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August
2002

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SMEs with a social conscience

Businesses do not have to be big to act on social and environmental concerns. More than half of SMEs are involved in socially responsible causes. They are motivated by ethics, but find they gain business benefits.

The 'triple bottom line' - financial, social and environmental performance - features strongly on the agenda of prominent multinationals. It is also more of a priority than has been realised for Europe's SMEs, although it is much more informal and unreported.

SMEs' corporate social responsibility (CSR) involvement is mostly in three activities: sport, culture and community health or welfare schemes. The most popular commitment for SMEs is sport, across all sizes of SMEs and in almost all European countries. In most instances, involvement is through donations, either in cash or kind.

SMEs mostly say they base their commitment to CSR on ethics, yet three quarters of them can also point to business benefits. A socially responsible stance can improve a business's image and reputation, increase customer loyalty and sales, improve relationships with suppliers, raise employee motivation and ease staff recruitment. Larger SMEs and those based in countries with greater CSR activity are more aware of the business benefits of CSR.

This approach is backed by consumer surveys. About a quarter of Europeans suggest that a business's social image is a "very important" factor in their choice of product or service supplier. Research in the UK( 1 ) showed that 17% of the population had boycotted a company for ethical reasons; 19% had positively used a company with a good ethical reputation; and a further 28% had done both.

The signs are that this trend will accelerate. The CSR-Europe survey( 2 ) found that two-thirds of citizens expect private businesses to take their involvement in social issues seriously. Larger enterprises are held responsible not only for their own performance, but for that of their suppliers - a cascade effect that impacts on SMEs. This is backed by a growing commitment to CSR-based investment. In the UK some 5% of professionally managed investments use some type of CSR criteria. In the United States that figure is much higher, at 13%.

Given consumers' declining loyalty towards suppliers, every business has to take CSR seriously. Improved communications systems make the risks attached to a negative business image - and the benefits of positive impressions - much greater.

Not all SMEs are equally committed to CSR concerns. The larger the SME, the more likely it is to have a CSR involvement. There is little variation according to trade sector, but a very large one based on location.

CSR involvement varies on a clear North/ South divide. It is highest in Norway, Iceland, Denmark, Finland, Liechtenstein and Austria and weakest in Spain, Italy and Greece. In addition, in France and the UK it is less common amongst SMEs than large businesses. Policies to promote CSR

Public bodies play a major role in influencing the CSR involvement of SMEs. Several countries have led the way with schemes promoting CSR activities.

Austria has several initiatives, including encouraging family friendly businesses and an employment law for disabled people. Belgium has a social labelling scheme for products to enable consumers to identify the working conditions of those employed to manufacture goods. Denmark has a social index to enable consumers to evaluate whether companies operate good social practices. France, Italy and Spain provide fiscal incentives for CSR activities. Several countries have public agencies promoting CSR activities amongst businesses.

Yet there is a broadly inverted relationship between the number of SMEs in a country benefiting from public support programmes for CSR and the overall proportion of SMEs in that country involved in external CSR activities. This study does not analyse this.

The Observatory's report is just the starting point for understanding the motivation for SMEs in CSR concerns. The researchers recognise that until now very little has been understood of this. The impact of culture on SMEs' decisions is unclear and there remains a lack of information on how SMEs' involvement in CSR is communicated to their stakeholders. Relationships between SMEs involved in CSR activities is also not yet understood.

It is obvious that if policy-makers wish to promote greater CSR involvement by SMEs then it is essential they have a clear analysis of what is currently happening. This report recognises it cannot, of itself, provide that analysis - but it does offer the first stage in improving our knowledge.

(1) Winning with integrity, MORI & Co-operative Bank, London, 1998, visit the website

(2) European survey of consumers' attitudes towards corporate social responsibility, 2000, visit the website


European SMEs and social and environmental responsibility
ISBN 92 828 3457 0
European Commission, Luxembourg, 2002
English, 72 pp, free of charge
Fax +32 2 299 8362, (email removed)
Visit the website to download the publication
Contact: (email removed)


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