---------------------------------------------------------------------------------------------------BUSI48070: Applied / Consultancy Project---------------------------------------------------------------------------------------------------Literature Review 1ST SEPTEMBER, 2014Nottingham Business SchoolMSc Accounting & FinanceQuestion: To what extent Corporate Social Responsibility (CSR) affect thecompany performance in particular on the Small and Medium-SiedCompanies! "#idence from de#elopin$ countries:Supervisor: Sue AlcockStudent Name: Nadhim Mohammed Ameen TahaStudent Number:N0!"!#!Submission $ate: #st September% &0#'ord (ounts: !!00Introduction:Over the past decades, Corporate Social Responsibility CSR! has "ainedpro#inenceintheacade#ic literat$reBa%%er et al&, 200'!&(o)ever,despitethe*act that CSRcanbeappliedtoall types o* co#panies,re"ardless o* their sector or si+e, #ostly it has been investi"ated on lar"eco#pany level l ,ell Br-.o and /$n0$era, 2001 (illary, 20002, Observatorys#all b$sinessesE$ropeanand#edi$#0&20023 Spence, 14443 5ernerand Spence, 2004!&2lso, it is vie)ed as a vital concept that b$sinesses o*all types and si+es need to $nderstand and address Charito$di,Sariannidis 6 7iannara%is, 20118 20!&9t has been ar"$ed that all or"ani+ations have an i#pact on society andtheenviron#ent thro$"htheir operations, prod$cts andservices andthro$"h their interaction )ith %ey sta%eholders andthere*ore CSRisi#portant inall :r#s, lar"eands#all 5illia#s, 200'3 Roche, 2002!&(o)ever, theliterat$reonCSRhas traditionally*oc$sedattentiononlar"er :r#s& 5hile articles have been callin" *or research on CSR in s#alland#edi$#enterprisesSMEs!sincethe1440s, the)or%todatehasbeenli#itedandthereis aconsiderablea#o$nt o* researchneeded;apointe et al&, 20043 Spence et al&, 2001!article 4!The E$ropean Co##ission de:ned CSR in 200< as =A concept wherebycompanies integrate social and environmental concerns in their businessoperations and in their interaction with their stakeholders on a voluntarybasis. article 11!&Proponentsofthisrequirement arguethat companiesplayavital roleinsocietyandtherefore should contribute to growth in social issues. Opponents to these demands holdthat privatelyruncompaniesshouldnot beheldresponsibleforactivitiesthat shouldprimarily be the domain of public agencies and private initiatives.Roleo* CorporateSocial Responsibility CSR! inS#all andMedi$#Enterprises SME>s! has attractedsi"ni:cant interest andattentioninrecent years& The p$rpose o* this paper is to b$ild so#e relevant #odel)hich )ill help to e?plore the i#pact o* CSR on SME>sarticle 2'!&Speci:cally, theroleo* CSRrelativetotheendorse#ent o* SMEs indevelopin" co$ntries is a :eld o* research that contin$es $nder en0$ired&9n this conte?t, CSR #ay be $nderstood as the inte"ration o*environ#ental, econo#ic, and co##$nal concerns into core strate"ies o*SMEs and their vol$ntary involve#ent in actions that are li%ely to pro#otesta%eholdersandsociety#orethanthenarro):nancial interesto*the:r#;$nd@Tho#sen, 2004!&(encethereasono* thest$dyisto#a%ecertain )hether the SMEs are co"ni+ant o* and act$ally practicin" the CSRnotion*or their end$rance& 9nspiteo* the"ro)in"si"ni:canceo* theSMEs,there is a lac% o* co#prehendin" in relation to CSR in SMEs andthere*orethep$rposeo* this st$dyis elevatin"thee?istin"bodyo*%no)led"e by respondin" the *ollo)in" 0$estion&E$ropean Co##ission EA, 2004! de:nes SME B$st as a b$siness havin"*e)erthan2'0)or%ersandlo)erthan''#illione$rot$rnoverandabalance sheet o* $nder 41 #illion e$ro& The Anited States s#all b$siness2d#inistration SB2 2004! incl$des no #eanin" *or SMEs article 2'!&CSRhasbeenproposedasco#binin"theecono#ics$ccesso* ab$siness)iththeincl$siono* social andenviron#ental considerationsintoitsoperations, sosatis*yin"c$sto#ers> de#ands, C)hilealso#ana"in"thee?pectationso*otherpeople, s$chase#ployees, s$ppliers and the co##$nity> E$ropean Co##ission, 20048 2! article 2s enterprises and '0@s o)ner#ana"er>s CSR en"a"e#ent )ill be e?ploredat a #acro@environ#ental level o* analysis&Th$s, *or a c$lt$re o* CSR to *$lly ta%e root, social responsibility co$ld perhaps be concept$alised as a national obli"ation, and SMEs #i"ht be ed$cated and "$ided to be able to identi*y the areas in )hich they can deploy "reatest i#pact and reso$rces *or develop#ent i&e& h$#an and labo$r ri"hts! d$e to their pro?i#ity and their direct relationships to the co##$nity& Th$s, at the #acro level, )e :nd this an opport$nity *or policy#a%ers to e?pand their eForts to pro#ote the ta%e $p o* #ainstrea# CSR by SMEs, that ste#s *ro# the stron" tradition o* "ivin" bac% )ith no e?pectation o* ret$rn in a #ore str$ct$red and strate"ic #anner article 14!&S#all and Medi$# Enterprises in developin" co$ntries are critical to the develop#ent processarticle 20!&9t is no) be"innin" to be inte"rated )ith other CSR iss$es by so#e lar"eco#panies& Onei#portantele#ent o* thisincl$desactivelys$pportin"SMEs thro$"h b$siness lin%s and social invest#ent, as )ell as inO$ence onthe p$blic policy a"enda& This #eans ta%in" a #ore holistic approach toCSR )here lin%a"es at diFerent levels o* b$siness operations are part o*an overall strate"y *or the s$pport o* SMEs&This is an e#er"in" CSR iss$e *or TNCs that are be"innin" to reco"ni+ethat *or#in" tradin" lin%s and develop#ent partnerships, )hich help SMEs"ain access to #ar%ets, :nance, trainin", physical in*rastr$ct$re andb$siness s$pport services can be one o* the %ey )ays that they can havea positive i#pact on poverty&Others are)or%in"#orebroadlyinconOict resol$tion,basichealthcareand ed$cation @ these initiatives )hile not ai#ed speci:cally at SMEs helpto create *avo$rable conditions in )hich s#all b$sinesses can "ro) andOo$rish&The )ays in )hich CSR aFects SMEs as o$tlined in Section 4, have thepotential *or creatin" positive social, environ#ental b$t also i#portantlyecono#icbene:ts3 bene:tsthat "obeyondtheSMEitsel*, toincl$de)ider localand nationalco##$nitiesin developin" co$ntries& (o)ever,there are also concerns that CSR )illbe a veilbehind )hich TNCs #ayhide as they rationalise their s$ppliers or pass on costs *or #onitorin" anda$ditin" social and environ#ental per*or#ance3 b$rdens that )o$ldincrease poverty levels and not lead to positive develop#ent&The %ey concern #ost o*ten voiced by both developin" co$ntry"overn#ents and ind$strialists is that CSR standards are a #echanis# *orretainin" Bobs, trade and invest#ent in developed co$ntries at thee?pense o* developin" econo#ies, )hich tend to co#pete thro$"h lo)erlabo$r costs and less strin"ent environ#ental re"$lations& This has been#ost controversial in relation to #oves to #a%e CSR standards#andatory, or lin% the# to trade a"ree#ents& (o)ever, as sho)n above,the bo$ndary bet)eenvol$ntaryand #andatorystandards is beco#in"increasin"ly bl$rred and in so#e sectors CSR criteria are beco#in"ind$stry standards&EorSMEsthesecosts canbeprohibitivelye?pensivein relationto theirs#aller o$tp$ts leadin" either to the SMEs the#selves decidin" that theycannot aFord to be certi:ed or to the lar"er co#panies rationali+in" theirs$pplychains toas#allern$#ber o*lar"e s$ppliersthatareeasier to#onitor& Eor #any co#panies this has been the :rst sta"e ini#ple#entin" an ethical so$rcin" policy, and is part o* a )ider trend o*co#panies b$ildin" closer lin%s )ith strate"ic s$ppliers&Press$re *or "reater CSR )hether *oc$sin" on environ#ental, cons$#er orh$#anri"htsiss$eso*tensharestheco##on$nderlyin"concernthatcorporate inO$ence is too "reat& By #any critics, the corporate sector ischar"ed)ith$nacco$ntablepo)er andinO$ence, c$lt$ral i#perialis#,bleedin" local econo#ies dry and $sin" the #obility o* capital to *orce aninternational Crace to the botto#>&9t is easier *or lar"e co#panies )ith their developed syste#s andecono#ies o* scale to deal )ith the de#ands *or *or#al #onitorin" andstandards& SMEs do not have the :nancial and h$#an reso$rces to investheavily in CSR activities $nless they brin" i##ediate tan"ible bene:ts&;ar"e co#panies have #ore co#ple? net)or%s o* relationships, )hich CSRcan help to stren"then, #ana"e and $nderstand& 9n SMEs theserelationshipsare#oreo*teninvestedinthepersonal interactiono*theentreprene$r&CSR is the Ch$#an *ace o* "lobali+ation> and as s$ch eases the entry o*"lobal co#panies into the ho#e #ar%ets, hi"h streets and sectors )hereSMEs have do#inated&Clearly SMEs )ill have to Boin the CSR *old, i* the s#all b$siness sector isnot tobeco#etheloopholein)hichpoll$tin", e?ploitativeind$striesOo$rish& (o)ever, #any o* the concerns $nderlyin" calls *or #ore CSR byTNCs do not apply to SMEs, )hich lac% the po)er to inO$ence"overn#ents, dictate standards or #ove bet)een co$ntries in search o*li"hter re"$lation& Ontheother hand, SMEs "enerallyhavea"reater$nderstandin" o* local c$lt$ral and political conte?ts, #ore lin%s )ith localcivil society and a "reater co##it#ent to operatin" in a speci:c areaBetter alignment with current and emerging consumer concernsand access to new marketsRCSRcanhelpco#panies"ainspeci:ccontracts ortradin"relationships )ithTNCs or co#panies inNorthern#ar%ets andco##$nicate directly )ith cons$#ers thro$"h environ#entaland sociallabels& (o)ever, e?port@oriented CSR can only s$cceed i* it is#atched by prod$ct 0$ality and service, )hich #eet international #ar%etstandards&Operational cost savings These derive *ro# environ#ental ePciency#eas$ress$chas)astered$ctionandener"yePciency, red$ctionsinabsenteeis# and staF t$rnover&Improvementsinproductivityandquality@ 7reaterePciencyandbetter #ana"e#ent enco$ra"ed by CSR can help co#panies to i#provethe 0$ality and prod$ctivity o* their o$tp$t&Learning and innovation @ CSR can help co#panies :nd ne) )ays to)or%, develop s%ills, #ana"e ris%s, sei+e opport$nities and solveproble#s&(o)ever apic%@and@#i?ba"o* b$siness bene:ts does not provideaco#pellin" case that these bene:ts )ill be si"ni:cant *or every co#pany,orin*actthatthey)ill notdistractattentionandreso$rcesa)ay*ro#other #ore pressin" iss$es and lead to :nancial r$in& 9n the case o* SMEsin developin" co$ntries, $p"radin" the 0$ality o* their technolo"y,#ana"e#ent and #ar%etin" are li%ely to be e0$ally pressin" priorities&Overall, theresee#stobea"eneral a)arenesso* CSRasab$sinessiss$e, and that it is o* relevance to SMEs& Many o* the #ain CSR iss$es areseen to be i#portant, in partic$lar environ#ental concerns poll$tion and)aste!, transparency and acco$ntability& 2ltho$"h there is a lo) level o*a)arenesso* e#er"in"international initiativess$chastheAN7lobalCo#pact, a n$#ber o* national and ind$stry@speci:c initiatives are $nder)ay, in partic$lar concernin" codes o* cond$ct& There is a "eneral concernabo$t the threats CSR #ay pose in creatin" a barrier to #ar%ets and theb$rden o* co#pliance and #onitorin"& (o)ever, there )ere perceived tobean$#ber o* opport$nities presentedbyCSR, incl$din"access to#ar%ets and better ali"n#ent to cons$#er concerns& 9n all, there see#sto be a perceptionthat CSR iss$es pose both threats and opport$nitiesthat )ill re0$ire a hei"htened a)areness and care*$l #ana"e#ent a#on"ind$stry associations and individ$al co#panies ali%e&9* CSRis tr$ly "oin" to beco#e a strate"ic *orce in contrib$tin"tointernational develop#ent andeli#inatin"thene"ativee?ternalitieso*b$siness, it #$st help to develop eFective and viable approaches to S#allB$siness Responsibility& 9t is cr$cial that8S CSR s$pports the role o* SMEs in develop#ent, and does not serve as atool to $nder#ine and disadvanta"e the#&S SMEs are not able to $nderc$t $niversal CSR standards and beco#e ablind@spotin)hiche?ploitativeandenviron#ental destr$ctivepractisesOo$rish&Th$s, the challen"es are to red$ce the barriers and threats )hilestren"thenin" the opport$nities and drivers in order to ens$re that CSRhas a )ide and positive i#pact on SMEs&Integrate tools to improve social and environmental impact withtools to improve quality management. This is be"innin" to happen atthec$ttin"ed"eo* CSRdevelop#entintheNorth)iththe#ove*ro#separate consideration o* social,environ#ental and econo#ic iss$esto)ardss$stainability#ana"e#entandtheincreasin"i#portance"ivento the b$siness case& (o)ever, social and environ#entalpress$re ons$ppliers tends to be piece#eal and $nrelated to the b$siness case&Develop a framework of !mall Business "esponsi#ility$ to $nderstand and pro#ote the positive social i#pact o* SMEs, and in partic$lar ho) to val$e, co##$nicate, re)ard and i#prove the Csilent social responsibility>, )hich already prevails in #any SMEs& This )o$ld inte"rate "lobal s$pply chain press$res and lin%a"es )ith b$siness case bene:ts and local acco$ntability and the i#portance o* SMEs in develop#ent article 20!&Corporate social responsibility in SMEs is a s$bBect that has not "ained #$ch research attention $ntil very recently, despite their lar"e representation a#on" total b$sinesses& 2s de:ned *or this st$dy, SMEs have *e)er than '00 e#ployees3 they are still 0$ite hetero"eneo$s in ter#s o* co#pany characteristics& Th$s a co#pany )ith less than 10 e#ployees #ay have very diFerent reso$rces and or"ani+ational c$lt$re co#pared to a co#pany that e#ploys close to '00 people article 21!&9t has beenclai#edthat SMEs arenot B$st s#all versions o* lar"ercorporationsandneedtohaveadiFerent %indo* approachintoCSRLechiche 6 Soparnot, 2012!& So *ar the acade#ic literat$re andpro#otion o* CSR by diFerent advocacy a"encies has been concentratin"on *or#al aspects o* CSR and s$stainability s$ch as reportin" or oPcialpro"ra#s *or co#panies& These #i"ht be s$itable *or lar"e corporations,b$t *or s#all and #edi$#@si+ed co#panies, *or#al pro"ra#s andreportin" re0$ire#ents #i"ht B$st create an e?tra b$rden @ th$s #a%in"CSR harder to i#ple#ent Eassin, 200G!& SME>s o*ten *ace the proble# o*concentratin" their scarce reso$rces as ePciently as possible, )hich$nder#ines the i#portance o* CSR and s$stainability research in this :eld,beca$se by "ainin" #ore %no)led"e abo$t the iss$es the i#ple#entationco$ld be #ore eFective article 21!&See article 22 and pa"e ' *or str$ct$re 9 thin% it is $se*$lTTTTTTTTTTTSeethebotto#pa"eGinthesa#earticle3 yo$)ill seeani#portantpointUUUSee top pa"e 4 also yo$ )ill see i#portant pointPlease see article 22 *ro# pa"e ' to 14, it is very i#portant *or #y topicTTTCorporate social responsibility CSR! can b$ild rep$tation and lead to societalandco#petitiveadvanta"e, )hichcanbeespecially$se*$l *or s#all and#edi$# si+ed enterprises SME! )ith li#ited reso$rces article 21!&SMEs can strate"ically $se CSR activities in order to develop a co#petitiveadvanta"e thro$"h diFerentiation by a creatin" societal advanta"e&,$rin" the recent years, s#all and #edi$# si+ed enterprises have ta%en anincreasedn$#bero* initiativesai#in"aten"a"in"inCSR/en%ins, 200s are at better position to ta%e advanta"eo* CSRpracticesthanlar"erenterprises,as they.re Oatter andadditionallypotentially *aster onthe*eet, less :?atedbyearnin"s andpriceratios,*$rther#ore SME>s are #ore li%ely to loo% $p *or 0$alities li%e inte"rity andhonesty& There.s th$s #$ch s$bBective and e#pirical evidence pointin" to onadeptness and pec$liarities o* SMEs in the perspective o* CSR&SME>s see# to be involvin" in a ran"e o* social econo#ic and environ#entalpracticesb$tdon.t$s$ally$setheter#CSRtocate"ori+ethis& 9ncertainSME>s o*ten have e?cellent econo#ic and social i#pacts in their localco##$nity )hich are not co##only ac%no)led"ed in CSR ter#s&)d#anta$es of CSR CSR has the potential to brin" si"ni:cance bene:ts not only to thesta%eholders receivin" the "ood)ill, b$t also to the b$sinesses participatin"in CSR& 2ltho$"h it>s co##only ac%no)led"ed that #any o* theseadvanta"es are intan"ible, va"$e, and i#pressionistic /en%ins, 200s obBectives, and decreased staF t$rnover rates M$rillo 6 ;o+ano,200 Sarb$tts, 20018 140!&2 9t has additionally been s$""ested thatSMEs "enerally have8 a "reater $nderstandin" o* local c$lt$ral andpolitical conte?ts3 #ore lin%s )ith local civil society3 and a "reaterco##it#ent to operatin" in a speci:c area&The 0$estionnaire e?plores ho) SMEs are aFected by CSR criteria bein"applied in the proc$re#ent processes o* clients& The #aBority o*respondents *elt that incl$din" social and environ#ental re0$ire#ents aspreconditions to s$pply )o$ld increase their #otivation to en"a"e in CSRG2 per cent *or environ#ental criteria and '' per cent *or social criteria!&(o)ever, a 0$arter )o$ld be disco$ra"ed *ro# tenderin" and 12 per centtho$"ht that s$ch criteria )o$ld be co$nterprod$ctive&5illia#son et al& 200 that is, an e#phasisoncost red$ctionsandePciency! andCre"$lation> considerationsdrivebehavio$r& (o)ever, a st$dy o* a non@#an$*act$rin" sector, resta$rants,byRevell andBlac%b$rn2004a8 2! discovered, CTheenviron#ent )asclearly a lo) priority *or #ost resta$rate$rs, )ho clai#ed to be too b$sycopin" )ith daily b$siness press$res to conte#plate environ#entaliss$es&> (ence, CSMEo)ner@#ana"ers havelittleincentivetoi#provetheir environ#ental per*or#ance)hilethey re#ain $nconvincedthatenviron#ental #ana"e#ent is "ood *or b$siness> Revell and Blac%b$rn,2004a8 1!, in ter#s o* either red$cin" costs or )innin" c$sto#ers& Mar%etde#ands basically thro$"h s$bcontractin" relationships! or the strate"icchoicetoobtainco#petitiveadvanta"e, havealsobeenidenti:edasi#portant reasons *or SMEs toen"a"einenviron#entallyresponsibleactivities E$ropean Co##ission, 20028 H!&9nher revie)o* theliterat$re, Spence200H! identi:es the*ollo)in"iss$es relatin" to b$siness ethics and CSR8Y see%in" ass$rance that the obBect SME is co#pliant )ith CSRstandards3Y *airness o* treat#ent o* the s$pplier )hen ne"otiatin" s$ch thin"s aster#s and conditions, and the $se o* po)er in s$pplier relationships3Yscepticis#re"ardin"theperceivedbene:tstoSMEs, even)henaCpartnership approach> is ta%en3Ytheass$#ptionbylar"e:r#sthat*or#al standardsarearelevant#eas$re o* CSR in SMEs3 and thatY lar"e co#pany! social responsibility and ethics policies sho$ld see%an open and honest partnership )ith SMEs rather than atte#pte?ploitation or short@ter# "ain&(o)ever, it has beens$""estedthat s#aller co#panies alsohaveaval$ableroletoplayReveni*itisacceptedthatlar"eb$sinessesandpri#ary s$ppliers needto helptheSME co##$nity (MReven$e 6C$sto#s, 200