EOI IMSD - dtruran ebbf - CSR in SMEs part 1 of 3

www.eoi.es
CSR in SMEs - an Introduction
IMSD / CSR in SMEs
PROFESSOR
daniel truran - @dtruran - daniel.truran@ebbf.org

ebbf.org / Daniel Truran www.eoi.es
Your assignment by Wednesday 23rd April
20% of marking EOI blog post
one or more short blog posts about one or more areas of CSR in SMEs
that struck you / that you felt are important
 
70% of marking a short document on CSR in SMEs
2 A4 pages maximum - 3 min presentation - website links
- Identify an SME that has applied CSR (world coverage)
- describe the driver that pushed that company to CSR
- identify stakeholders it positively influenced
- describe success it brought about: IMPORTANT quantify success
email to : daniel.truran@ebbf.org
!
10% of marking attention and “intelligent” active participation in
the class
IMSD / CSR in SMEs

what can you expect from this course?
(Today) 
Traditional and new definitions of SMEs and its key success drivers
 
(Friday 4th April)  
Creating and measuring values alignment in SMEs
New Leadership styles enabling CSR in SMEs
 
 
(Wednesday 23rd April) 
What works and what doesn’t applying CSR in SMEs 
Our personal area of influence in creating change in SMEs
IMSD / CSR in SMEs

Definition of SME ?
Medium-sized enterprises:
- Have fewer than 250 employees.
- Their annual turnover should not exceed EUR 40 million
- Or their annual balance-sheet total should be less than EUR 27 million.
 
Small enterprises:
- have between 10 and 49 employees.
- They should have an annual turnover not exceeding EUR 7 million
- or an annual balance-sheet total not exceeding EUR 5 million.
 
Micro-enterprises:  
are enterprises which have fewer than 10 employees
!
(According to Commission Recommendation (96/280/EC) of 3 April 1996 )
IMSD / CSR in SMEs

new definitions ... •Campalyst is one of the 'micro-multinationals' that
have emerged over the past few years.
•Enabled by communication technologies, they can
set up shop anywhere. "Small is an asset, it
means you're able to respond to consumer needs
very quickly. You can be agile without the
bureaucracy."
•"For us, opening an office in another country would
mean one of us flying there, finding a co-working
space and setting up a desk”
•"We're really fast, so if we see that there is, for
example, a huge market for us in Brazil, we'll be
there in a week.”
•Today's start-ups will never grow into conglomerates
with a staff of 100,000 that traditional path is
over. It's ineffective."
IMSD / CSR in SMEs
http://www.lisboncouncil.net//index.php?option=com_downloads&id=639

IMSD / CSR in SMEs
how many employees does a company serving
1.11 billion people using their site each month 
(as of May 2013) have ?
WhatsApp bought for $19 billion
it enjoys 420 million monthly users
number of employees ? 55
3,500

What are the characteristics of an SME?
They usually have extensive local knowledge of resources, supply patterns and
purchasing trends.
IMSD / CSR in SMEs
SMEs also represent an important source of innovation. They tend to
occupy specialized market “niches” and follow competitive strategies
that set them apart from other companies.
They are highly adaptable and fast changers
They draw upon the community for their workforce and rely on it to do business.
They are an important source of employment.
They provide goods and services tailored to local needs and at costs affordable
to local people.

“local” market of SMEs
IMSD / CSR in SMEs
suppliers
customers
shareholders
employees

new definitions ...
http://www.cnbcmagazine.com/story/rise-of-the-roaming-empires/1558/3/
Being spread across 18 time zones poses
challenges.
Most of the staff have monthly Skype
meetings;
managers have a bi-weekly substitute for
the traditional chat around the water
cooler.
The company uses Google+ hangouts and
shared desktops, and Dropbox for sharing
documents.
"Most large companies cannot compete on
this level”
IMSD / CSR in SMEs
Avego operates in China, Europe and the US, yet its head office is in Kinsale, southern coast of
Ireland.
!
"The idea of a headquarters is really a foreign concept,”

Impact of SMEs
In OECD (*) economies SMEs and
microenterprises account for:
over 95% of firms,
60-70% employment,
55% of GDP  
In developing countries, more than
90% of all firms outside the
agricultural sector are SMEs and
microenterprises.
SMEs and Microenterprises also create 80% of pollution
IMSD / CSR in SMEs
(*) Most OECD members are high-income economies with a "very high" Human Development Index (HDI) and are regarded as developed countries.

common good
local community
government
environment
shareholders
suppliers
employees
management
clients
organization
IMSD / CSR in SMEs
Impact of SMEs

IMSD / CSR in SMEs
"Proﬁt for a company is like oxygen for a person,
if you don’t have enough of it, you’re out of the
game
but if you think your life is only about breathing
as if their purpose is breathing,
you’re really missing something”
!
Peter Drucker

yet another definition of CSR?
IMSD / CSR in SMEs
they can be negative impacts
unemployment, noise/pollution, exclusion, congestion, product misuse ....
or positive impacts
jobs, support social enterprise, education skills and training, community
investment, local amenities ...
“the sum of your activities is the social and economic impact of
business in a locality”  
BitC - Business in the Community (UK)

What decisions affect?
where you locate and manage your operations [site location and
management]
implications: getting to work ...
!
who you hire [employment]
!
what and from whom you purchase [supply chain and procurement]
!
how and what you produce and sell [product and service deliver]
!
what and how you give back [community and social investment]
....
IMSD / CSR in SMEs

common good
local community
government
environment
shareholders
suppliers
employees
management
clients
organization
IMSD / CSR in SMEs
examples from your companies
what positive or negative effects ?

Collective impact
!
Collectively SMEs have considerable environmental impact. However,
given the various challenges with which they are confronted, and the
perception that their individual impact is not significant, it is unlikely
that environmental concerns will figure high on their business
agendas.
IMSD / CSR in SMEs
do you agree?
What - drives - SMEs to be “responsible”?
are you ok with this?

Collective impact
!
Collectively SMEs have considerable environmental impact. However,
given the various challenges with which they are confronted, and the
perception that their individual impact is not significant, it is unlikely
that environmental concerns will figure high on their business
agendas.
!
the good corporations can do
By engaging with SMEs, assisting them with capacity building, and
aiding them with compliance, particularly with environmental
standards, large corporations can help SMEs integrate sustainable
development thinking into their production processes and operations.
IMSD / CSR in SMEs
What - drives - SMEs to be “responsible”?

What drives an SME’s efforts in CSR?
corporate supply chain
http://www.sustainabilityconsulting.com/walmart-services/
IMSD / CSR in SMEs
Walmart Supplier Sustainability Assessment

using a scorecard to your advantage
Another challenge for some suppliers is figuring out how to translate the
scorecard's answers into strategic management plans.
!
The scorecard's 15 questions are grouped into four categories: energy and
climate; material efficiency; natural resources; and people and
community
!
so it's easy to see which sustainability category need to be addressed with
short term tactics.
!
What's more difficult is building the right internal team and developing a
more strategic approach, because most manufacturers don't organize
their management teams and business units around sustainability
categories.
http://www.fivewinds.com/english/news-and-events/patterns-newsletter/how-to-use-walmart-s-supplier-scorecard-to-your-advantage.htm

!
- Large corporation's supply chain requirements
- Government regulation - constraints concerning environment
social contracts and legislation
- Increased demand from customers/society
!
- Personal wish to be responsible, to do the right thing
- Eco-efficiency driven innovation
- ....
IMSD / CSR in SMEs

Difference between these two groupings?
!
- Large corporation's supply chain requirements
- Government regulation - constraints concerning environment
social contracts and legislation
- Increased demand from customers/society
!
!
- Personal wish to be responsible, to do the right thing
- Eco-efficiency driven innovation
- ...
PASSIVE v
ACTIVE v
IMSD / CSR in SMEs
creating the love brand ... (or the “like” brand)

Love Brand 
Emotional Engagement with your stakeholders
IMSD / CSR in SMEs

Love Brand
Stakeholders “in love”
!
Not only buy
!
But actively promote
IMSD / CSR in SMEs

evolving purchasing patterns
purchase
IMSD / CSR in SMEs
awareness
we recognize a need (say, a new sweater),
consideration
search for information about various stores and options
preference
develop a list of criteria

OLD purchasing patterns:
aiming to create loyalty
awareness
preference
consideration purchase
loyalty
IMSD / CSR in SMEs

NEW purchasing pattern:
the key is now creating - positive advocacy -
awareness
preference
consideration purchase
advocacy
loyalty
IMSD / CSR in SMEs
have you used the powerful
opportunity to “advocate” recently?

getting that advocacy
advocacy
making the promise delivering the promise
creating emotional engagement
IMSD / CSR in SMEs

Love Brand
Are you in “love” with any brand because of its
sustainability / responsibility?
!
what is your emotional engagement?
IMSD / CSR in SMEs

Principle behind successful SMEs
“having a healthy business
should go hand in hand
with creating a healthy community”
IMSD / CSR in SMEs

EnterpriseEnterpriseEnterprise
Shareholders
Employees
Custom
ers
Environm
ent
Communities
Suppliers
the enterprise eco system:  
the stakeholder concept
IMSD / CSR in SMEs
Who are the “stakeholders” involved
in the following three examples?

Who are the “stakeholders”
involved in these three examples?
Why? What was their driver?
Who made CSR happen in these SMEs?
IMSD / CSR in SMEs

Warby Parker - doing good doing well
http://youtu.be/DarG-uI319c

Sure ... but in times of crisis,
when the pressure is on?
IMSD / CSR in SMEs

Closer to local community
IMSD / CSR in SMEs

"my first and current job is to create contracts
with hotels, restaurants and all stakeholders
present in the tourism sector. From my first day
at work I always tried to be honest and
transparent with my suppliers whilst of course
always trying to achieve the financial goals of my
company. Even though combining the two was
sometimes a challenge, in the end I was rewarded
in both areas!
!
This happened not so long ago when the manager
of a large Italian hotel chain decided to confirm a
big contract with us, taking away share from our
competitors, he justified his decision by saying:
trust in times of crisis
Giada Dall’O
“in times of economic crisis such as the ones we are living now, knowing
that you can trust the people that you work with is fundamental”
IMSD / CSR in SMEs

Shareholders
Employees
Custom
ers
Environm
ent
Communities
Suppliers
IMSD / CSR in SMEs
Who are the “stakeholders” involved in
those three examples?
Who made CSR happen
in these SMEs?
Why?
What was their driver?

What are some direct consequences / drivers
of SME’s efforts in CSR ?
http://www.bi.no/CenterFiles/Centre%20for%20Corporate%20Responsibility/SME_Innovation_CSR.pdf
Active (not passive)
CSR
Innovation
Culture
Integrity
Courage
wins public approval
(love - emotional engagement)
differentiates your business
minimizes risks
reduces costs
IMSD / CSR in SMEs

pick a stakeholder  
and be socially responsible
Shareholders
Employees
Custom
ers
Environm
ent
CommunitiesSuppliers
IMSD / CSR in SMEs

IMSD / CSR in SMEs

Identify Stakeholders
outcome of dialogue with stakeholders
www.ebbf.org
Build Impact Measurement WITH stakeholders
IMSD / CSR in SMEs
Dialogue as a source of information and understanding
Suppliers to IVECO example
Source of innovation

Examples of stakeholder
conversations
CEO closing the entire factory down for one day
to set 10 year strategy
including the toilet cleaner - FULL engagement
IMSD / CSR in SMEs

“…significantly boost our company’s
performance during the next five
years.
How? Foremost, we look to inspire our
employees’ hope in the future, to
fill them with a sense of progress
and advancement in their careers as
well as their personal lives.
How we treat and teach our employees
and the sense of respect and
fairness our company projects, will
instill the loyalty, motivation and
positive thinking our team needs to
accomplish our goals.” 
 
Fasha Mahjoor - CEO of Phenomenex
IMSD / CSR in SMEs

which is the first stakeholder to involve
in a CSR initiative?
Shareholders
Employees
Custom
ers
Environm
ent
CommunitiesSuppliers
IMSD / CSR in SMEs

why do you think that employees
should be the first focus point of  
CSR in SMEs ?
Shareholders
Employees
Custom
ers
Environm
entCommunities
Suppliers
IMSD / CSR in SMEs

EXTRA “BONUS” CONTENT

new definitions ...
Campalyst is one of the 'micro-multinationals' that
have emerged over the past few years. With
global aspirations from the get-go, enabled by
communication technologies, they can set up
shop anywhere. "Small is an asset, it means
you're able to respond to consumer needs very
quickly. You can be agile without the
bureaucracy." Today's start-ups will never grow
into conglomerates with a staff of 100,000 that
traditional path is over. It's ineffective."
!
"For us, opening an office in another country would
mean one of us flying there, finding a co-working
space and setting up a desk, or just hiring
another person there. This is totally our
decision," he says. "We're really fast, so if we see
that there is, for example, a huge market for us
in Brazil, we'll be there in a week."
IMSD / CSR in SMEs
http://www.lisboncouncil.net//index.php?option=com_downloads&id=639

new definitions ...
http://www.cnbcmagazine.com/story/rise-of-the-roaming-empires/1558/3/
Being spread across 18 time zones poses
challenges.
Most of the staff have monthly Skype
meetings;
managers have a bi-weekly substitute for
the traditional chat around the water
cooler.
The company uses Google+ hangouts and
shared desktops, and Dropbox for sharing
documents.
"Most large companies cannot compete on
this level”
IMSD / CSR in SMEs
... his company Avego operates in China, Europe and the US, yet its head office is in Kinsale, near
Cork on the southern coast of Ireland. "The idea of a headquarters is really a foreign concept,"
he says.
The nature of its products meant ... opening up offices for sales and support in Washington DC
and Silicon Valley, as well as a manufacturing facility for its hardware and a support office in
Dalian, China. Around 30 of its staff are in Ireland, with 15 in China and eight in the US.

What are other drivers of CSR in SMEs?
China PeopleIndia
IMSD / CSR in SMEs

Adapting to different environments
The Indian example
The Gandhian principle of trusteeship
(GandhiM.K. Harijan, 1927) expresses the
inherent duties of the business enterprises to
its consumers, workers,community and the
mutual responsibilities of these to one
another.
IMSD / CSR in SMEs

The Indian example
!
India has 638,596 villages. The rural population is 72.2%
The private sector plays a critical part in the growth of rural India:
1. bridge the gap left by the government 
2. increase their markets.  
If you help build a road in rural India it benefits the community and
your company.
Examples: work in the rural areas for agriculture, animal husbandry,
water conservation, village institution building, capacity building and
amenities to ﬁshermen, rural development programs which touches the
lives of people in remote villages medical services to the communities.
http://www.scribd.com/doc/51283801/4th-Wheel-March-2011-Newsletter
IMSD / CSR in SMEs
focus on relevant area to make an impact

IMSD / CSR in SMEs
http://www.chinacsrproject.org/

The Chinese example  
Hebei Huatong Wires & Cables Co. Ltd
(working with GIZ)
!
. particularly important for export companies
. high rate of employee turnover
. poor product quality points
IMSD / CSR in SMEs

(In China)
Employee Care Scheme:
! minimum of two hours of technical or managerial training every week.
! Operators on the production line would take a minimum of 20 hours of in-house training and a
minimum of 50 hours of on-site training every year
! All employees would take a minimum of one hour of safety education training every month.
! Selected employees would visit peer companies once every six months
! Employees encouraged to receive advanced vocational training. The training fee would always
be fully reimbursed in the case of cable related operations. Other types of training would also be
partially subsidized.
!
Improving working conditions:
! A workplace safety fund was established. Huatong decided to allocate RMB 100,000 (USD
14,754) per year to the fund.
! RMB 100,000 (USD 14,754) per year also allocated for Personal Protection Equipments (PPEs) to
the workshop in the area of production.
! Medical check-up for all employees twice a year. 
! Medical box was equipped on site in all workshops.
IMSD / CSR in SMEs

(In China)
Employee Care Scheme:
! RMB 150,000 (USD 221,302) was invested to install solar bathing systems at all employee
dormitories.
! RMB 40,000 (USD 5,905) was invested to build a sports room and a basketball court.
! Two tourism-related activities would be organized every year in spring and summer for
the employees, to be defined by Huatong’s management system.
! An entertainment activity would be organized for all employees every three months.
! A birthday party would be organized every month for those employees whose birthdays
fall in that month.
IMSD / CSR in SMEs

(In China)
The Employee Care Scheme brought about encouraging results in 2009.
! The employee turnover rate was reduced from 5.7% to 2.8% (from end of 2008 to end
of 2009).
!
This led to the following unintended benefits to Huatong compared to a year earlier:
! The costs of recruitment and training were effectively reduced by RMB 13,000, (USD
1,917), 47.6% lower than the year before.
! The product First Pass Rate increased from 97.1% to 99.2%.
! The customer satisfaction rate in services increased from 74.6% to 86.3%.
! The overall savings achieved due to the upgrading of skills were over RMB 5 Million
(USD 737,676)
IMSD / CSR in SMEs

GIZ in China
IMSD / CSR in SMEs

EOI IMSD - dtruran ebbf - CSR in SMEs part 1 of 3

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EOI IMSD - dtruran ebbf - CSR in SMEs part 1 of 3