The social responsibility movement is killing of the SMV

Small and medium size companies or SMVs have been forgotten in our increased efforts to pressure companies to become more responsible. A few days ago I discussed with a local carpenter I know about how social responsibility is changing the way we are doing business and not least how business relates to society. He was not unreceptive to the ideas and recognized that business do potentially have a great impact on both social and economic factors. However, he did have some questions that I found difficult to answer directly through the mainstream CSR thinking.

  1. As a small business he was unable to meet the new criteria that the state and municipalities put forward in order to get contacts. In “our” strive to force business to become more responsible we are at the same time killing of the small and medium size companies ability to bid for the most lucrative contracts. In Denmark there is about 305’000 companies (yes, it’s true. Out of a population of 5,5 million) of these are 1100 or 0,36% required by law to have a CSR policy. All though this is a very small percentage of the total number of businesses are the requirements for SMVs to document their ethical behavior in a wide range of areas on the increase. For example, if you want to be shortlisted to bid on government contract through the state purchasing central (SKI) you will have to document your performance in a wide of areas. In the final evaluation 10-20% weight or points will be given to the environmental impact that the business can document to have. Most small business do not have a elaborate environmental management system that will tell them what their impact is so for most small companies this area will be left blank or inadequate filled out. This has the effect that they will not be given points for the questions, or as SKI puts it:“If the questions are not answered or inadequately answered, and the requested documentation is not produced, the contracting authorities are entitled – and may be obliged – to disregard the tender in question.”
  2. If you want to bid on big contracts anywhere, you need to have excellent computer skills. The time where big companies took up the phonebook and called the local electrician is over. Now local craftsmen will have to make bids, be short listed and document behavior on a wide range of areas before they let you in the door. For many small businesses this is just too much work so most contracts will go to medium or big size contractors. One of the reasons why they became craftsmen in the first place was because they did not want to sit in an office and fill out endless forms, but now they are forced to if they want to have any business at all.
  3. The majority of SMV actually has a great social impact in their local community. In the old days if one of the youngsters came into trouble you took him to the mechanic or blacksmith around the corner and asked if they could help out with the youngsters “surplus” energy. This is still the case today but it’s not recognized as CSR actually it is not given any merit at all. When one look at the amount of training places there is in big companies compared to SMVs it is mind bobbling. Most big companies just don’t take trouble youth at all they rather have them out of the local technical school so that their costs for education can be deducted on their tax bill.
  4. Most ethnic minorities have problems getting into the mainstream jobs so for many first and second generation immigrants the only option is to create their own business. These businesses support and create the foundation for future citizens that will bring new ideas and innovation to the societies that they are part of. The impact of immigration cannot be underestimated just look at the US, Australia and New Zeeland that are build upon immigrants wanting and striving to achieve a better future for themselves and their families.      
  5. Small business presents a opportunity for women that would otherwise be out of the job market to get a foothold. Many new businesses are within e-business is started by women as it they can be managed from the home and in most cases does not require a lot of warehouse space (at least in the initial phase). If women choose to take full advantage of the opportunity for parental leave there is a relative high likelihood that they will lose their connection with their old place of work and in some cases they want to change their working patterns. Small business gives women a opportunity to be their own boss, planning and managing their own time. These are opportunities that big business does not offer, even with the best of work/life balance plans out there. 
  6. Investment in small business has shown to have a significant local impact. Micro investments like the once done by Grameen bank have shown that investing/lending in “bottom of the pyramid” business ventures can have a very good return. Actually it has shown to be better than lending money to mainstream businesses because of the diversification of risk and that investments are done with survival in mind and not fluffy business ideas and fancy spreadsheets. Today one can as a private investor put money in microloans through websites like MyC4 and Kiva

With this in mind do big companies still have a obligation towards society? Of cause they do but in our euphoria to create a better world we should not forget that there are others out there that really do a difference and whose impact is many times bigger in total than all the biggest multinationals combined. It is like the question of what weights the most all the elephants of the world or all the ants? And the answer is, as you might know, the ants. They might be small but their sheer numbers combined make them weigh so much that they outperform all the elephants combined.


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