture

While engaging with CSR is often a slow process for the owners and managers of traditional small businesses, sustainable entrepreneurs who are launching startups and building “from scratch” understand from the very beginning that authentically embracing CSR and various CSR practices makes good business sense. For example, when sustainable entrepreneurs take on and promote initiatives to make society as a whole happier and healthier they are also working to improve the conditions in the marketplace, thus improving the foundation for a thriving business. When the lives of potential customers are improved they become more prosperous and this means that they are better able to consider and purchase the products and services that the sustainable entrepreneur and others are offering. In addition, implementing sustainable practices such as using less packaging and reducing energy waste not only helps to conserve the environment it also helps sustainable entrepreneurs cut their costs and improves the quality of the workplace for employees. Other business benefits of CSR which are extremely important to startups struggling to survive and find their niche in competitive marketplaces include brand differentiation, access to talented workers interested in working for companies with a socially responsible mission and alignment with a rising tide of consumer awareness and demand for businesses to act responsibly and offer products and services that are not only useful but which also contribute to sustainability. Sustainable entrepreneurs are often fixated on innovation as a means for transforming an industry toward sustainability; however, like any other startup a sustainable entrepreneurial venture must have the capacity to survive, develop and grow in order to have the economic, environmental and social impact that was intended when the firm was established.

A final element for small businesses and startups to consider is how to create and maintain an organizational culture that supports sustainability. The owners of a small business that has been operating in a traditional fashion may need to dramatically transform the organizational culture in order for new CSR-related initiatives to gain support. The founders of a startup will likely have an easier time establishing the appropriate organizational culture provided that they have a plan in place from the very beginning. In either case, the recipe for success includes articulating the company’s mission and identity, leadership commitment and internal and external engagement. The leaders of the organization need to understand how organizational change occurs and build trust among all of the stakeholders.