Concept Note: Study of comparative behavior of big and small towards different issues pertaining to Corporate Social Responsibility (CSR) in Corporate / Enterprise Social Responsibility (ESR) in MSMEs.
- Introduction
Given the difficulty in agreeing to a universal definition of Corporate Social Responsibility for both Corporate Enterprise and the Small & Medium Enterprises, the principal objective of this study will be to understand the comparative behavior of big and small towards different issues pertaining to Corporate Social Responsibility/ Enterprise Social Responsibility. The behavior of corporate towards these issues will be based on available documented information with various industry associations, industry foundations, related forums and industry websites, survey by industry networks etc.
Recently the UNIDO has taken up a project on Corporate Social Responsibility (CSR) as part of a thematic-cooperation between United Nations Industrial Development Organisation (UNIDO) and Swiss Agency for Development and Cooperation, in the area of SME Cluster Development with an aim to understand the perceptions and the practices with respect to Enterprises Social Responsibility at the SME level. Under this project, a survey was conduced in five clusters for mapping the Enterprise Social Responsibility (ESR) practices in SME Clusters. The selection of these five clusters was made to cover different geographical areas, different product sectors and different cultural background. On the basis of information available from this survey and focused group discussion on certain issues and other documented information available, an effort will be made to understand the hypothesis that “ SME’s are different from Corporate Enterprises with regard to their Social Responsibility”.
Significance of MSMEs in Indian Economy:
The Indian industrial economy is characterized by a dynamic and versatile set of enterprise actors, who are small and medium in terms of scale of operations. This SME category has been leading a typical competitive advantage to Indian industry in terms of controlling sufficient markets globally. It is because of their ability to make available low-volume customized products, flexible response and lower fixed overhead costs. The other typical behavior of these SME’s is that in most of the cases depending upon their specialization, they have evolved as clusters.
The importance of SME’s as compared to Corporate Enterprises with regard to their contribution towards Indian economy can be best understood that they have a share of 40% in terms of volume, 80% in terms of employment, 60% in terms of exports and 92% in terms of number of enterprises. These figures are indicative of the economic significance of SME’s.
S No. / Contribution to Indian Economy / Corporate Enterprises (%) / SME’s (%)1 / In terms of volume / 60 / 40
2 / In terms of employment / 20 / 80
3 / In terms of exports / 40 / 60
4 / In terms of no. of enterprises / 7 to 8 / 92
MSMEs and their role in socio economic development: The importance of Micro, small and medium enterprises (MSME) for its contribution in the Indian economy growth is a matter of record and needs no further elaboration. However with the changing focus from economic growth to inclusive growth, MSMEs sector role in the socio economic development of India needs to be understood, explored and facilitated. What is so significant about MSMEs that makes them special in their relation to socio economic development of the country? Here are few facts which may give answer to this question.
- Wide spread reach: There are around 12.34 million (1) MSMEs, including 1.9 million registered one which are spread out across the length and breadth of India. They may be touching the lives of 123.4 million directly or indirectly which is roughly 10% of India’s population.
- Major share in GDP: MSMEs combined output is roughly 7% of country’s Gross Domestic Production (GDP).
- Big employment generator; MSME sector is the second largest manpower employer in the country next only to agriculture sector. It provides employment to more than 20 million people which is roughly 2 % of country’s population. Looked from social angle, it helps in solving the unemployment and under-employment problem in the society.
- Facilitates balanced regional development: Dispersionof MSMEs in all parts of the country helps in removing regional imbalances by promoting decentralized development of industries. MSMEs can be found every where, which may be rural, urban, coastal, desert, mountains, forest, backward/ forward areas. This decentralized concept also helps in reducing the other problems like pollution, congestion, housing, sanitations etc.
- Helps in equitable distribution of wealth/ income: When the entrepreneurial talent is allowed to grow in different regions and areas, the income is also distributed instead of being concentrated in the hands of few. This help in solving a big social issue of bridging the gap between rich and poor.
- Act as nursery for entrepreneurship: MSMEs provide a natural habitat for entrepreneurs. Through this platform, the latent/ raw talent available locally can hone their skills and talents, to experiments, to innovate and transform their ideas into goods and services needed by the society.
- Brief description of UNIDO-SDC Thematic Cooperation.
The principles of Entreprise social responsibility (ESR), though far from being universally established, are making an inroad into how the private sector operates, What kind of activities they undertake, what are the principal drivers of ESR and most importantly what can different institutions do to make such initiatives vibrant, strong, inclusive and sustainable. Some literature, especially in the West is available on the role of large enterprises, more so multinational enterprises in fostering socially responsible behaviour. However, the large number of small and medium enterprises (SMEs) in developing countries have so far either played a marginal role in the ESR movement or have not projected their role properly. The project aims to look into these issues in a practical and action-oriented manner to ascertain if ESR compliance is more feasible and sustainable for SMEs that are located within clusters on account of the greater potential for coordinated private partnerships within such geographical concentrations. Building on its role as the role as the specialised UN Agency within the UN Global Compact with a mandate on SMEs and its decade-long experience in the field of SME cluster Development, UNIDO teams up with the Swiss Agency for Development and Cooperation (SDC) on a Thematic Cooperation that encompasses both action-oriented research and field-level technical assistance. The project aims at identifying and disseminating good practise to operational suggestions on how to enhance SME participation in the ESR movement.
Objective of the thematic cooperation Project
The developmental objective of this project is to further enable a greater number of small and medium manufacturing enterprises in developing countries improve their overall competitiveness in a socially responsible way, and, therefore, integrate more successfully and sustain ably into national and international supply chains.
The immediate objective of this project is to explore and start addressing the reasons behind the seemingly low level of participation of SMEs from developing countries in the ESR movement. As explained above, such low participation raises serious doubts on the capacity of many SMEs from developing countries to effectively integrate into regional/global value chains but also to ensure a sustainable and harmonious rate of growth.
Project aims and objective for next 12 months:
Output / Sub activity- CSR mainstreaming in SME cluster development methodology which means reorientation of Existing Cluster Development Methodology with ESR approach by updating following tools.
- Cluster Selection
- Diagnostic Study
- Trust building
- Action Plan
- Implementation
- Monitoring & Evaluation
- Exit Strategy
- Development of Training Material for Cluster Development Agent (CDA) for CDP with ESR angle.
- To understand CDP with application of ESR behavior in SME Cluster at Sports Goods Cluster Jalandhar as pilot project and draw learning’s from the same. ( ongoing)
- Pilot initiative on improving H & S of workers of Trichy Fabrication Cluster which would be first of its kind because in this case the large buyers are involved in the programme. ( Under Explorations)
- Identifying and gaining an insight into CSR compliance issues in two SMEs clusters in the areas of IT and Garment respectively for exploring their motivation level to engage with CSR and the extent to which they are willing to take ownership of the initiative. (Undergoing)
- A study on social costs benefit analysis for SMEs for implementing international and national social codes and regulatory norms. (Undergoing)
- Case study on ESR business case- how ESR improves profitability. (Undergoing)
- Systemization of philanthropic approach of ESR at Jalandhar Sports SMEs Cluster.(Undergoing)
- Understanding BCCI’s Social Responsible Business Project implemented in 20 select SMEswith an aim to familiarize and encourage adoption of responsible business practices in the Indian SMEs. Main stress will be the understanding of four components namely Planning and Implementing C R, Monitoring and Evaluation C R, Reporting and Communicating C R, Technical Regulations for SMEs to access EU Marketplace.
- Identification of few more pilot initiatives in clusters on ESR to draw extra learning’s. ( Under Explorations)
- WRAP- LUDHIANA-How international buyers can work in partnership with stakeholders in their value chain to improve the ESR status. ( Under Explorations)
- ETI – Barailly- How international buyers can work in partnership with stakeholders in their value chain to improve the ESR status. ( Under Explorations)
Cluster Mapping (ESR Diagnostic/ trust building) .
- To map and understand the ESR behavior in five different cluster in India (Kalady, Trichy, Moradabad, Ludhiana & Jalandhar) and learning from them through a structured questionnaire. Publishing consolidated report on SME ESR survey of these 5 clusters. (ongoing)
Preparing a methodology on Cluster Development with CSR perspective
- Research on secondary information available to understand behavior of SME towards CSR. (Done)
- To understand what drives ESR in SMEs (Done).
- SME CSR issues , challenges , best practices ( case studies) etc
- Mapping of Different Govt. schemes which can be focused on CSR.
- Are SMEs different from Large firms in the behaviour towards CSR (e.g. perception, type of activities, Drivers, amount spent etc.
- Behaviour of SME outside the cluster environment VS the one in the cluster.
- Comparison of requirements of buyers (local and international).
- Preparation of training material
- Advocacy and Policy
- Financial Institutions
- SMEs Credit Rating Agencies
- Corporate having SMEs in their supply chain.
- Role of business colleges/ schools
- Dissemination of information
- National Advisory Group
- National and International level workshop
- Dialogue with stakeholders like Government, industry and its associations, FI’s etc, Academic institutions, experts and practitioners.
- Publishing and dissemination of documents, reports, research papers. CDP methodology with CSR dimension, CDA training toolkit, Listing of schemes & resource/ knowledge organizations, ESR mapping report etc.
- Inclusion of SME ESR on Academic world like colleges, business schools, research papers etc.
- .Establishing Resource centre (s)
- Methodology – diagnosis, resources, action plan, implementation, monitoring
- Training manual
- Case studies on best practices
- legal maters related to ESR
- Mapping of Knowledge institutions/ resources institutions, BDS provides etc
- Need for this comparative study:
- The bulk of the literature on Social Responsibility till date relates to Corporate/ Large Firms.
- Most of the research work done on CSR is mainly confined to Big Corporate.
- Based upon secondary literature as above and other CSR Survey Reports, one can at least have the knowledge of various parameters relating to CSR in Corporate such as Perceptions, Type of CSR activities, CSR application area, how they do it, who are the drivers for their CSR, system of identification of CSR priority areas, how they implement their CSR, how the impact assessment is carried out, how much amount in terms of money, goods and time is spent on these CSR activities, multi stakeholders approach to CSR and so on.
- Till date, very little is known about Social Responsibility in MSMEs in India. But what ever little is available, it either suggests that MSMEs are not responsible citizens or at best ignore their contribution to the society. In fact, most radical literature actually highlights the comparatively more polluting nature of MSM enterprises, skipping compliance of genuine welfare laws and at worst employing child labour.
- In order to facilitate ESR in MSMEs in India and to that matter in developing countries, it shall be appropriate to make comparative study of Social Responsibility parameters in Corporate and MSMEs
4. Objective of this study:
The objective of this study is
- To understand the comparative behavior of big and small towards different issues pertaining to Corporate Social Responsibility (CSR) in Corporate / Enterprise Social Responsibility (ESR) in MSMEs in India.
- To analyse the hypothesis “SME’s are different from Corporate Enterprises with regard to their Social Responsibility”.
Time Line : one work month – spread over 3 months.
5. Methodology
Step-1
Knowledge resources for this study:
A. MSMEs Level:
- Inputs from UNIDO-CDP & CSR 5 survey reports on Mapping of ESR Perceptions in Indian SMEs Clusters.
- “ The Responsible Businesses” Book by Meera Mitra
- Other publications on ESR in SMEs
B. Corporate Level:
- Respective Websites- Annual reports/ CSR reports
- CSR survey report PIC ( 2002)
- NASSCOM- CSR survey report 06-07
- Book by Prof. Bakhi, MDI Gurgaon on CSR
- CSR work by Dr. Deepankar Gupta, JNU
- Other publications on CSR
Step-2
Parameters to be considered for studying the behavior:
- Perceptions
- Drivers
- Typology of activities ( type/area)
- Criteria of prioritizations of area and type.
- Resources utilized
- Knowledge inputs
- Implementation
- Individually
- Bilaterally
- Outsourcing
- Multi stakeholders
- Funding sources.
- Is it part of their business strategy
- Monitoring and evaluation.
- Impact assessment etc.
Step-3
- Data Compilation
- Analysis.
- Format and analysis checklist to be evolved by discussions.
- Qualitative analysis based on information in the form of graphs and tables etc.
Step-4
Submission of first draft of report.