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A study of corporate social responsibility in small and medium enterprises during recession Essay

CHAPTER ONE: INTRODUCTION

Background of the Study

Corporate Social Responsibility

            Society’s preoccupation with the social responsibility of organizations has existed since at least the early 1930s and probably even before this period. Wells (n.d) notes that it is perhaps the infamous Dodd-Berle correspondence contained within the Harvard Law Review Issue of 1931-32 that launched the debate regarding corporate social responsibility. The said debate started when corporate law professor Adolf A. Berle Jr. published an article arguing for imposition of legal control son management so that only their shareholders would benefit from their decisions (Berle, 1931). E.M. Dodd, another professor from Harvard, published an article that addressed the issue introduced by Berle. He argues that managers that aside from merely focusing on the interests of the shareholders, the former must also take into consideration the concerns of the employees, consumers and the organization’s stakeholders. Berle (1931) then counter-responded by saying that companies should ““not abandon emphasis on the view that business corporations exist for the sole purpose of making profits for their stockholders until such time as [one is] prepared to offer a clear and reasonably enforceable scheme of responsibilities to someone else” (Berle, 1932; p. 1365).

            Because the corporate social responsibility concept

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and debate is rooted from the legal community, several academic disciplines have followed the abovementioned argument, with little discussion occurring between and among them (Radin, 1999). More specifically, researchers in the field of business ethics have spent substantial effort in the past two decades in order to come up with a stakeholder theory that would eventually fall under corporate social responsibility, existing as a separate approach to management.

            The issue of corporate social responsibility was no longer discussed after the argument between Berle and Dodd. It was only however, in the 1960s and the 1970s, that the issue resurfaced against the backdrop of the civil rights movement. This is because of the fact that the top agendas of politicians, public interest groups, individual citizens and corporations have been largely influenced by concerns about the environment, product safety, workplace health and safety, racial and sex discrimination, urban congestion, political corruption and technological advance. Aside from this, the increasing influence and power that organizations possess during this period has eventually led to a widespread societal believe that large businesses has a duty towards ensuring the betterment of society (Banner, 1979).

            The power and influence of corporations, actual or perceived, and the impact of their economic, social and political actions on society in general, have resulted in a broad societal expansion that corporations be accountable for their actions. Simply put, there is a growing public sentiment that organizations must be responsible enough to weigh the impact of their decisions on the different parties involved. As a result, they must be able to eliminate, minimize or compensate for the harmful damages that they may inflict on the society. The abovementioned justification is basically derived from a moral position that corporations are expected and should behave like any other citizen in the society that must uphold both ethical and moral responsibilities. This expectation is also justified on the basis that corresponding responsibilities always accompany power. As Dodd (1932) asserts, “power over the lives of others tends to create on the part of those most worthy to exercise it a sense of responsibility.”

Moreover, the increasing power of organizations has resulted in a societal expectation that corporations act proactively and at the same time, carry out a leadership role in order to provide solutions to problems that the world faces (CSR Survey, 2003). This means that given that organizations frequently have more resources than the governments, they should give something back to the society. In the same manner, they are also called for the allocation of part of their resources in order to carry out good works and help the less fortunate sectors of society. of their resources to carrying out good works and helping the less fortunate sectors of society. Overall, this CSR goal is justified as follows: initially, a societal need is identified. For instance, areas such as education, healthcare, low-income housing or the arts may require certain amounts of funding that cannot be generated privately or that government is unable to provide to enable these institutions to continue making goods or services available or even to exist. Second, corporations are identified as capable of filling the gap by providing either funds or infrastructure to address the need. In other words, an appeal to organizations is made because they frequently have the capacity, in accordance with their size and reach, to act as agents of “social progress” (Kahn, 1997).

            As repeatedly mentioned in the previous paragraphs, corporate social responsibility has been required of companies that have both actual or perceived power and influence. It is in relation with this that multinational corporations who are operating in various part o the planet where people fear the effects and consequences of globalization are expected to perform such duties. This, according to Zinkin (2004) is usually brought about by the fact that these corporations are usually seen as enemies rather than friends in foreign countries where they are situated in. Thus, to regain the trust and confidence of the people, the company must be able to make their social responsibility known as this is said to give them legitimacy for performing its actions in a said country (Zinkins, 2004).

Corporate Social Responsibility in Small Medium Enterprises (SMEs)

            Because of the abovementioned, small and medium enterprises or SMEs are often underestimated in corporate social responsibility research and policy making, Morsing and Perrini (2009) note. These two authors, together with Joseph (n.d.) reveal that contrary to the belief that corporate social responsibility initiatives are only common to large and multinational companies, small and medium enterprises or SMEs do engage in CSR. However, it must be carefully noted that their practice significantly differs from that of the larger and multinational companies (Morsing & Perrini, 2009; Joseph, n.d.).

            Many factors influence the development of corporate strategies with regard to their social responsibilities; these often include the following: (1) size; (2) level of internationalization; (2) innovation; (4) commitment to the local community; (5) brand recognition; and lastly, (6) environmental concerns. While the most common form of CSR initiatives are always seen as being championed by multinational companies who were the said pioneers of this field, SMEs were seen to have developed new tools and approaches in order for them to manage important social and environmental issues that are within their scope of strategic and competitive activities, Morsing and Perrini (2009) discuss. Aside from this, the authors also found out that corporate social responsibility plays an important role in ensuring the small and medium enterprises’ businesses for the former creates a competitive advantage for them. Usually, this is brought about by the fact that small and medium enterprises do not consider initiatives pertaining to corporate social responsibility as an ad hoc expense (Morsing & Perrini, 2009). Instead, they incorporate it effectively into their business activities in order for it to positively affect the organization’s performance and competitiveness by focusing on their potential to develop (Morsing & Perrini, 2009). At the same time, they also make use of the said initiatives to reduce their risk profile.

            It was also found out that unlike in large, multinational companies, CSR initiatives in SMEs are often used in order to establish mutual helps, functional to stability and survival in increasingly competitive market arenas (Morsing & Perrini, 2009). Aside from this, it was also seen that corporate social responsibility was used in order to attain the following: (1) enhancement of reputation and (2) to stimulate confidence and loyalty that may eventually result to workforce stability and the development of better relationships with financial institutions, suppliers and other partners (Morsing & Perrini, 2009).

            Finally, CSR initiatives also allow SMEs to ensure the health and safety of their employees, the improvement of their work climate as well as the enhancement of their productivity; and finally, to ensure a source of differentiation and visibility in markets that are characterized as complex and dynamic (Morsing & Perrini, 2009).

Corporate Social Responsibility during times of Recession

During times of economic uncertainty or a crisis such as a recession, many corporations consider abandoning or putting to the side their CSR practices in order to perform the traditional role of businesses: to make a profit. Apparently, the firms must focus on ensuring that they continue to earn despite times of economic uncertainties and prevent their losses. As a result, they are in need to cut down portions of their budget that go to other areas (such as the development of practices and initiatives to corporate social responsibility). This research shall then look into whether the abovementioned does exist in the experience of businesses, most especially the Small and Medium Enterprises or SMEs.

Objectives of the Study

            It is in line with the discussion made from the previous paragraphs that this research aims to accomplish the following:

To provide an in depth analysis of corporate social responsibility (CSR) initiatives in small and medium enterprises (SMEs);
To determine the importance of corporate social responsibility (CSR) to small and medium enterprises (SMEs);
To differentiate initiatives pertaining to corporate social responsibility (CSR) in small and medium enterprises (SMEs) from that of multinational corporations;
To look into which of the three aspects of CSR are the initiatives of SMEs directed to;
To determine the advantages and costs of CSR to SMEs; and finally,
To look into the effects of economic uncertainties or recession to the CSR initiatives of SMEs.

Statement of the Problem

            The dynamics of the relationship between businesses and the society have significantly been altered with the onset of the era of globalization- a period in the history of human kind that has witnessed the increase in the influence of companies, including the small and medium enterprises and has also changed the position and opinion of various governments. The onset of globalization has also caused a paradigm shift in working with and appreciating of the necessity of improving relations with all stakeholders. As a result, all these changes have caused businesses to ensure that they develop a sense of responsibility towards all members of the society.

            However, initiatives and practices of corporate social responsibility are usually associated with large and multinational corporations. Hence, small and medium enterprises or SMEs are usually disregarded by researchers and other scholars investigating on this matter. Nonetheless, as proven by the discussion made above, these enterprises also practice corporate social responsibility but differ from that of the larger multinational corporations.

            Without a doubt, corporate social responsibility initiatives and practices regardless of the size of an organization, firm or corporation has been increasing its popularity. However, these are seen to have been greatly affected by times of economic uncertainties such a recession. This is usually because of the fact that during these times, most companies would prefer to save their companies from losses and bankruptcy, thus suspending their CSR programs.

Research Questions

            In line with the problem stated previously and in concurrence with the objectives of this dissertation, this study aims to answer the following research questions:

How do small and medium enterprises (SMEs) construct programs and initiatives related to corporate social responsibility (CSR)?
How important are CSR initiatives to SMEs?
What are the major differences between the CSR initiatives of SMEs and larger multinational corporations?
Which of the three aspects of CSR are the initiatives of SMEs directed to?
What are the positive and negative effects of CSR initiatives to SMEs?
Does economic uncertainty or recession affect the CSR initiatives of SMEs?

Hypotheses

In accordance with the six research questions previously listed, this research also aims to either prove or disprove the following hypothesis:

Null Hypothesis 1: Small and Medium Enterprises (SMEs) do not focus on relationship building and gaining a competitive advantage in constructing programs and initiatives related to corporate social responsibility (CSR).

Alternative Hypothesis 1: Small and Medium Enterprises (SMEs) focus on relationship building and gaining a competitive advantage in constructing programs and initiatives related to corporate social responsibility (CSR).

Null Hypothesis 2: Corporate Social Responsibility (CSR) initiatives are of no vital importance to Small and Medium Enterprises (SMEs).

Alternative Hypothesis 2: Corporate Social Responsibility (CSR) initiatives are of vital importance to Small and Medium Enterprises (SMEs) as it ensure their competitive advantage and at the same time, lead to the enhancement of their reputation.

Null Hypothesis 3: There are no major differences between CSR initiatives of SMEs and larger, multinational corporations.

Alternative Hypothesis 3: There are major differences between CSR initiatives of SMEs and larger, multinational corporations.

Null Hypothesis 4: The CSR initiatives of SMEs are not directed to all three aspects of corporate social responsibility.

Alternative Hypothesis 4: The CSR initiatives of SMEs are directed to all three aspects of corporate social responsibility.

Null Hypothesis 5: The CSR initiatives do not pose neither positive nor negative effects to SMEs.

Alternative Hypothesis 5: The CSR initiatives pose more positive effects than consequences to SMEs.

Null Hypothesis 6: Economic uncertainty or recession does not affect the CSR initiatives of SMEs.

Alternative Hypothesis 6: Economic uncertainty or recession affects the CSR initiatives of SMEs.

Significance of the Study

            The entire world is in the midst of a global economic meltdown or a recession. As a result, companies all over the world are reducing their budget in order to ensure their survival in times of an economic uncertainty. It is in relation with this that this study is of vital significance as it could give companies a clearer picture on what they can ensure that they could still earn without having to put their corporate social responsibility initiatives aside. In the same manner, this research could also give people a better understanding about the engagement of small and medium enterprises to initiatives regarding corporate social responsibility as this is often neglected by scholars who undertake research in the field. More specifically, it could give readers a better understanding of the difference between the CSR initiatives of SMEs and their multinational counterparts which are most commonly associated with the practice of CSR.

An Overview of Methodology and the Data Analysis Plan

In order to ensure the success of this research in meeting its objectives, answering the research questions and proving or disproving the hypotheses, this dissertation shall intertwine both qualitative and quantitative approaches to research. For the qualitative aspect, a literature review was seen to be of vital importance in order to examine previous articles, books and journals written with regard to the topic at hand. This in depth analysis could then aid the researcher in looking closely into the theoretical background of corporate social responsibility. In the same manner, this review of related literature could also help the researcher in determining the unsubstantial aspects of previous studies connected with the topic at hand (i.e. the inability to analyze CSR in SMEs). Finally, the qualitative approach to research would also be the basis by which the researcher could construct its data collection tool as well as validate the results coming from the use of the questionnaire method.

            The quantitative method, on the other hand, entails the use of the questionnaire method in order to obtain the perceptions of one hundred and fifty respondents who are members of small and medium enterprises (SMEs) with regard to the topic of dissertation. The data collection tool, the questionnaire, is structured in such a way that it covers four main themes, these are the following: (1) reasons behind why SMEs undertake initiatives regarding corporate social responsibility; (2) the CSR initiatives of SMEs; (3) the CSR initiatives of the respondents’ organizations; and finally, (4) the effects of recession on CSR. Aside from this, the questions contained in the data collection tool are structured using a Likert-Style. Hence, in measuring the apparentness of the items in the experience of SMEs, the following scale was used: 5- Very Apparent, 4- Apparent, 3- Neutral, 2- Weakly Experienced and last, 1- Not Experienced at All. In the same manner, the following scale was used in order to measure the agreement of respondents regarding other factors contained in the questionnaire: 5- Strongly Agree, 4- Agree, 3- Neutral, 2- Disagree, and last, 1- Strongly Disagree.

            In order to analyze the data obtained by the researcher from the use of the survey questionnaire, a correlational research was undertaken. This correlational approach enabled the researcher to identify the following: (1) the reasons why SMEs continue to pursue CSR even during recession; and lastly, (2) the derailers of the CSR initiatives of the SMEs.

Scope and Limitations

            This study covers all initiatives and programs falling under the umbrella of corporate social responsibility (CSR). It is however, limited only to small and medium enterprises (SMEs) in the United States of America.

Definition of Terms

Corporate Social Responsibility (CSR) – the management of business processes in order to meet the economic, legal, ethical and discretionary expectations that society puts upon enterprises (Carroll, 1979).

Small and Medium Enterprises (SMEs)- firms that has less than two hundred and fifty employees (Joseph, n.d.).

Recession- A  significant decline in [the] economic activity spread across the country, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales (National Bureau of Economic Research, 2008).

Organization of the Study

This study is organized into six chapters, namely: (1) Introduction, (2) Literature Review, (3) Methodology, (4) Results; (5) Discussions; and (6) Summary, Conclusions and Recommendations.

            The first chapter presented the background to the study, the objectives of the research, the statement of the problem, the research questions, the hypotheses that the study shall either prove or disprove, the significance of the study, the different methods to be used, scope and limitations, the definition of terms, and finally, the organization of the study.

            Chapter two presents the review of existing literature written with regard to the topic at hand. More specifically, it discusses the following subtopics: (1) CSR Definitions and History; (2) CSR and SMEs; (3) CSR and Recession; (4) CSR Measurement and Standards; and lastly, (5) CSR Benefits for Companies.

            Chapter three, on the other hand, presents the different methods that the research shall use in the gathering of data for this study. Moreover, it would also present the different steps undertaken by the researcher in order to ensure the reliability and validity of the methods used. It also presents the detailed process of how the researcher obtained the opinions of the respondents.

            Chapter four then presents the results obtained by the researcher from the different methods used. It contains tables and charts that graphically illustrate the responses of the one hundred and fifty participants (150) who responded to the different survey items.

            Chapter five discusses the results of the study, comparing it with the findings of the literature review. This chapter basically contains the discussion that led to the discovery of the answers to the research questions.

            Finally, the sixth chapter provides the summary to the study, the conclusions and lastly, the recommendations that the researcher deem necessary for future researchers as well as to SMEs who wish to undertake CSR initiatives even during economic uncertainties.

CHAPTER TWO: LITERATURE REVIEW

CSR Definitions and History

            Globalization, an increase in the influence of companies including small and medium enterprises, a change in the position and opinion of various governments, and a paradigm shift in working with and appreciating the importance of building solid relations with stakeholders—all of these factors have contributed in changing the dynamics of the relationship between business and society. Businesses have always been mindful of their responsibilities towards society. The concept of companies sharing their resources and influence with other groups has been repeatedly spoken about for centuries (Bowen, 1953).

            Companies are now more aware and mindful of their responsibilities, roles, and rights towards society. Companies implement activities, practices, and guidelines in order to fulfill their legal, ethical, social, and environmental roles and responsibilities to stakeholders, which include shareholders, employees, customers, suppliers, the environment and society in general. These actions have been given many terms—corporate responsibility (CR), corporate social and environmental responsibility (CSER), corporate citizenship, corporate accountability and socially responsible business (SRB) (Raynard & Forstater, 2002). However the most famous terminology would have to be Corporate Social Responsibility (CSR).

            Academic literature about CSR primarily began to be written in the 20th century. The term Corporate Social Responsibility and modern view on CSR are largely attributed to Howard Bowen, who is considered by many scholars, especially Carroll, as the father of CSR. Bowen conceived CSR as an integral part of a bigger vision of a better American society with a robust and socially responsible business sector. Before Bowen wrote his book in 1953, CSR was not a generally accepted practice among businesses in the US.

            Carroll (1991) writes that in the early years, businesses believed that their only obligation was to their shareholders and their only function was the quest of financial improvement in order to provide the highest financial return to their shareholders. However, the errors of this way of thinking soon became apparent. For one thing, businesses still had to work within laws set down by governments. In the 1960s, groups advocating social issues pushed for a more extensive concept of responsibilities for businesses. In the 1970s, various organizations in charge of the social issues pushed by the activist groups were created in the U.S. Some of these organizations were the Environmental Protection Agency (EPA), Equal Employment Opportunity Commission (EEOC), Occupational Safety and Health Administration (OSHA), and Consumer Product Safety Commission (CPSC). These governmental organizations allowed the establishment of national public policy that now acknowledges the legality of environmental issues. Because of the new policies, businesses were forced to re-examine their own strategies and to learn how to develop a balance between making a profit and responding to the legal and ethical responsibilities placed upon them by a widening range of stakeholders.

            For Bowen (1953), businesses become prominent in society because society needs the products and services provided by these companies. This grants businesses vital decision-making power in the way they affect the lives of many people. Therefore, for a balanced business-society relationship to continue, Bowen (1953) asks what responsibilities to society can businessmen within reason be expected to assume. The answer to this question, Bowen states, is corporate social responsibility. He defines CSR as a social obligation that necessitates businessmen to engage in policies, to formulate decisions, or to implement actions that are considered desirable when connected with the objectives and values of society. He took a broad attitude towards defining what business responsibilities include—responsiveness, stewardship, social audit, corporate citizenship and rudimentary stakeholder theory.

            Bowen’s concept of a mutual relationship between business and society is echoed by Porter and Kramer (2006) who point out that the value of CSR lies in the shared value companies share with societies in which they exist. Businesses operate in social contexts and societies need the products and services that businesses provide, thus there is a mutual need for each entity. CSR, therefore, makes it possible to promote a collaborative relationship between business and society.

            Many have tried to create a definition of corporate social responsibility that will encompass its functions and the range of responsibilities it entails. One of the most comprehensive has been given out by the World Business Council for Sustainable Development (2007). This organization defines CSR as the long-lasting commitment that businesses create that compels them to behave in an ethical manner and to add to the development of the economy while helping improve the quality of life of their employees and their families in addition to the lives of those in the local communities and society in general. This definition is specific enough to imply the holistic and philanthropic maxim of CSR. Yet, this definition is also broad enough to include activities or programs that companies engage in that do not directly yield income but bring visible and long-term benefits for companies and the recipients of the programs and activities such as youth and partner communities. With this definition programs such as scholarships and funds for research, advocacy programs for the environment, and livelihood programs can be considered as CSR.

            One of the earliest authors on CSR, Carroll (1979) was first to propose the four categories of ordered layers of CSR—economic, legal, ethical, and discretionary—when he wrote that the social responsibility of businesses includes the economic, legal, ethical, and discretionary expectations that society puts upon enterprises.

            Aupperle, Carroll, and Hatfield (1985) further defined these categories into:

·         economic responsibilities showcase the principle that businesses have the primary responsibility to be generate products and profits and to answer the desires of their customers;

·         legal responsibilities highlight the issue that economic responsibilities must be performed within the restriction of rules and regulations as mandated by the laws of the land;

·         ethical responsibilities takes into consideration the codes, norms, and values that are not written into laws but are still followed implicitly by members of society; these responsibilities rise above the complexities of written laws and encompass activities that are vigorously carried out without any clear and defined statements made about them;

·         discretionary or philanthropic responsibilities reflect the voluntary nature of actions that are not easy to establish and assess, but are still expected by society.

            These categories are still widely cited and frequently reproduced in top management and CSR journals by many researchers and authors on CSR up to this day. The reason for its lasting acknowledgement may be because of the simplicity of the model. Carroll’s (1979) categories are easy to understand and appeal to logic. The author himself writes that these categories are merely guidelines or reminders that the motives or actions of businesses can be generally classified into any of the categories he presented. The arrangement and relative influence of each category was intended to imply the basic role each had in the progression of significance. When it first came out, Carroll’s model showed a point of view that was both retrospective and developmental at the same time. It was based on the assertion that historically businesses first emphasized only the economic aspects of their trade. The legal aspect came next, and the ethical and discretionary were only emphasized in recent years.

            Juholin (2004) suggests that the reason why companies practice corporate social responsibility (CSR) is notably because of long-term profits that CSR gives to companies. Other reasons may also include the commitment of top management to the moral and ethical standards promoted by CSR, competitiveness of the market today, and the visionary skills of many leaders of companies, which allows them to anticipate the various needs of the future.

            Porter and Kramer (2006) agree with the long-term profits provided by CSR. The authors point out that companies should practice CSR and integrate this in their core strategic plans to ensure long-term prosperity. This is because socially responsible activities can reflect back goodwill for companies. On the other hand, activities that harm the environment or result in disadvantaging stakeholders can only bring about bad karma in the form of bad financial operation, low brand positioning, and, worse, a rift in the relationship between companies and their consumers and suppliers and costly litigations. Porter and Kramer (2006) write that corporations are not obligated to solve the problems of the world. They do not have resources to do this. But, a company that is managed well can make a much better impact than any other organization or charity group when they do something good for society.

            However, CSR does not merely imply profitability for companies. CSR entail results that go beyond the costs or constraint of altruistic actions. CSR can be a source of market opportunity, improvement, and an edge over the competition (Porter & Kramer, 2006). It also does not mean engaging in activities for the sake of doing what is socially required and expected of these companies based on legal and social laws, especially laws on environmental issues. CSR implies taking action to go beyond these laws in order to minimize any harm towards and maximize benefits for all stakeholders in order to fulfill what society desires (Raynard & Forstater, 2002).

            Warhurst (2001) identifies four major elements of CSR—product use, business practice, and distribution of profits. Product use entails the positive involvement of products from businesses that assist in the promotion of welfare and better class of life for members of society. Business practice entails business governance that observes the rules and regulations and that presents a high level of thrust towards welfare of the natural environment and equity for all generations and species. Distribution of profits entails equal distribution of profits across a varied range of sectors of society, with emphasis on local communities.

            Bowen (1953) also notes that CSR should not be seen as a primary solution to the many problems that society carries. CSR can only do so much, and it should only be seen by companies and society as a set of guidelines for businesses in the way they perform and carry on their operations within the context of a larger society and the many issues that abound within the social milieu that they operate in.

            A key concept in CSR is the idea of stakeholders. Stakeholders are all groups or individuals who have an impact on or are affected by the attainment of any organization’s goals (Freeman, 1984). It can be said that stakeholders are any entity who have a big “stake” on what businesses do. The concept of stakeholders therefore goes beyond companies’ shareholders, employees, and clients or customers. It includes communities, public interest groups, social activist groups, environmental groups, and the media which, according to Freeman, author of the Stakeholder Theory, businesses are accountable to.

            Other researchers (Marcus, 1996; Munilla & Miles, 2005) list down specific stakeholders as: owners; customers; employees; local, regional and national communities; competitors; suppliers; social activists; public at large; creditors; non-government organizations (NGOs); and even the natural environment, which, although it cannot state its opinions and make its messages heard, has become one of the major stakeholders today because of the many laws promulgated in order to sustainably care for the Earth .

            Hopkins (2003) writes that CSR primarily deals with making sure that businesses treat stakeholders in an ethical or in a responsible way. Ethical or responsible implies treating stakeholders in a way or mode that is considered suitable by members of any civilized society. The social context of this definition includes economic responsibility. Stakeholders can be both within businesses and outside it. This signifies the natural environment as a stakeholder. In a broader sense, the objective of social responsibility is to establish better and higher standards of living while at the same time maintaining the capability of businesses to make a profit. These two components of the objective of social responsibility are both done for the stakeholders within and outside the companies.

            According to Freeman (1984) for transactions with stakeholders to be successful, businesses must accept the authority of various stakeholders and the procedures that these stakeholders make use of. In this way stakeholders will have the freedom to communicate their concerns. Furthermore, to manage and develop a strong relationship with stakeholders, businesses must understand the concerns of stakeholders in order to develop programs that will address these concerns. Stakeholders have various ways at their disposal in order to make sure that businesses accomplish society’s expectations. Some may opt to conduct rallies, some may opt for more peaceful negotiations, some may engage in joint activities such as seminars or tree-planting sessions or other awareness raising activities, and some may use the media to further disseminate their issues. For example, environmental group Greenpeace printed out pamphlets and wrote articles against food made of genetically modified organisms, which led to some food manufacturing corporations to either stop production of certain products or to develop new, healthier items.

            Historically, Freeman (1984) points out that the term “stakeholder” first appeared in management literature in a 1963 international memorandum given out by the Stanford Research Institute. The term then was strictly yet broadly defined as the peoples or groups who give their support to companies and without whom businesses would stop to surviving. The main idea in this initial context already shows a measure of the importance of stakeholders. In a way, this definition states that without the support of stakeholders, businesses would not be able to survive. Of course, the limitation of this definition lies in the fact that stakeholders here may mean only the groups that are influential for companies such as the shareholders or government groups or investors.

            Each business activity may be liable to a different group of stakeholders. This is because each individual in society is interested in and promotes a varied and widely different range of concerns (Freeman, 1984). Some are more interested in environmental issues, while others advocate for employment benefits, and still others fight for education. One way to determine which stakeholder is relevant to which particular aspect of business is through the generation of generic stakeholder map, which is a diagram of the various groups relevant to the whole organization broken down into levels and subdivisions in order to divide big groups into small groups based on specific interests. Some experts, however, think that this mapping procedure does not encapsulate the complex linkages between businesses and the various individuals and groups in society.

            An approach of corporate social responsibility that centers on stakeholders puts an emphasis on strategic and effective management of relationships and promotion of what Freeman and McVea (2001) write as shared interests. The stakeholders’ model also puts some emphasis on persuading businesses to rebuild or even restore relationships with groups or organizations they have been at odds with or have had a rift in relationship with. A good stakeholder management program also consists of actions such as open communication, negotiation, management, and motivation. The end result of all of these actions leads to the establishment of an attitude of partnering, of mutual association and interdependence between businesses and stakeholders. All of these activities are held together by the values and ethical standards that businesses stand for.

            Freeman and McVea (2001) further emphasize that a good stakeholder management promotes businesses’ own company values. CSR is not merely catering to the stakeholders’ interests and abandoning all other aspects of businesses. Rather it entails in-depth deliberations while taking into account all factors of social expectations. A well-developed stakeholder management program also allows businesses to create approaches that can serve stakeholders even in the long run. Although some individuals may not be happy with the short-term decisions and may feel that their causes need to be looked into more deeply, a good stakeholders’ management program takes all things into considerations so that all stakeholders, not just a chosen few, continue to be firm supporters of businesses.

            In addition to understanding stakeholders’ concerns, businesses must also see the other components of CSR in order to determine the entire range of responsibilities that stakeholders expect businesses to embrace. When discussing and identifying these components of CSR, scholars and authors have been turning to the CSR pyramid presented by Carroll (1991). The CSR pyramid is arranged in a way that follows the levels of Carroll’s (1979) earlier work of the four categories of CSR. The arrangement is in accordance with the degrees of social expectations that have been connected with each category. It has been used to assess businesses performance in terms of quantity, quality, effectiveness, and efficiency in their implementation of CSR initiatives.

The Pyramid of Corporate Social Responsibility

        Be a good             Philanthropic Responsibility            Contribute resources to the

        corporate citizen                                                          community; Improve quality of life

      Be ethical                    Ethical Responsibility                 Obligation to do what is right,                                                                                                         just, and fair; Avoid harm

  Obey the law                     Legal Responsibility                Law is society’s codification                                                                                                                                  of right and wrong;                                                                                                              Play by the rules of the game

Be profitable                    Economic Responsibility         The foundation on which all others rest

Pyramid of Corporate Social Responsibility (Carroll, 1991, p. 39)

            Obligations or responsibilities included in the pyramid have always exited in the business world. But the importance of philanthropic and ethical responsibilities was only given attention in recent years. Through this pyramid, Carroll (1991) hoped to show that a good CSR program can be broken down into well-defined components that make up a whole total package. It can be seen as a framework for comprehending companies’ ever-evolving CSR activities. In addition, looking at each component can help leaders to distinguish and understand the various obligations of businesses that are constantly in a conflict with one another but which are mutually exclusive of each other. Based on the expected activities for each level, it can be said that economic responsibilities seem to be always in tension with the other responsibilities.

            Carroll (1991) also included the concept of stakeholders in this model pointing out that taking into account the perspective of stakeholders would allow businesses to recognize the tension between all levels of the pyramid as realities of any organization. This perspective can also allow businesses to see the pyramid as a united basis or framework of how firms will implement their decisions, actions, and programs.

            As can be seen, economic profit forms the foundation of the whole pyramid. This shows the Carroll (1991) acknowledges the basic fact that businesses were created historically as economic entities that are primarily concerned with making money and creating profit. Without this component, all other responsibilities become moot matters. Carroll states that the idea he was proposing was that CSR, to be acknowledged as a legitimate action for businesses, had to deal with the whole range of responsibilities these businesses has to answer for to society. Of course this would have to include the most basic responsibility—economic. The next level shows that businesses are obligated to follow the rules of law—various national and international laws—that society has laid down in order to brand businesses are good corporate citizens. By performing their obligations in this level, businesses are already partially fulfilling their social contract with society. Legal responsibilities point to the rules codified into law while ethical responsibilities, the next level of the CSR pyramid, take into account the standards of moral conduct and norms that society expects businesses to follow even though these have not been codified into law. The last level, philanthropic responsibilities, involves voluntarily sharing resources to and helping improve the quality of lives of various stakeholders through charitable activities.

            Many companies feel that by contributing financial aid to communities, they are already performing their roles are good corporate citizens. However, by separating ethical and philanthropic responsibilities, Carroll (1991) was able to show that philanthropic programs are just a part of the bigger picture. CSR is not limited to donations, but to the values that businesses advocate and stand by, and to the ethical standards that companies adhere to and strategically implement in their core programs. In a sense, charitable projects can be said to be just the tip of a much larger and more important base of social responsibilities.

CSR and SMEs

            By its terminology, CSR initiatives are more often connected with large multinational companies. However, CSR is not about the size of the enterprise. Lepoutre and Heene (2006) write that CSR can provide some useful aid to any type of business, no matter the size or industry they may come from.

            However, Shetty, Ramanathan and Jayabalan (2008) point out that SMEs do not put much emphasis and are least concerned about CSR, especially initiatives that pertain to environmental issues. This is because conducting CSR is deemed as part of the urgent worries of these enterprises nor would conducting CSR add some income to SMEs that are under immense strain and pressure to perform in a highly competitive market despite limited manpower capability and low levels of profits.

            Lepoutre and Heene (2006) add that other obstacles that may hinder SMEs from developing CSR initiatives within their organizations can be categorized under lack of time; not enough information about stakeholders, issues, and various CSR programs being implemented; shortage of funds for CSR; not enough authority and influence during negotiations; and lack of motivating factors that will necessitate the development of CSR programs.

            Murillo and Lozano (2006) emphasize the lack of information or knowledge of SMEs about CSR. In an analysis of four case studies on Catalan companies that stand out for their CSR programs, the authors discovered that it was very difficult for SMEs to understand the concept of CSR. The understanding of CSR of these SMEs could not go beyond the details of the specific practices implemented by the companies. They argue that the values carried by owner or the founding director play an important role on whether or not CSR programs will be developed by firms.

            However, social responsibilities are still as much a part of small and medium enterprises (SMEs). After all, SMEs have an important position in the financial sector of all countries. It can even be said that SMEs are the backbone of many economies around the world. These enterprises provide numerous jobs in developed and developing countries (Shetty, Ramanathan, & Jayabalan, 2008), allow strong competition to thrive in the market, and encourage innovation, diversification, and flexibility in business environments, and provide excellent working environment for employees (Armstrong & Taylor, 2000). SMEs also create a pool of entrepreneurs who are prepared to take risks in order to achieve new products, services, and business tactics. Based on these arguments, SMEs can be seen as an important component in the business world. These enterprises allow reform to take place in order to remove outmoded business practices and promote dynamism, factors that can only bring positive change into the business world. Armstrong and Taylor (2000) point out that research and government policies should focus more on the growth of SMEs instead of firms that have become too large and are headed towards more towards stagnation than further expansion.

            During a forum on fostering CSR among SMEs, the European Commission (2004) observed that a lot of SMEs show a clear commitment to their responsibilities towards the natural environment, society, and communities. However, a lot of the initiatives performed by SMEs may not be considered “CSR” by corporations doing them. SMEs that have gotten successful consistently supply first-rate products and services. These businesses offer jobs to many people. They allow employees to become quite engaged in operations and utilize the enthusiasm, motivation, and capabilities of their employees in order to achieve their long-term goals and attain success in the process. They acknowledge the importance of conducting discussions and encouraging open communication with employees that allow employees to actively participate in all programs and activities. SMEs are always mindful of issues on human rights, health, and safety in the workplaces. They support education and training programs in order to help employees gain new skills, and to attain a balance between their personal lives and their work. They implement procedures and policies that allow for fair recruitment and promotions regardless of the gender, race, physical traits, age, or sexual orientation of employees. A lot of SMEs work towards attaining sustainable operations while at the same time maintaining a conscious effort to make use of natural resources and to get supplies from sustainable sources, and all the while finding new ways to upgrade to more efficient technologies for their energy and water needs. They also take into consideration the amount of waste materials and excess packaging that they might produce. A lot of SMEs also give back to their local communities through activities that provide concrete help such as allowing employees to volunteer for local schools, backing up activities organized by local communities, and assisting in environmental activities such as clean-up drives.

            These activities may seem small projects when compared to large-scale philanthropic programs of big corporations. However, the European Commission (2004) points out that these CSR programs implemented by small and medium enterprises still make a difference and still answer the expectations of society towards socially responsible actions.

            Jenkins (2006) writes that there is a significantly growing number of SMEs that engage in CSR initiatives. Studying twenty four companies the author deemed as good examples of CSR in SMEs, findings showed that SMEs prefer to learn CSR best practices through networking. Capability and motivation to engage in CSR can generally be considered in connection with social approval and recognition from immediate peers. Also, a strong leadership from managers or owners who champion the responsibilities and values promoted by CSR is needed in order to implement CSR within these small and medium businesses.

            Jenkins (2006) also points out that many of the enterprises make use of the Stakeholder’s Theory of Freeman (1984) as the guidelines for their companies’ objective of creating CSR initiatives that give long-term results while emphasizing stakeholders’ legal, ethical, social and environmental pints of view.

            According to Freeman and McVea (2001) studies have indicated that companies that integrate CSR into their core strategies perform better than companies that do not practice CSR. Data from studies have demonstrated that having a bad social performance can hurt companies financially.

            This is especially true in developing countries where SMEs play a crucial role in helping pave the way out of poverty. However, Raynard and Forstater (2002) caution SMEs to implement CSR programs that support rather than undermine the growth of these small and medium businesses. A way to determine whether CSR is undermining or supporting business goals is to see if the demands of these so-called CSR initiatives are actually protecting the interests of only a few people, are demoralizing the culture of the local communities, or are steeped in bureaucratic processes. All of these could lead to a total effect destabilizing livelihoods. CSR, by its basic tenet of creating a better quality of life especially for all stakeholders of businesses, should never be a tool for pollution, exploitation, and other damaging actions that some companies may profit from. On the other hand, implementing a well-researched and well-developed CSR program can help greatly towards improvements in social, environmental, and the overall quality and management of society.

            Mankelow and Quazi (2007) conducted an exploratory study on the motivational factors that compel SMEs to engage in CSR initiatives. Four underlying motivational dimensions were discovered and grouped into (Mankelow & Quazi, 2007, p. 2370)  : “Caring for the customers and community”, “Profit through caring”, “Community orientation”, and “The business of business is business”. These findings reflected that diverse nature of people and the varied nature of SMEs. It showed the wide range of motivations that prompt SMEs to engage in CSR initiatives. The advocacy and belief of owners are also important in determining which motivation will prompt businesses. Owners that acknowledge their role as leaders and as members of the community might be more motivated to engage in CSR for the benefit of internal and external stakeholders. Owners like these may allow their employees to take on flexible working hours in exchange for overtime pay and may sponsor local sports activities, donate goods and services, or allow employees to volunteer their hours in order to give back to local communities. This allows the SME sector to make a significant contribution towards communities. As can be gleaned from the findings, the concept of “caring” is important in connection with CSR since it can be found in three of the four motivations. It is only in the fourth motivational category that profitability is discussed.

            Mankelow and Quazi (2007) state that their study’s findings corroborate the results of s previous study done by Quazi and O’Brien (2000). They show that SME owners can be prompted to engage in CSR initiatives by being motivated by the possibility of gaining profit because of CSR activities while showing that they care for the welfare of their customers and the communities that surround their businesses.

CSR and Recession

            However, during times of economic uncertainty and recession, many companies have thought of throwing away or at least putting to the side CSR practices and programs in favor of focusing on the essential role of businesses which is to make a profit. This is especially true with the recession now plaguing the whole world. The first indications of the economic downturn began in January of 2008 when the New York Stock Exchange began to show a sharp drop in profits in major markets all over the world. This was followed by a series of collapses and a number of American and European banks declaring massive losses. The current financial state has become so bad that economists, businesses, and world leaders are already comparing it to the Great Depression of 1929-1930. Because of this state, even partners of various businesses begin to question whether money and time should be spent on CSR programs when other more important and more time-sensitive programs seem more urgent and more in need of prioritization (Olson, 2008).

            Sen and Bhattacharya (2001) write that many companies CSR initiatives may result in financial losses because of the additional costs of giving extensively to charitable causes stated in the CSR plans. These companies view these costs as resources that could be better used towards the improvement of the quality of products that, in turn, could lead to better customer satisfaction.

            Friedman (1970), one of the most outspoken proponent against CSR, once wrote that social matters are not the concern of businesses and the concept of CSR is at the most basic sense a seditious set of principles in civilized society. These problems should be settled by the state itself. For Friedman, businesses exist with just one and simply one responsibility towards society, and that is to make use of the resources within its reach in order to perform its fundamental function of making and increasing its profits. As long as businesses stay within the regulation stated by society, that is these firms compete openly and freely without resorting to any forms of dishonesty or scams, then they are performing already their one responsibility towards society.  In other words, for Friedman, the interests of the shareholders should be more important and should be placed above the interests of the stakeholders.

            Looking closely at this argument, one can see that even Friedman acknowledged that businesses do still have a responsibility towards society and, in fact, that he was already saying that businesses should practice three of the four fundamental programs of CSR written by Carroll (1991)—economic, legal, and ethical. The only aspect left out was philanthropic, which seems to be, for Friedman, an area reserved for social organizations or foundations, not companies bent on making profits. Some studies have deliberated that perhaps Friedman wanted to get rid of the dilemma the profit-oriented companies may face when they are forced to conduct non-profit-oriented projects in order to satisfy their stakeholders’ interests. After all, in the highly competitive economy today, especially during times of economic uncertainties, companies need to maximize everything in order to get the most of their resources. It may be seen that doing philanthropic activities may not be advantageous or viable for companies that are already cutting down costs on operations in order to survive.

            Aupperle, Carroll, and Hatfield (1985) discovered that there is no significant relation between CSR programs and a firm’s risk-adjusted financial performance. According to their study, socially responsible businesses actually develop a competitive disadvantage because of their CSR programs. They argue that the costs incurred by CSR programs fall directly upon the bottom line, which cuts down earnings. They further argue that these costs could have been avoided by not engaging in too much CSR initiatives, or the expenditures could have been borne by other individuals or the government.

            Reinhardt, Stavins and Vietor (2008) ask the questions: are enterprises given added moral or social responsibilities that force them to go beyond just total compliance of environmental policies and compelling them towards committing their resources in order to protect the environment? In what way should business leaders view the idea of companies forfeiting their profits just to meet the expectations of society? What then should businesses do about the fiduciary obligations they have towards their shareholders? Can they still fulfill their responsibilities towards their shareholders and maintain a sustainable enterprise? Or will the influences of the highly competitive market cause all of their initiatives and the impact of these activities null or at best temporary? Do companies often or once in a while actually behave like good corporate citizens and engage in CSR activities—voluntarily giving up their earnings in order to help protect the environment? Should businesses engage in such activities? Can it be said that doing CSR is an efficient way to utilize social resources?

            Reinhardt, Stavins and Vietor (2008) write that firms do not have to engage in CSR when faced with intense pressure from the competition on the market. However, they identify six conditions that can make it economically sustainable for firms to produce their usual goods and services while helping stakeholders. These conditions are: formulation of laws that impose rigid guidelines that will require all firms competing in the same market to engage in the same CSR actions in order to make a level playing field for all businesses; making sure that the CSR initiatives will not cost businesses so much, for example restaurants donating leftover food to homeless shelters will not have to spend additional expenditure while helping out some members of the community; should businesses be forced to spend money, the expense should be minimal and should have a return of investment that is greater than the original expense like the installation of energy-saving technologies that can result in savings for businesses in the long run which may compensate for the initial investment; CSR should be able to generate an increase in revenue such as the use of organic materials for clothing manufacturers, which incorporate issues of environmental sustainability, and the generation of good will, improvement of reputation, and increase sales; businesses could choose to go beyond the regular environmental, health, and safety regulations to enhance their standing and importance for negotiations that they are currently engaged in or for future dialogues they wish to engage in order to turn aside or manipulate future policies or prevent the imposition of existing regulations; and, finally, CSR could be used in order to have an influence on future regulations, which could lead to an advantage over competitive firms that have shown less socially responsible actions.

            Friedman (1970) further points out that CSR programs obtain finances and resources that should otherwise be given to owners, employees, and customers. Furthermore, by putting the money and resources in order to satisfy the desire of only a few organizations or the minority, executives fail to serve the interests of the people they are principally accountable to. In a way, Friedman argues, executives can be seen as forcing their businesses to pay a tax and squander the earnings for “social” purposes. This, for Friedman, is an insufferable practice, especially because the executive has neither the capabilities nor the authority to do so.

            However, trends have shown that although Friedman might have been coming from a purely economist point of view, there are still many businessmen who acknowledge that sharing even just a small part of their profits for philanthropic activities still comes under shrewd business practices. Franck Riboud, CEO at Danone, stated that it is essential for businesses to go beyond the just talking about issues of sustainability. People have to concentrate on putting into practice what they say, and carrying out an approach that sensible or practical and clear-cut. (Danone, 2003). In other words, for businesses to do well in the 21st century arena where social groups and various other stakeholders can truly make their cases heard and acted upon, creating CSR programs that are well-developed and balanced correctly is an essential factor towards achieving success.

            Michel (2009) writes that according to a recent survey done by Booz & Co., a global management consulting firm, among 828 senior managers many are still of the opinion that the recession is not stopping but is just delaying some CSR programs from being implemented as businesses choose carefully what their companies will be spending on. However, this may just be a temporary delay because signs still show that companies, especially those in the manufacturing sector, are still willing to continue their CSR programs. Specific findings of the survey showed that 40 percent of the respondents believed that CSR initiatives, especially those lean towards sustainable development or green environment, may slow down due to the economic downturn. The sectors following this plan are mostly businesses dealing with transportation and energy sectors.

            However, on a more positive note, Michel (2009) has discovered that in some companies, especially those whose brands rely on social issues such as sustainable development, these delays are not happening. CSR programs are in fact given more priority for companies carrying these “green” brands. This is in answer to consumers’ demand for environmental-friendly products and consumers’ high regard for the use of natural resources. Also, companies that implements a procedure or uses as their principal driver plant safety regulations are seen are proceeding with CSR programs despite tight budgets by developing very low-cost conservation measures or low-cost improvement projects like including an additional level of monitoring for operations or investing in training employees more than in equipment or control devices that the enterprises have at the moment.

            Based on its history, CSR flourished during economic stability and growth. However, Raynard and Forstater (2002) firmly advice that CSR should still be integrated into the central strategies of businesses in order for these companies to stay alive and endure global recession or economic insecurity. Based on various models showing the ups and downs of economic cycles, a downward trend, even economic crises or recessions, in finances at some point in history is inevitable. Therefore, if CSR programs are fully integrated into the core strategies and plans of businesses then these programs will most likely remain strong despite any bad financial consequences economic uncertainties may bring into companies. However, if CSR programs are merely add-ons for philanthropic purposes then it is likely that these programs will be cut off from businesses’ budgets during financial crises. Eventually, the success of CSR will be seen after many years. This success will depend on whether CSR will be placed within the central part of the strategies and development plans of businesses. If CSR attains this position then conducting such initiatives will be seen by businesses as part of the ‘business as usual’ scheme of things, regardless of whether there is an economic crisis or not. (Raynard and Forstater, 2002).

            Raynard and Forstater (2002) point to Danone, a French food company, that managed to survive despite an economic crisis by using CSR. When the company had to implement some drastic downsizing by closing down some manufacturing plants, criticisms rained down on it. However, it still implemented some well-developed programs that tackled social issues in order to alleviate the negative results of its decisions. The following year, stakeholders voted Danone as the most socially responsible employer. This showed that long-term CSR programs can help companies not only outlive financial crises, but also regain their reputations as good corporate citizens.

            Olson (2008) writes that managing CSR during economic downturns in a strategic manner necessitates bold and aggressive approaches that some companies may not be willing to do. Culling from experiences of the members of the Business for Social Responsibility group, Olson lists down some lessons and techniques that businesses may implement in order to continue CSR programs while riding out the recession—integrating CSR into core objectives, “think R&D”, highlight the benefits of CSR through clear and compelling measurements, and build partnerships.

            Olson’s (2008) first advice has already been written about by other authors (Porter & Kramer, 2006; Freeman & McVea, 2001; Raynard & Forstater, 2002). Some components of CSR programs can actually be implemented to support budget cuts and cost-control plans, can help with challenges such as consequences of downsizing, and, if the programs are broad enough, can include activities that result in visible and substantial success for businesses. Olson cites 3M and Wal-Mart as businesses that managed to develop CSR-related efforts to cut cost. CSR programs can also be compared to research and development (R&D) programs, which is all about actions that are closely controlled and geared towards capability-building, which can continue and intensify over a period of time the worth of the primary assets of companies, that is their goods and services, employees, and the trust placed in their brand name. The idea here is that CSR is critical to the long-term competitiveness of businesses. US-based GE, Novartis of Switzerland, and Toyota of Japan managed to find ways to increase R&D and new CSR schemes even during financially hard times.

            Luo and Bhattacharya (2006) point out that a closer examination of the CSR portfolios of some of top-rated companies in terms of CSR like United Parcel Service, Alcoa, Verizon Communications show that they have integrated their CSR plans closely into their business strategies. This can be seen in the investment these companies have put into activities such as training for workers, safety measure for employees, and instilling pride among staff through volunteer programs that allow employees to become visible contributors to local communities. Viewed from a logical perspective, satisfied employees lead to good customer service which, in turn, can influence customer satisfaction and the market value of businesses. Some CSR initiatives also create volunteer programs for employees, which increases visibility of companies in local communities and assists in capturing the favorable attention of consumers—both loyal buyers and potential customers.

            Zappala (2004) adds that allowing employees to volunteer can create a collective feeling of purpose among employees. Volunteering can also increase loyalty among employees because they realize and understand that their own personal values are aligned with that of the companies they work for. These results can help promote teamwork among all employee volunteers. It can also help improve the skills of employees, especially skills necessary for leadership and community service.

            It has been proven time and again that businesses can benefit from CSR programs. Olson’s (2008) writes that it is important therefore to have list of these benefits and to show a measure of the tangible and intangible benefits that CSR programs can give. CSR programs can also be an avenue to build partnerships with organizations since it is “radically cross-functional. This is where SMEs have an advantage since large corporations usually have a silo structure wherein departments virtually have little or no interaction with each other or with other organizations outside of their usual dealings. By virtue of the tight structure and kin-like environment of SMEs, these types of businesses can easily build new partnerships with organizations that share the values that they advocate and thus multiply the impact of their shared CSR programs.

            The question whether companies can afford to maintain commitment towards CSR efforts should never even be considered because, as Olson (2008) points out, companies cannot afford not to keep their commitment strong. This is because it is during times of economic uncertainty that the values companies adhere to truly shine. It is when companies are going through some rough times can stakeholders see if companies still adhere to their social responsibility of fair employment, environmental protection, charity and the other social expectations these companies pledged to advocate during times of stable economy. Thus, these hard times are when stakeholders truly see and decide whether businesses are worthy of their loyalty and support.

            The International Labor Organization (2009) echoes Olson’s (2008) arguments. There is a high risk during economic downturns and recessions for companies to break social expectations that can lead to consequences such as workers exploitations or radical downsizing of employee ranks. The ILO therefore recommends that, most especially during times of economic instability and crisis, businesses may want to develop further and even expand their utilization of CSR initiatives as an accompaniment to the approaches and objectives that they may want to pursue. This is because CSR efforts can promote a sustainable working environment that is an important foundation for the recuperation and development of businesses. CSR is also a vital component in lessening poverty, especially among the organizations and groups hit by the recession. CSR initiatives are great tools to create positive social changes even in these dire times. The goal is for all enterprises to sustain their businesses through the recession and to recover their losses through the help of CSR efforts in order to facilitate the revival of the various economies all over the world.

CSR Measurements and Standards

            As Olson (2008) suggested, having clear measurements of CSR can help businesses justify their continuing commitment towards CSR programs.

            The concept of Total Quality Management (TQM) is closely connected with CSR. The concept of Quality Management (QM) as a vital part of measuring the competencies of businesses was pioneered by Deming in the USA in the 1950s. Many businesses in Japan adopted his idea. QM became to popular among Japanese companies in starting in the 60s that the expansion of these firms even in overseas shores attribute their success to Deming, even going so far as to create the Deming Award, which is given to companies that show exceptional QM. TQM, an expansion of the QM concept, is founded on the same principles of CSR. Deming developed fourteen points which promote working environments wherein managers, employees and customers treat each other with respect and transactions are done fairly and decently. These fourteen points are: 1) creation of a constant drive towards advancing and improving goods and services with the general objective of remaining competitive and surviving the market, and providing jobs; 2) adoption of new values and beliefs when necessary; 3) elimination of the custom of and reliance on inspection in order to maintain quality of goods and services especially outfits that rely on mass production by integrating the concept of quality into the product or service at the moment of its creation;  4) elimination of the custom of creating partnerships or enterprises based on profit alone; 5) constant improvement of systems used in manufacturing and service, quality, and efficiency in order to lessen costs; 6) establishment of on-the-job training programs; 7) establishment of good leadership; 8) institutionalization of a working environment that eliminates fear, which allows all employees to work in an effective manner; 9) establishment of open communication with no barriers between and among all departments; 10) elimination of debilitating mottos or speeches expecting no defects and higher levels of productivity that incite and target employees; 11) elimination of quotas for factory workers and allowing for a style of management that emphasizes objectives rather than numbers; 12) removal of obstacles that hinder employees from taking pride in their work;13) establishment of a dynamic educational program that promotes self-improvement; and 13) establishment of programs that will allow all employees to work together in order to achieve the goal of transforming companies into businesses that maintain total quality management. (Deming, 1986)

            Deming (1986) reminds businesses to practice all of these points together, and not just select a few and leave out the rest to truly implement TQM. Furthermore, these points compel companies to maintain a constancy of purpose, set goals, train employees, and reduce costs because of the model’s overall and integrated framework.

            CSR has an ethical anchor that is considered essential for CSR programs (Woods, 1991). This ethical anchor can be measured through sustainable performance based on critical principles and outcomes that are interlocked with each other—Principles of corporate social responsibility: Institutional, Organizational, and Individual principles; Processes of corporate social responsiveness: Environmental concerns, Stakeholders concerns, and Issues of management; Outcomes of corporate behavior: Social (cultural and environmental) impacts, Social programs, and Social policies.

            Wood’s (1991) model argues that CSR is a process or a set of processes. The model requires businesses to develop CSR programs that express the companies’ principles on social responsibility while showing clearly the procedures of sensitivity towards society, regulations, and plans by which these CSR efforts will be implemented. This model also compels firms to develop CSR programs that produce tangible results. In addition, this model takes into account principles of legitimacy (institutional), public responsibility (organizational) and managerial discretion (individual). The processes of corporate social responsiveness, that is behavioral processes, consist of environmental assessment stakeholder management, and issues management. The observable outcomes of corporate behavior are composed of social impacts, social programs, and social policies.

            One useful tool for businesses to assess their CSR programs is the 20-item Corporate Responsibility Index Through Internet Consultation of Stakeholders or CRITICS developed by Hopkins (2003). CRITICS was built as an answer to a need for businesses to have more than just measuring tools, but indices based on inclusion criteria that will guide them to fairly and objectively assess their programs. CRITICS is a questionnaire that produces an index data that will rate businesses’ CSR programs. Although total objectivity cannot be achieved through this tool, it does allow businesses to continuously improve their ratings over time.

            CRITICS can be seen as a mere guide on what CSR programs should include rather than a how-to create CSR programs. Hopkins (2003) writes that CRITICS can be a self-assessment tool to help companies, especially those who are just starting with their CSR programs, in their mission to become more socially responsible. The components of CRITICS include whether companies have: a statement of the companies’ mission and values which must reflect business principles or vision of corporate responsibility that companies adhere to; an existing code of ethics and whether it is distributed to the employees; training program for staff on the code of ethics; a manager solely responsible for ethical or CSR issues; company products that are socially responsible; publications that show a social report or an ethical audit; company policies that require suppliers to also adhere or comply to companies’ code of ethics; constant dialogues with all stakeholders—internal and external—on CSR issues; policies on payment of wages in whatever sector of companies; policies that support human rights of employees; projects that contribute something to local communities surrounding companies; been given fines for false advertising; programs that apply environmental standards like ISO14000 or EMAS or CERES; been involved in law suits concerning corruption or other malpractices; policies against corruption or acts of bribery; policies that promote fair recruitment, promotion, and training for all employees; programs of employee participation to profits; practices that promote transparency in the actions of the leaders, especially the Board of Directors; and programs that create jobs.

            Martin (2002) developed the Virtue Matrix, which aims to create a conceptual framework that will answer such questions as why impels businesses to engage in CSR, what issues drive stakeholders to demand greater CSR activities from businesses, what is the link between globalization and the levels of concern on CSR, what hinders businesses from engaging in CSR, and what factors can enhance the contribution of CSR in society.

            Martin (2002) writes that the Virtue Matrix consists of the bottom quadrants having activities that showcase the Civil Foundation. This refers to the pre-existing programs done to observe CSR initiatives. The left quadrant of the grid shows voluntary activities that are guided by norms and customs. The right quadrant represents observance of the policies and laws written down by governments. The top pair of quadrants is labeled “Frontier” which signifies the risks businesses take because they truly believe in the inherent significance of the CSR initiatives, whether these actions result in economic, social or environmental income or returns. Activities found in the Frontier quadrants may explain the reason behind companies’ tenacity in remaining committed to the social responsibilities that they have initiated, even though these activities may seem costly. Perhaps, the most noteworthy contribution of this matrix is that it helps transform CSR initiatives from being subjective to objective.

            Based on Martin’s (2002) grid, several types of businesses emerge. There are enterprises that willingly do CSR such as the Body Shop, which is known worldwide as a skin- and hair-care company that has incorporated the values of their CSR program into their brand proposition. The company’s brand is a pledge to all consumers that every Body Shop product bought is already a step towards three values—improvement of the lives of women in developing countries, promotion of animal rights, protection of the environment. Then there are companies that simply keep business by doing what is right in connection with the laws, that is by complying with regulations like anti-sexual harassment and work-safety rules. There are companies whose leaders engage in CSR despite some incompatibility with shareholders’ interests just because these leaders perceive CSR as something right and something they must do.

            For businesses that want to further evaluate the outcomes of their CSR programs, Werre (2003) suggests three effects to be assessed: Social effects (e.g., employee treatment), environmental effects, and economic effects. Social Accountability 8000 is one of the most used audits that can be used for external and internal auditing efforts. It was developed by the Social Accountability International, an agency under the US Council on Economic Priorities. Its components specifies standards on child labor, health and safety, freedom of association, right to collective bargaining, discrimination, disciplinary practices, working hours and remuneration (Hopkins, 2003).

            Other audits and certifications include, Dow Jones Sustainability Index, Fortune Reputation Ranking, and Domini 400 Social Index. These audits, however, may be subject to some errors due to auditors who may not be well trained, components or standards that do not take into account specific local demands made upon international businesses, and standards that rely largely on intuitive processes (Hopkins, 2003).

            These measurements may help businesses avoid the issue Friedman’s (1970) arguments of profit over social welfare brings to light, that is, businesses must prove that they engage in CSR because of a sincere commitment to society and not because of some hidden agenda for profit or marketing.

CSR Benefits for Companies

            Although the benefits of CSR may vary depending on a variety of factors—the type of efforts being done, relevant stakeholders, values of the companies, etc. Lichtenstein, Drumwright, and Braig (2004) showed that as many as 90% of the Fortune 500 companies now engage in CSR initiatives. Based on their experiments, CSR is reported to affect, directly and indirectly, the reputation of companies, sales, and donations by consumers to company-affiliated non-profit organizations. Results showed that CSR efforts can enhance companies’ reputations and create a more positive name-recall among consumers. In addition, CSR initiatives can also indirectly increase what is called the identification of customers with corporations. This phenomenon happens when CSR efforts overlap with and are attuned to customers’ self concepts such as compassion or civic-mindedness. This leads to customers perceiving companies in a more positive light because they think that companies match their own values in life. Thus, customers develop higher degrees of identification with companies, which, in turn, can lead to stronger feelings of brand loyalty and support. In a way, this feeling of identification can also indirectly turn into increased sales for companies because customers with higher level of identification can shows higher levels of brand satisfaction and purchase.

            Other benefits for businesses include savings on operational cost through the implementation of environmental efficiency measures; more astute sensitivity towards the anticipation of and supervision of risk management protocols; enhanced capability to gain knowledge of new trends and products; and increased capacity to innovate (Raynard & Forstater, 2002).

            Lichtenstein, Drumwright, and Braig’s (2004) experiments surprisingly showed that, in addition to inspiring customers to support non-profit organizations affiliated with companies that they strongly identify with, CSR initiatives can also motivate customers to donate to organizations supported by companies that have negative records on social issues. For example companies said to have poor labor management can show that they want to have a better rating and change their shortcomings in the eyes of their customers by showing support for international fair labor practices. If customers see that these companies are genuine in their attempt to change their values, it is likely that consumers will still give their donations because the CSR initiative is done in order to achieve a good cause and a chance for businesses and consumers alike to do something good for society. Consumers will also have the satisfaction of helping their favored companies to rehabilitate their businesses. However, this attempt at change must be in a domain these companies are bad at. Lichtenstein, Drumwright, and Braig’s (2004) study showed that companies that try to conduct CSR initiatives in other domains, consumers perceive this as insincere acts. Thus, donations and support are less likely to be given to companies.

            Lichtenstein, Drumwright, and Braig’s (2004) point out that it is still better to have a good CSR program and rating in place. As the age old saying goes, an ounce of prevention is worth a pound of cure. Initiating efforts to erase negative CSR records will take a much heavier toll on companies’ resources—especially financial, human, and time—than integrating from the start a well-developed CSR plan. The benefits of a good CSR practice will be better than the benefits obtained from CSR initiatives done as an add-on for publicity. Having a strong record of

CSR can create a positive environment and perspective that can, in turn, create favorable evaluations of and attitude toward the businesses in the consumers’ minds (Sen & Bhattacharya, 2001).

            Luo and Bhattacharya (2006) state that CSR initiatives can affect companies’ market value through the customer satisfaction. They note that their findings pertain to the important effect of CSR on businesses’ return. This implies a financial value of CSR to the strategies of companies. The findings also show a significant connection and causal chain between CSR, customers satisfaction, market value. This suggests that CSR can help create a foundation of satisfied customers, which, in turn, can mediate financial returns. However, the researchers note, these initiatives can result in either financial gain or loss for companies depending on internal situations and the product-related abilities of businesses. Financial returns can be seen through a resource-based view. To have positive returns, businesses should implement and promote a combination of CSR initiatives that entail external activities and internal abilities of the companies that can generate and sustain companies’ financial value. This implies for companies to maintain advantages that are sustainable and competitive at the same time, they must encourage internal and external assets. In a sense, CSR initiatives that showcase stated financial, marketing, and communication objectives can enhance company visibility, enhance customer satisfaction, and generate financial gain.

            Raynard and Forstater (2002) point out that the benefits of CSR programs may vary and may not show the same level of significance for all businesses. Each company needs to take into consideration the product, industry, and service they provide when planning out and implementing their strategies for CSR initiatives.

            Luo and Bhattacharya (2006) caution businesses that CSR may have a dark side. Their findings indicate that firms that do not show high levels of innovativeness may not obtain a good level of customer satisfaction even through their CSR efforts. In fact, customer satisfaction may decrease, which could ultimately lead to financial losses. Citing the competitive signaling theory, the authors write that stakeholders may perceive low innovativeness as a signal of low levels of competitiveness and, as a consequence, weak future performance in the market. In other words, companies that do not meet the needs of customers because of low innovative tactics may be seen as making wrong strategic moves and having unwise priorities. This may lead to a contamination of the legitimacy of companies and negative market value. Consumers may view the CSR initiatives of such firms as something done to take advantage of an opportunity or something that is scheming and deceptive—activities that are disguised as CSR but are actually done to increase sales. This, in turn, can lead to CSR efforts to backfire—leading to the dark side of CSR.

            Positive CSR efforts can also be used as public relations strategies. Luo and Bhattacharya (2006) point to the better way companies such as Home Depot, IBM, Wal-Mart, General Electric, and Cisco conducted their CSR initiatives. More than just giving away checks or money, these companies perform creative CSR initiatives such as Home Depot’s “donation” of 2 million hours to various types of community services and IBM’s project for schools and communities that are populated with Latinos wherein they provided 100 specialized software that translated English emails to Spanish.

            In summary, Luo and Bhattacharya (2006) state that CSR efforts generate more impact when these activities are perceived as for altruistic purposes rather than profit and self-interest purposes. The authors point out that companies with low corporate abilities are more likely to spend on less important and purely cost-adding CSR initiatives like making cash donations. Meanwhile, companies that have high corporate abilities engage in “smarter” CSR that can generate some long-term financial gains. They add that their findings seemed to point out that “doing good” results in complicated propositions.

            Related to the idea of using CSR initiatives for public relations, the impact of CSR programs on consumers’ attitudes and behavior can rely on whether the customers are aware of businesses’ CSR initiatives. Many consumers have minimal knowledge of the CSR initiatives of their favorite brands. However, studies have shown that when customers know about the efforts businesses make towards uplifting the quality of life in society, then an increase in desire to purchase and heightened loyalty to the brand can take place among consumers (Sen, Bhattacharya, & Korschun, 2006; Luo & Bhattacharya, 2006; Raynard & Forstater, 2002). This also has an indirect consequence of generating positive perception and increased motivation among employees of these companies. Awareness is the key factor. Awareness can play an important part in customer satisfaction, and brand and product evaluation.

            Marin, Ruiz, and Rubio (2009) attempted to discover whether CSR initiatives truly influence brand loyalty among consumers. Their findings showed that CSE efforts can be directly linked with an increase in commitment towards certain brands. They discovered two reasons that may account for this. One, consumers evaluate companies with good CSR practice in a more positive light thus they buy more products and services from companies they perceive as socially responsible businesses. Two, consumers identify more with companies that show strong values, a result echoed by other studies (Lichtenstein, Drumwright, and Braig, 2004). In addition, the authors discovered that identity salience plays a significant role on how much influence CSR can have on the loyalty of customers. A strong identity salience can increase the positive reactions of customers towards product stimuli thus increasing brand loyalty.

            On the other hand, Taylor, Barker, and Simpson (2003) conducted a study of SMEs in South Yorkshire, England and the reactions of these enterprises towards existing environmental regulations. They found out that generally SMEs believe that issues concerning the natural environment affect businesses. However, many did not perceive any connection between compliance to environmental best practices and customer satisfaction. In fact, complying with environmental regulations is seen as added business expenditure that cannot be transferred to consumers in the form of added benefits. Few businesses could see that meeting such regulations could lead to an advantage in the market.

            CSR practices also have been proven to positively affect internal human relations in terms of recruitment, employee management, and promoting good morale in the working environment (Raynard & Forstater, 2002). Some researches have also demonstrated that CSR programs can improve trust and understanding among employees. This leads to an increase in motivation and loyalty among employees, which, in turn, can lead to an increase in efficiency in work output, intensified support for the kind of culture promoted within companies, and more open and more effective communication among all employees, from those from the highest levels to the lowest rank and file staff (Jenkins, 2004).

            Turban and Greening (1997) have shown that companies that are seen as having a strong CSR program and committed to the issues it advocates, often attract potential and retain current employees. This results in reduced turnover, easier employment processes, and a cut in training costs. In addition to consumers positively evaluating companies with strong CSR, employees also develop a positive outlook towards their work and workplace. This is especially true when employees find that their own personal values are aligned with those of the businesses they work for. Companies whose CSR practices are not integrated wholly into their strategies sometimes ask their employees to overlook written or moral laws in exchange for higher profits and salaries. This type of bribery can often lead to a culture of fear and low morale in workplaces, which can, in turn, create distrust, disloyalty, and low commitment among employees.

            In addition, in a survey of European employees, almost 90 percent of the respondents answered that they would be more loyal towards companies that show a strong commitment towards social responsibility (Zappala, 2004).

            CSR initiatives can also help companies in their market research. Sen and Bhattacharya (2001) indicate that implementing CSR programs can allow firms to better understand the needs and wants of their customers, thus allowing these businesses to improve their customer-specific knowledge. Through CSR, businesses can determine which issues, values, and tactics attract the consumers’ attention, and which generate a negative reaction from customers. In this way, businesses can customize their approaches to better reach their target market and the target responsibilities they wish to accomplish through CSR.

            SMEs still have a long way to go towards implementing, communicating to their stakeholders, and fully utilizing the benefits of well-developed CSR programs (Murillo & Lozano, 2006). As they continue to learn how to go about doing their responsibilities towards society, companies, especially the leaders and owners, must always keep in mind that in order to sustain their businesses they must commit themselves towards eliminating all forms of immoral actions such as bribery, dishonesty, discrimination, unreliability, cruelty, and lack of respect towards the diversity of people, culture, and biodiversity that seem to plague various business dealings these days (Kidder, 2005).

CHAPTER THREE: METHODOLOGY

Introduction

            This chapter presents the methods used by the researcher in order to gather important information to reach valid conclusions for the study. More specifically, it would cover the following subtopics: (1) research design; (2) the selection of participants; (3) instrumentation; (4) assumptions and limitations; (5) the procedures; and lastly, (6) how the data will be processed and analyzed.

            In order to efficiently analyze the corporate social responsibility (CSR) initiatives of small and medium enterprises (SMEs), thus study shall make use of both quantitative and qualitative methods. For the quantitative aspect, a survey shall be used in order to obtain the opinions of one hundred and fifty (150) respondents who shall receive the data collection tool personally. On the other hand, the qualitative part of this study shall feature the articles published regarding the topic. These articles would be essential in determining the measures by which researchers analyzed the CSR initiatives of companies. These measures shall then be applied in the analysis of that of SMEs. In the same manner, the articles and books that the researcher shall be using for this study would help in determining whether or not SMEs continue their CSR initiatives even during times of economic uncertainties or recession. Aside from this, the researcher believes that these secondary sources would help in finding out the benefits and consequences of CSR initiatives to SMEs.

            As it has been mentioned, this study shall make use of several methodologies in order to review the corporate social responsibility (CSR) initiatives of small and medium enterprises (SMEs). These methodologies, once again, would be of vital importance as this paper delves into the status of SMEs’ CSR initiatives. In the same manner, the methodologies used from both the qualitative and quantitative approach would help in looking into the advantages and disadvantages that the said initiatives have brought to small and medium enterprises (SMEs).

Research Design

Quantitative Design

As earlier mentioned, the study adopts a descriptive quantitative design, attempting to provide the general factors that may be used in order to analyze the CSR initiatives of SME. Moreover, it would also help in determining the following: (1) the reasons why SMEs undertake the CSR initiative; (2) how their practice is different from that of the multinational companies who are often associated with CSR; (3) the focus of the SMEs’ CSR initiatives; and finally, (4) the effects of recession on their practices. The use of a quantitative style is advantageous such that it can standardize the varying nature and perceptions of the respondents with regard to the CSR initiatives of SMEs.

Qualitative Design

Aside from the previously discussed, this study also adopts a qualitative design. This will function in order to augment, understand and better explain the statistics that was gathered from the instrument. In the same manner, it would also feature an investigative research of the secondary data that analyzes, explains and describes the corporate social responsibility (CSR) initiatives of the small and medium enterprises (SMEs). In the same manner, the results of the qualitative and quantitative researches would be compared vis-à-vis each other. Upon finding common denominators then, the researcher would explain the factors that are essential for the analysis of the CSR initiatives.

Methods

            As stated a number of times in this chapter, this research shall make use of different methods from both the qualitative and quantitative approaches in order to gain a better understanding of the topic at hand.

Qualitative Methods

Under the qualitative design, the researcher shall make use of the analysis of secondary data in order to find out the main themes present in the existing literature written with regard to corporate social responsibility initiatives of the small and medium enterprises. Thus, it is in relation with this that the literature review presented in the second chapter of this paper was conducted in order to present the findings from the use of the abovementioned method.

The literature review method involves a compilation of a number of written articles or published research by accredited scholars and professionals, Taylor (2008) notes. The author of this study believes that literature review is appropriate in approaching the topic as the latter conveys to the reader the already existing knowledge; concepts and ideas there are about the subject matter (Taylor, 2008). Aside from the aforementioned, the literature review also allows the researcher to cite and discuss the strengths and weaknesses of the different material that he or she will be presenting in his or her study, Anson and Schwegler (2000) mentioned.

            Taylor (2008) also notes that the use of a literature review allows the researcher to make use of two main skills: first, the ability to show how well an author can seek information with regard to his or her topic (Taylor, 2008; Troyka, 2008) and second, critical appraisal as the researcher has to be organized and should possess the ability to identify any kind of bias in the literature and studies that the researcher shall be making use of (Taylor, 2008).

To elaborate, literature review for this paper shall include an organized presentation of researches, articles or studies directed at the author’s area of study.  A synthesis or summary of all findings will be done and at the same time, the author will also cite what is lacking in literature.  Areas that are inconsistent will be noted by the author, ending with a final conclusion in the form of a research question that may be helpful in future studies.  These four tasks when executed properly will make this research paper valid and beneficial for future proponents of a similar or related study.

The structure of applied research shall also be used in order to analytically review the corporate social responsibility initiatives of small and medium enterprises in the United States of America. Applied research is basically concerned with the application of research techniques, procedures, and methods that form the body of research methodology as applied to the collection of information about various aspects of a situation, issue, problem or information gathered can be issued for policy formation and administration (Krueger & Casey, 2000).

Having used the techniques of applied research, this study shall also take into one of its forms, descriptive research. Descriptive research attempts to describe systematically a situation, problem, phenomenon, service or program, or provides information about, example, the living conditions of a community, or describes attitudes towards an issue (Babbie, 1998). Using this particular form of research, the researcher would look into the initiative as a while. It would also provide information about the said concept and how it has affected SMEs.

The research would also use content analysis. Content analysis is a technique used for gathering and analysing the content of the documents retrieved from the World Wide Web. The content shall be sorted into themes, analysing only what is in the text as the purpose of the writer of these articles could not be very clear to the researcher (Neuendorf, 2002).

Quantitative Methods

            Aside from the abovementioned, quantitative methods shall also be used in this study. More specifically, it would make use of the questionnaire method in order to obtain the opinions and perceptions of one hundred and fifty respondents with regard to CSR initiatives.

Survey questionnaires that have been deployed for research have two specific objectives. One is to quantitatively depict certain facets of the group being investigated. The analysis of the questionnaires may be mainly focused on associations between variables or with making estimates in a descriptive manner to a well defined group of respondents. Next, it is also an effective means of gathering data by soliciting individual evaluations through predetermined items or questions. Their responses, which may pertain to their own views, compose the data set subject for statistical analysis (Fowler, 2002).

            Lanthier (2002) defines the questionnaire method or survey, from its name per se, as the set of questions given to the people who serves as respondents for a particular study. Basically, the purpose of applying such method is to obtain information about their respondent’s attitudes, thoughts, behaviors, and the like pertaining to the topic at hand. Through this, the researchers applying this particular method are given a clearer picture of a group’s opinion based on the compilation of answers obtained from the survey participants.

            The use of the questionnaire method in this study is used to its advantage due to the method’s capacity of finding out the attitudes, thoughts and perceptions of a large group of people through the use of a certain percentage of their population, the sample. Simply put, the questionnaire method allows the researcher to be more confident in generalizing their findings as compared with the use of the case study method (Lanthier 2002). Lanthier further adds that the use of this method allows for easy decision making due to its feature that has been previously discussed.

            However, this method also has its own disadvantages. First is the sensitivity of how questions are constructed. Lanthier (2002) calls for the proper construction of questions in order to obtain the exact responses needed by the researcher. According to the author, the way a question is worded can definitely alter the way that the people may answer the question. The second disadvantage of this method is how the sample would be selected (Lanthier 2002). Apparently, random sampling is the best way to choose respondents in this kind of study. However, obtaining these people through the said method ay be quite difficult since not all participants are really selected randomly.

Selection of Participants

            The participants for the survey were selected using purposive sampling. The inclusion criteria are as follows: (1) must be an employee of a small and medium enterprise (SME); (2) has explicitly confirmed awareness about the corporate social responsibility (CSR) initiatives of their company; and (3) has expressed consent on his willingness to participate in the study.

Instrumentation

The primary tool that would be used for data collection under the quantitative design of this research would be of course, the questionnaire. The questionnaire shall make use Likert-style five point questions which shall be based from the findings of the previous researches.

According to the Colorado State University Writing Guides (2008), the use of Likert-style questions are very advantageous to the researcher since these are more easy to analyze since the answers could be given a number or value to make statistical interpretation possible. It is also more specific, thus could be used to communicate similar meanings.

There are some strong advantages that set out the self-administered questionnaire over other data collection techniques (Fowler, 2002). When compared to the mail questionnaire, the chosen method secures a higher response rate and costs less. The first of these advantages can be attributed to the fact that it is handed out in person and through phone interviews, and that the interviewer is present. As a result, the overall atmosphere is warmer, friendlier and less impersonal. Additionally, because of the presence of the researcher, the participants are accorded a wider scope of clarity (Alreck & Settle, 1994). If anything is not clear in the questionnaire, the researcher himself can clarify a particular question, achieving a higher degree of accuracy and consequently more reliable responses—which is not applicable to the other mode of analyzing data as logistics companies would not have the chance to clarify or reason out why there are such requirements for the key account manager positions (Dillman, 1999; Alreck & Settle, 1994). With regard to the second advantage, the selected method can be followed at a comparatively low cost, as there is no demand for trained staff but solely the cost of printing the actual questionnaire forms (Dillman, 1999).

Assumptions and Limitations

The following are the assumptions or hypotheses that this research wishes to validate:

Null Hypothesis 1: Small and Medium Enterprises (SMEs) do not focus on relationship building and gaining a competitive advantage in constructing programs and initiatives related to corporate social responsibility (CSR).

Alternative Hypothesis 1: Small and Medium Enterprises (SMEs) focus on relationship building and gaining a competitive advantage in constructing programs and initiatives related to corporate social responsibility (CSR).

Null Hypothesis 2: Corporate Social Responsibility (CSR) initiatives are of no vital importance to Small and Medium Enterprises (SMEs).

Alternative Hypothesis 2: Corporate Social Responsibility (CSR) initiatives are of vital importance to Small and Medium Enterprises (SMEs) as it ensure their competitive advantage and at the same time, lead to the enhancement of their reputation.

Null Hypothesis 3: There are no major differences between CSR initiatives of SMEs and larger, multinational corporations.

Alternative Hypothesis 3: There are major differences between CSR initiatives of SMEs and larger, multinational corporations.

Null Hypothesis 4: The CSR initiatives of SMEs are not directed to all three aspects of corporate social responsibility.

Alternative Hypothesis 4: The CSR initiatives of SMEs are directed to all three aspects of corporate social responsibility.

Null Hypothesis 5: The CSR initiatives do not pose neither positive nor negative effects to SMEs.

Alternative Hypothesis 5: The CSR initiatives pose more positive effects than consequences to SMEs.

Null Hypothesis 6: Economic uncertainty or recession does not affect the CSR initiatives of SMEs.

Alternative Hypothesis 6: Economic uncertainty or recession affects the CSR initiatives of SMEs.

            One of the limitations that the researcher expects to meet in going through this study is the tendency to rely only on the results obtained from the use of the survey questionnaires. In the same manner, there is also a limitation on the part of the researcher to clarify the points made by the survey participants from their answers to the questions in the survey.

Procedures

            In order to obtain the most accurate data for this research, the author of this dissertation followed the following steps:

            First, the researcher obtained a list of SMEs from the Securities and Exchange Commission of the United States of America. Once this list was acquired, the researcher handed out letters to its administrators in order to obtain their permission for the conduction of the study. As soon as the researcher obtained the said permission, a total of two hundred (200) questionnaires had been sent in order to ensure that one hundred fifty responses can be retrieved.

            The researcher then processed the results using the Statistical Package for the Social Sciences (SPSS) and analyzed the data obtained. After performing this, the researcher then continued on with the comparison of these results with the findings produced by the literature review. These analyses then produced the most essential information needed by the researcher in order to answer the research questions.

Data Processing and Analysis

            The data obtained by the researcher shall be processed using the Statistical Package for the Social Sciences (SPSS). It would be highly descriptive in nature and would be presented using basic and simple statistics. It would also present means and standard deviations in order to gain a better understanding of the responses of the survey participants with regard to the questions contained in the survey. Aside from this, a correlational research would also be performed in order to determine the following: (1) the SMEs’ reasons for pursuing CSR initiatives even during recession; and lastly, (2) the derailers of CSR in SMEs.

Conclusion

            The research shall closely intertwine the methods included under the qualitative and quantitative approaches in order to effectively analyze the CSR initiatives of the SMEs. In the same manner, it is through the use of several methodologies that the researcher aims to efficiently determine the advantages and consequences of the CSR initiative to the SMEs. Finally, this would also help in determining why SMEs continue to undertake initiatives even during times of economic uncertainty or recession.

CHAPTER FOUR: RESULTS

Introduction

            This study presents the results obtained by the researcher from the use of the questionnaire method. This chapter is divided into the following subsections: (1) an introductory portion, (2) reasons behind why small and medium enterprises undertake initiatives regarding corporate social responsibility; (3) the CSR initiatives of SMEs; (4) the CSR initiatives of the respondents’ organization; (5) CSR and recession; (6) the reasons for pursuing CSR even during recession: a correlational approach; (7) the derailers of CSR: a correlational approach and last, (8) a summary of all the results presented in this chapter.

Reasons behind why Small and Medium Enterprises Undertake Initiatives regarding Corporate Social Responsibility

            The first section covered by the questionnaire was concerned with the reasons behind why small and medium enterprises undertake initiative regarding corporate social responsibility. The first reason cited was long term profits. The results of the survey show that out of the one hundred and fifty respondents: (1) thirty or 20.0% find this very apparent; (2) fifty three or 35.5% find this apparent; (3) thirty eight (25.3%) were neutral; (4) twenty six or 17.3% find this weakly experienced; and lastly, (5) only three (2.0%) said that this was not experienced at all in their enterprise (see Table 1 and Chart 1). These results then reveal a mean of 3.54 and a standard deviation of 1.06, thus showing that the respondents were relatively neutral with regard to the experience of their enterprise with regard to long term profits as one of the reasons why they undertake initiatives regarding corporate social responsibility (see Table 8).

Table 1.

Frequency and Percentage Breakdown: Long Term Profits as one of the Reasons why Small and Medium Enterprises Undertake Initiatives regarding Corporate Social Responsibility

Frequency
Percent
Valid
1.00
3
2.0

2.00
26
17.3

3.00
38
25.3

4.00
53
35.3

5.00
30
20.0

Total
150
100.0

Chart 1.

Long Term Profits as one of the Reasons why Small and Medium Enterprises Undertake Initiatives regarding Corporate Social Responsibility

The commitment of the top management to the moral and ethical standards is another reason behind the SME’s development of initiatives regarding corporate social responsibility was also investigated. Of the one hundred and fifty respondents: (1) seventy three (48.7%) said this was very apparent; (2) sixty one (40.7%) said this was apparent; and lastly, (3) only sixteen (10.7%) were neutral (see Table 2 and Chart 2). These responses then produced a mean of 4.38 and a standard deviation of 0.67, thus showing that in general, the respondents find this apparent in their experience of CSR as SMEs (see Table 8).

Table 2.

Frequency and Percentage Breakdown: Commitment of Top Management as the Moral and Ethical Standards as one of the Reasons why Small and Medium Enterprises Undertake Initiatives regarding Corporate Social Responsibility

Frequency
Percent
Valid
3.00
16
10.7

4.00
61
40.7

5.00
73
48.7

Total
150
100.0

Chart 2.

Commitment of Top Management as the Moral and Ethical Standards as one of the Reasons why Small and Medium Enterprises Undertake Initiatives regarding Corporate Social Responsibility

            Another reason behind the development of initiatives pertaining to corporate social responsibility was the visionary skills that the leaders of the companies possess. Table 3 and Chart 3 show that of the one hundred and fifty respondents: (1) thirty seven (24.7%) said this was apparent; (2) twenty five (16.7%) were neutral; (3) eighty seven (58.0%) said this was weakly experienced; and lastly, (4) only one (0.7%) said that this is not at all experienced in their organization. These varied responses then produced a mean of 2.65 and a standard deviation of 0.86, thus showing that in general, the respondents find this reason weakly experienced in their organization (see Table 8).

Table 3.

Frequency and Percentage Breakdown: Visionary Skills of Many Company Leaders as one of the Reasons why Small and Medium Enterprises Undertake Initiatives regarding Corporate Social Responsibility

Frequency
Percent
Valid
1.00
1
.7

2.00
87
58.0

3.00
25
16.7

4.00
37
24.7

Total
150
100.0

Chart 3.

Visionary Skills of Many Company Leaders as one of the Reasons why Small and Medium Enterprises Undertake Initiatives regarding Corporate Social Responsibility

            The fourth reason behind the adoption of CSR initiatives was that activities that fail to acknowledge social responsibility result to bad karma in the form of bad financial operation and low brand positioning. The results of the survey show that out of the one hundred and fifty respondents: (1) fifty seven (38.0%) said this was very apparent; (2) twenty five (16.7%) said this was apparent; (3) twenty one (14.0%) were neutral; (4) twenty four (16.0%) said that this was weakly experienced; and lastly, (5) twenty three (15.3%) said that this was not at all experienced in their organization (see Table 4 and Chart 4). These varied responses then produced a mean of 3.46 and a standard deviation of 1.50, thus showing that in general, the respondents were neutral with regard to  their experience as a small and medium enterprise (SME) (see table 8).

Table 4.

Frequency and Percentage Breakdown: Avoiding Bad Karma in the form of Bad Financial Operation and Low Brand Positioning as one of the Reasons why Small and Medium Enterprises Undertake Initiatives regarding Corporate Social Responsibility

Frequency
Percent
Valid
1.00
23
15.3

2.00
24
16.0

3.00
21
14.0

4.00
25
16.7

5.00
57
38.0

Total
150
100.0

Chart 4.

Avoiding Bad Karma in the form of Bad Financial Operation and Low Brand Positioning as one of the Reasons why Small and Medium Enterprises Undertake Initiatives regarding Corporate Social Responsibility

            The tendency of corporations to apply CSR initiatives out of fear that this may create a rift in their relationship with their consumers and suppliers that may cost litigations was also examined under the first subsection of the questionnaire. Table 5 and Chart 5 shows that out of the one hundred and fifty respondents: (1) twenty eight (18.7%) find this very apparent; (2) twenty three (15.3%) find this apparent; (3) forty seven (31.3%) were neutral; (4) thirty (20.0%) said this was weakly experienced; and lastly, (5) twenty two (14.7%) said that this was not at all experienced in their firms. These responses then yielded a mean of 3.03 and a standard deviation of 1.30, showing that in general, the survey participants were neutral with regard to this factor’s influence in their adoption of initiatives related to corporate social responsibility (see Table 8).

Table 5.

 Frequency and Percentage Breakdown: Fear of a rift in the relationship between Companies and their consumers and suppliers that may result to costly litigations as one of the Reasons why Small and Medium Enterprises Undertake Initiatives regarding Corporate Social Responsibility

Frequency
Percent
Valid
1.00
22
14.7

2.00
30
20.0

3.00
47
31.3

4.00
23
15.3

5.00
28
18.7

Total
150
100.0

Chart 5.

Fear of a rift in the relationship between Companies and their consumers and suppliers that may result to costly litigations as one of the Reasons why Small and Medium Enterprises Undertake Initiatives regarding Corporate Social Responsibility

            The sixth reason behind the adoption of CSR initiatives that was investigated upon was market opportunity. Table 6 and Chart 6 show the following results: (1) sixteen (10.7%) find this very apparent; (2) twenty four (16.0%) said this was apparent; (3) thirty eight (25.3%) were neutral; and lastly, (4) seventy two (48.0%) said that they weakly experienced this factor. These then produced a mean of 2.89 and a standard deviation of 1.30, thus showing that the respondents, in general, find this particular factor weakly experienced (see Table 8).

Table 6.

Frequency and Percentage Breakdown: Market Opportunity as one of the Reasons why Small and Medium Enterprises Undertake Initiatives regarding Corporate Social Responsibility

Frequency
Percent
Valid
2.00
72
48.0

3.00
38
25.3

4.00
24
16.0

5.00
16
10.7

Total
150
100.0

Chart 6.

Market Opportunity as one of the Reasons why Small and Medium Enterprises Undertake Initiatives regarding Corporate Social Responsibility

            The fifth factor examined by the researcher was concerned with the adoption of CSR initiatives in order to ensure the corporation’s competitive advantage. Table 7 and Chart 7 reveals the following responses: (1) ninety one (60.7%) find this very apparent; (2) forty five (30.0%) said this was apparent; and lastly, (3) fourteen (9.3%) were neutral. These then produced a mean of 4.51 and a standard deviation of 0.66, thus showing that the respondents find the said factor apparent in their adoption of corporate social responsibility initiatives (see Table 8).

Table 7.

Frequency and Percentage Breakdown: Competitive Advantage as one of the Reasons why Small and Medium Enterprises Undertake Initiatives regarding Corporate Social Responsibility

Frequency
Percent
Valid
3.00
14
9.3

4.00
45
30.0

5.00
91
60.7

Total
150
100.0

Chart 7.

Competitive Advantage as one of the Reasons why Small and Medium Enterprises Undertake Initiatives regarding Corporate Social Responsibility

Table 8.

Min, Max, Mean and Standard Deviation: Reasons Behind Why SMEs Undertake Initiatives Regarding Corporate Social Responsibility

N
Minimum
Maximum
Mean
Std. Deviation
Profit
150
1.00
5.00
3.5400
1.05950
Commit
150
3.00
5.00
4.3800
.67227
Vision
150
1.00
4.00
2.6533
.85911
Karma
150
1.00
5.00
3.4600
1.50449
Rift
150
1.00
5.00
3.0333
1.30264
Opport
150
2.00
5.00
2.8933
1.03071
Compadv
150
3.00
5.00
4.5133
.66289
Valid N (listwise)
150

The CSR Initiatives of SMEs

            The second portion of the questionnaire looked into the CSR initiatives of the Small and Medium Enterprises or SMEs. The first item under this section states that developing CSR initiatives are carried out with ample time. The respondents’ answers to this question were confined only in two levels: 2 (disagree) and 1 (strongly disagree). Table 9 and Chart 9 show that forty two (28.7%) said that they disagree and one hundred seven (71.3%) strongly disagreed. These responses then produced a mean of 1.29 and a standard deviation of 0.45 shows that the survey participants strongly disagreed that CSR initiatives are carried out with ample time in SMEs (see Table 13).

Table 9.

Frequency and Percentage Breakdown: Carrying out of CSR Initiatives in SMEs with Ample Time

Frequency
Percent
Valid
1.00
107
71.3

2.00
43
28.7

Total
150
100.0

Chart 9.

Carrying out of CSR Initiatives in SMEs with Ample Time

            The manageability of CSR initiatives due to the availability of enough information about stakeholders and other issues was also analyzed. Seventy eight respondents (52.0%) said that they disagree with the statement while seventy two (48.0%) said that they strongly disagree (see Table 10 and Chart 10). These responses then produced a mean of 1.52 and a standard deviation of 0.50, thus showing that the respondents strongly disagree with the statement that developing CSR initiatives (in SMEs) are manageable because there is enough information about stakeholders and issues (see Table 13).

Table 10.

Frequency and Percentage Breakdown: Manageability of CSR Initiatives in SMEs due to the availability of enough information about stakeholders and other issues

Frequency
Percent
Valid
1.00
72
48.0

2.00
78
52.0

Total
150
100.0
Chart 10.

Manageability of CSR Initiatives in SMEs due to the availability of enough information about stakeholders and other issues

            The SMEs’ possession of adequate funds in order to implement CSR initiatives was also analyzed. The results show that: (1) one hundred and one (67.3%) strongly disagreed; and (2) forty (26.7%) strongly disagreed with the said statement concerning the practice of CSR by SMEs (see Table 11 and Chart 11). These then revealed a mean of 1.67 and a standard deviation of 0.47, showing that in general, the respondents strongly disagreed with regard to the SMEs possession of enough funds in order to implement their CSR initiatives (see Table 13).

Table 11.

Frequency and Percentage Breakdown: SMEs’ possession of adequate funds in order to implement CSR initiatives

Frequency
Percent
Valid
1.00
49
32.7

2.00
101
67.3

Total
150
100.0

Chart 11.

SMEs’ possession of adequate funds in order to implement CSR initiatives

            The last item included in this particular subsection dealt with the SMEs’ possession of clear motivating factors in order to develop their CSR programs. One hundred ten respondents (73.3%) said that they disagree with the statement while forty (26.7%) said that they strongly disagree (see Table 12 and Chart 12). This then produced a mean of 1.73 and a standard deviation of 0.44, thus revealing that the respondents strongly disagree with the statement that SMEs have clear motivating factors to develop CSR programs (see Table 13).

Table 12.

Frequency and Percentage Breakdown: SMEs’ possession of clear motivating factors to develop CSR programs

Frequency
Percent
Valid
1.00
40
26.7

2.00
110
73.3

Total
150
100.0

Chart 12.

SMEs’ possession of clear motivating factors to develop CSR programs

Table 13.

Min, Max, Mean and Standard Deviation: the CSR Initiatives of SMEs

N
Minimum
Maximum
Mean
Std. Deviation
Time
150
1.00
2.00
1.2867
.45372
Info
150
1.00
2.00
1.5200
.50127
Fund
150
1.00
2.00
1.6733
.47057
Motiv
150
1.00
2.00
1.7333
.44370
Valid N (listwise)
150

The CSR Initiative of the Respondents’ Organization

            Using the scale of 1-5, with 5 (very apparent) as the highest and 1 (not experienced at all) as the lowest, the questionnaire developed by the researcher also looked into the CSR initiative of the organizations to which the respondents belong to based on their experience as small and medium enterprises (SMEs). More specifically, this particular subsection looked into which of the three themes of CSR are their initiatives directed to. The first item was natural environment as a theme of CSR. Table 14 and Chart 14 show that of the one hundred and fifty respondents: (1) twenty (13.3%) said that this was very apparent; (2) one hundred (66.7%) said that this was apparent; and lastly, thirty (20.0%) were neutral. These then produced a mean of 3.93 and a standard deviation of 0.58. These figures then only show that the respondents were relatively neutral with regard to the natural environment as the focus of CSR initiatives being advocated by SMEs (see Table 18).

Table 14.

Frequency and Percentage Breakdown: the Natural Environment as the focus of SMEs’ CSR Initiatives

Frequency
Percent
Valid
3.00
30
20.0

4.00
100
66.7

5.00
20
13.3

Total
150
100.0

Chart 14.

The Natural Environment as the focus of SMEs’ CSR Initiatives

            The society as the focus of CSR initiatives of SMEs was also examined in the survey questionnaire developed by the researcher. The results show that of the one hundred and fifty respondents: (1) sixty (40.0%) were neutral; (2) seventy (46.7%) said that this was weakly experienced; and last, (3) twenty (13.3%) said that this was not at all experienced in their organization (see Table 15 and Chart 15). These responses then produced a mean of 2.27 and a standard deviation of 0.68, revealing that the respondents find the society as the focus of their CSR initiatives weakly experienced in the practice of their organization (see Table 18),

Table 15.

Frequency and Percentage Breakdown: the Society as the focus of SMEs’ CSR Initiatives

Frequency
Percent
Valid
1.00
20
13.3

2.00
70
46.7

3.00
60
40.0

Total
150
100.0

Chart 15.

The Society as the focus of SMEs’ CSR Initiatives

            The researcher also looked into the communities as the focus of CSR initiatives in SMEs. Out of the one hundred and fifty respondents: (1) one hundred and thirty three (88.7%) said this was apparent; (2) seven (4.7%) were neutral; and (3) only ten (6.7%) said that this was weakly experienced (see Table 16 and Chart 16). These then yielded a mean of 3.82 and a standard deviation of 0.53, revealing that the respondents were relatively neutral with regard to their focus communities as the focus of their CSR initiatives (see Table 18).

Table 16.

Frequency and Percentage Breakdown: the Communities as the focus of SMEs’ CSR Initiatives

Frequency
Percent
Valid
2.00
10
6.7

3.00
7
4.7

4.00
133
88.7

Total
150
100.0

Chart 16.

The Communities as the focus of SMEs’ CSR Initiatives

            Finally, the researcher also looked into the natural environment, society and communities as the foci of CSR initiatives developed by SMEs. The results showed that forty participants (26.7%) responded to this question with a 4 (apparent); ninety (60.0%) with a 3 (neutral) and lastly, twenty (13.3%) with a 2 (weakly experienced) (see Table 17 and Chart 17). These then produced a mean of 3.13 and a standard deviation of 0.62, thus showing that the respondents were neutral in the evaluation of the statement that their CSR initiatives are directed towards three themes: the natural environment, the society and the communities (see Table 18).

Table 17.

Frequency and Percentage Breakdown: the Natural Environment, the Society and the Communities as the foci of SMEs’ CSR Initiatives

Frequency
Percent
Valid
2.00
20
13.3

3.00
90
60.0

4.00
40
26.7

Total
150
100.0

Chart 17.

The Natural Environment, the Society and the Communities as the foci of SMEs’ CSR Initiatives

Table 18.

Min, Max, Mean and Standard Deviation: Themes of SMEs’ CSR Initiatives

N
Minimum
Maximum
Mean
Std. Deviation
ThemeI
150
3.00
5.00
3.9333
.57541
ThemeII
150
1.00
3.00
2.2667
.68215
ThemeIII
150
2.00
4.00
3.8200
.53181
Allabove
150
2.00
4.00
3.1333
.62031
Valid N (listwise)
150

CSR Initiatives of SMEs during Recession

            The researcher then looked into what happens to the CSR initiatives of the SMEs during times of economic uncertainty such as a recession. In order to examine this, the statement during economic uncertainty and recession, many companies continue to place the same premium to CSR practices and programs rather than focusing on making a profit due to crisis was included in the survey. The following responses were obtained: (1) fourteen (9.3%) said this was very apparent; (2) thirty five (23.3%) were neutral; (3) ninety five (63.3%) said this was weakly experienced; and (6) six (4.0%) said that this was not at all experienced in their organization (see Table 19 and Chart 19). These results then revealed a mean of 2.38 and a standard deviation of 0.71, showing that the respondents find the said it is weakly experienced in their organization that they continue to advocate CSR practices rather than make profit during times of economic uncertainty such as a recession (see Table 20).

Table 19.

Frequency and Percentage Breakdown: CSR initiatives of SMEs during Recession

Frequency
Percent
Valid
1.00
6
4.0

2.00
95
63.3

3.00
35
23.3

4.00
14
9.3

Total
150
100.0

Chart 19.

CSR initiatives of SMEs during Recession

Table 20.

Min, Max, Mean and Standard Deviation: CSR initiatives of SMEs during Recession

N
Minimum
Maximum
Mean
Std. Deviation
Recess
150
1.00
4.00
2.3800
.71108
Valid N (listwise)
150

Reasons for Pursuing Corporate Social Responsibility Initiatives even during Recession: A Correlational Research

            In order for the researcher to determine the reasons why SMEs continue to pursue CSR initiatives during recession, a correlational approach to research was used. The questions that dealt with the reasons why companies undertake CSR initiatives were correlated with the question that looked into whether SMEs continue with the latter even during times of economic uncertainties. Table 21 shows the results of the correlational research performed by the researcher.

Table 21.

Reasons for Pursuing Corporate Social Responsibility Initiatives even during Recession: A Correlational Research

Recess
Profit
Pearson Correlation
.118

Sig. (2-tailed)
.151

N
150
Commit
Pearson Correlation
-.094

Sig. (2-tailed)
.255

N
150
Vision
Pearson Correlation
.602(**)

Sig. (2-tailed)
.000

N
150
Karma
Pearson Correlation
-.039

Sig. (2-tailed)
.635

N
150
Rift
Pearson Correlation
.044

Sig. (2-tailed)
.591

N
150
Opport
Pearson Correlation
-.155

Sig. (2-tailed)
.058

N
150
Compadv
Pearson Correlation
.281(**)

Sig. (2-tailed)
.000

N
150
Recess
Pearson Correlation
1

Sig. (2-tailed)

N
150
**  Correlation is significant at the 0.01 level (2-tailed).

*  Correlation is significant at the 0.05 level (2-tailed).

The correlational research shows that at the 0.05 level (*), no factor that influences the undertaking of CSR initiatives is positively correlated with the whether or not the companies continue the said programs even during recession. On the other hand, however, only competitive advantage and the visionary skills of the leaders are positively correlated with the question regarding the continuity of programs during recession at the 0.01 level (**).  These then only shows that competitive advantage and the visionary skills of the leaders are the main reasons why some SMEs continue their CSR initiatives even during times of economic uncertainties such as a recession.

Derailers of CSR: A Correlational Research

Finally, the researcher also looked into the derailers of CSR using the correlational approach to research. In accomplishing this, the questions that fall under the category of SMEs’ experience of CSR are correlated with the question regarding the continuance of the said initiatives despite being in the midst of a recession. Table 22 shows the results of this particular data analysis technique.

Table 22.

Derailers of CSR: A Correlational Research

Recess
Time
Pearson Correlation
.201(*)

Sig. (2-tailed)
.014

N
150
Info
Pearson Correlation
.101

Sig. (2-tailed)
.219

N
150
Fund
Pearson Correlation
.012

Sig. (2-tailed)
.880

N
150
Motiv
Pearson Correlation
.302(**)

Sig. (2-tailed)
.000

N
150
Recess
Pearson Correlation
1

Sig. (2-tailed)

N
150
**  Correlation is significant at the 0.01 level (2-tailed).

*  Correlation is significant at the 0.05 level (2-tailed).

The table above shows that at the 0.05 level (*), only the inability of SMEs to carry out their CSR initiatives with ample time is correlated with recession. On the other hand, at the 0.01 level (**), only the lack of motivating factors was correlated with recession.  This then shows that the two are basically considered to be the derailers of CSR.

Summary

            This chapter once again presented the responses of the survey participants as made available through the use of the survey questionnaire. It has properly identified the following: (1) the reasons why small and medium enterprises undertake initiatives regarding corporate social responsibility; (2) the practice of CSR in SMEs; (3) the CSR initiatives of the organizations to which the respondents belong to; (4) the main focus of the CSR initiatives of the SMEs; (5) the effects of recession to the said initiatives; (7) the reasons for pursuing CSR even during times of economic uncertainties; and finally, (8) the derailers of CSR. The next chapter of this study shall then analyze the data obtained in relation with the literature reviewed by the researcher. This analysis would then aid the author of this dissertation to provide answers to the different research questions earlier obtained.

CHAPTER FIVE: DISCUSSION

Introduction

            This chapter is dedicated to the discussion of the results obtained by the researcher from the use of the questionnaire method. The results obtained shall be compared vis-à-vis with the findings from the literature reviewed. It is through this that the researcher was able to come up with answers to the research questions. Hence the following themes had been covered by this chapter: (1) the corporate social responsibility initiatives of small and medium enterprises; (2) the importance of corporate social responsibility to small and medium enterprises; (3) the difference between the CSR initiatives of SMEs when compared to the multinational corporations; and lastly, (4) the effects of economic uncertainties or recession to the CSR initiatives of SMEs.

The Corporate Social Responsibility Initiatives of Small and Medium Enterprises

            The researcher first looked into the characteristics of the corporate social responsibility initiatives of the small and medium enterprises. The literature review earlier mentioned that due to the definition given to corporate social responsibility, it is often more connected with the large multinational companies. However, this study reiterates that the undertaking of the said initiatives is not in a way, influenced by the size of an enterprise. In fact, as also earlier discussed, Lepoutre and Heene (2006) discussed that CSR is both very important and useful to any type of business, regardless of its size or the industry where it comes from.

            The survey questionnaire first looked into the reasons why small and medium enterprises (SMEs) develop programs and initiatives with regard to corporate social responsibility. Of the six factors that were included in the questionnaire, the following were said to be apparent in influencing the respondents’ organizations’ programs with regard to corporate social responsibility: (1) the commitment of top management to the moral and ethical standards (mean= 4.38, standard deviation= 0.67) and (2) to gain competitive advantage (mean= 4.51, standard deviation= 0.66). On the other hand, the respondents were neutral with regard to its influence to CSR initiatives: (1) to gain long term profits (mean= 3.54); (2) because activities that fail to acknowledge social responsibility result to bad karma in the form of bad financial operation and low brand positioning (mean= 3.46); (3) fear that corporations that are not socially responsible would damage their relationships with their consumers, supplies and may eventually result to costly litigations (mean= 3.03). Finally, the respondents find the following factor weakly experienced by their companies in undertaking initiatives pertaining to corporate social responsibility: (1) the visionary skills of many leaders of companies (mean= 2.65) and (2) as a market opportunity (mean= 2.89).

            The results presented above in a way, failed to prove the claim of Juholin (2004). Juholin (2004) stated that companies usually practice corporate social responsibility (CSR) because of the long term profits that it may give to the companies. On the other hand, however, the results has proven the other reasons cited by Juholin (2004) with regard to companies’ adoption of CSR initiatives, including: (1) the commitment of top management to the moral and ethical standards that are more often than not, advocated by programs and initiatives related to corporate social responsibility and (2) to ensure their competitiveness even during the times of intense competition.

            Another research conducted in relation to this aspect of the dissertation has been authored by Porter and Kramer (2006). Similar to that of Juholin (2004), these two authors claimed with the statement that companies become advocates of corporate social responsibility initiatives due to the belief that it might bring about long term profits. This is because of the fact that more or less, companies that practice CSR integrate this to their core strategic plans, thereby assuring them of long-term prosperity. Hence, the results obtained by the study which reflects the neutrality of the respondents with regard to the said factor proves that the corporate social responsibility initiatives undertaken by the small and medium enterprises or SMEs are not in any way, significantly influencing the desire to make long term profits.

            The responses of the survey participants to the questions that discovered the reasons behind the adoption of CSR initiatives also reflected their neutrality with regard to their belief that negative experiences may result from their inability to develop the latter. Apparently, the study of Porter and Kramer (2006) that was earlier discussed revealed that there is a tendency for some companies to only advocate CSR initiatives for fear of negative effects that may befall on them once this is not done properly. These negative effects are often in the form of the following: (1) bad financial operation; (2) low brand positioning; (3) a rift in the relationship between companies and their consumers and suppliers; and finally, (4) costly litigations. Conversely, once a company has been socially responsible for their actions, then positive effects can be expected. However, one must again note that the SMEs who served as respondents to this study were relatively neutral with regard to the influence of the abovementioned to their CSR programs and initiatives.

            Finally, the respondents also revealed that they weakly experience the fact that their CSR initiatives are brought about the visionary skills of their leaders as well as a source of market opportunity. Hence, this particular finding has relatively disproved the claims of Juholin (2004) as well as that of Porter and Kramer (2006).

            The researcher acknowledges the fact that the researches authored by Juholin (2004) and Porter and Kramer (2006) were basically done from the point of view of the multinational corporations who were major proponents of the CSR initiatives. It is then in relation with this that not all of the factors that they have enumerated were significantly apparent to the experience of the respondents whose companies fall under the small and medium enterprises (SMEs) category. It is from this then that the researcher concludes that more often than not, there are two notable reasons why SMEs: the first is to gain a competitive advantage and the second, the commitment to moral and ethical standards. As a result, these findings then are seen to concur with the research conducted by Morsing and Perrini (2009) who claimed that small and medium enterprises do undertake corporate social responsibility initiatives in order to ensure their competitive advantage, noting that the latter incorporate it effectively into their business activities to affect not just the performance of the entire organization but their competitiveness in the market as well.

            In looking into the corporate social responsibility initiatives of the small and medium enterprises, the researcher also looked into the former’s main features in general. The researchers all said that the following were not experienced at all in their organizations: (1) developing CSR initiatives are carried out with ample time (mean= 1.27); (2) developing CSR initiatives are manageable because there is enough information about stakeholders and issues (mean= 0.50); (3) SMEs have enough funds to implement CSR initiatives (mean=1.67); and lastly, (4) SMEs have clear motivating factors to develop CSR programs (mean=1.73).

            The abovementioned responses to survey questions then proved the findings of the research conducted by Lepoutre and Heene (2006). These two noted that SMEs, unlike the multinational corporations tend to face different obstacles that prevent them from successfully developing CSR initiatives within their organizations. These obstacles include the following: (1) lack of time; (2) not enough information about stakeholders, issues and the different programs being implemented under CSR: (3) the lack of authority and influence during negotiations; and lastly, (4) the lack of motivating factors that are of paramount importance to the development of CSR programs.

             It is then in relation to this that this research supports the claim of Murillo and Lozano (2006) who noted that in one way or another, SMEs lack an understanding of the concept of corporate social responsibility. Apparently, their knowledge with regard to the latter are only confined on the practices that they implement which more or less are in relation with the advocacies of the director. Aside from this, it has been said that SMEs tend to only provide excellent working environment for their employees as a part of their CSR initiatives (Armstrong & Taylor, 2000).

            The researcher, however, finds the abovementioned characteristics vague. As a result, it looked more specifically into the CSR practice of the respondents’ organizations. In doing so, the researcher would be able to prove whether or not the CSR programs of SMEs are only confined with the commitment to provide excellent working environment to the employees. The results of the survey show that in relation to the experience of the respondents, they were neutral with the fact that the focus of their CSR programs are the following: (1) the natural environment (mean= 3.93); (2) the communities (mean= 3.83); and (3) all of the above (the natural environment, the society and the communities) (mean= 3.13). On the other hand, they also reveal that the society as the focus of their CSR initiatives are weakly experienced in their organization (mean= 2.27). This then points to the fact that without a doubt, the CSR initiatives of most SMEs are invisible to the point that they misunderstood the concept, thinking that it is enough for them to provide excellent working conditions to their employees, as earlier discussed by Armstrong and Taylor (2000). In the same manner, it has also been noted by the European Commission (2004) that the initiatives of the SMEs may be hard to understand for it is seldom that they concur with the traditional definitions of corporate social responsibility that are applicable to larger multinational corporations.

            In relation with what has been previously discussed, the European Commission (2004) further comments that the corporate social responsibility initiatives of small and medium enterprises are often confined to the following: (1) to get involved in operations in order to ensure the enthusiasm, motivation and the enhancement of their employees’ capabilities so as to meet their long-term goals and the attainment of success; (2) to consider human rights, health and safety of their workplace; (3) to ensure the proper use of natural resources; and finally, (4) giving back to local communities (i.e. environmental activities like clean up drives). Thus, without a doubt, the corporate social responsibility initiatives of the small and medium enterprises seem relatively small-scale when compared to the philanthropic projects of the multinational corporations.

The Importance of Corporate Social Responsibility to Small and Medium Enterprises

            This research also looked into the importance of corporate social responsibility initiatives to small and medium enterprises to better understand the manner by which they develop their programs. In order to discover how important these initiatives are to them, the reasons why they undertake the initiatives must again be analyzed.

            As earlier stated, among all the reasons why company undertake the CSR initiative, the factors “to ensure the competitiveness of the companies” and “to meet the moral and ethical standards of the top management” were apparent to the experience of the respondents’ organization.  Mentioned earlier was the study of Morsing and Perrini (2009) who noted that small and medium enterprises (SMEs) undertake initiatives relating to corporate social responsibility as they want to gain their competitiveness in a market characterized by intense competition. They further discuss that SMEs make use of the corporate social responsibility initiatives in order to develop their performance and competitiveness. Moreover, they find it important in order to help them in the reduction of their risk profile (Morsing & Perrini, 2009).

            Finally, Morsing and Perrini (2009) discuss that the importance of CSR to SMEs lie on the fact that the latter is being used in order to achieve the following: (1) to enhance their reputation; (2) to stimulate confidence and loyalty which is considered to be important to ensure the stability of the workforce and the development of better relationships with financial institutions, suppliers and other partners.

The Difference between the CSR Initiatives of SMEs when compared to Multinational Corporations

            In line with the discussions previously made, the researcher can now determine the major differences existing between the corporate social responsibility initiatives of small and medium enterprises (SMEs) when compared to the multinational corporations. As earlier noted, Lepoutre and Heene (2006) have recognized that unlike the larger multinational corporations, many obstacles prevent the SMEs from efficiently developing corporate social responsibility initiatives that are successful as compared with the former. Once again, the following were the root causes and these were confirmed by the respondents of this study: (1) lack of time, information about stakeholders, issues and programs; (2) shortage of funds; (3) lack of authority and influence; and lastly, (4) the lack of motivating factors that are important in the development of CSR programs.

            It is in relation with the abovementioned factors that earlier discussion noted that SMEs lack an understanding of what corporate social responsibility initiatives are really about. More often than not, it does not concur with the definitions being adhered to by larger multinational corporations who are apparently focusing their initiatives to philanthropic purposes; to the environment, the society and the communities. On the other hand, however, the initiatives of SMEs, as discussed by the European commission (2004) are only focused upon the development of their workplace by focusing on initiatives that would improve the conditions of their employees. Aside from this, it must also be noted that their projects are often smaller than that of the multinational corporations.

The Effects of Recession to the CSR Initiatives of SMEs

            The researcher then looks into the effects of economic uncertainties or recession to the corporate social responsibility initiatives of the small and medium enterprises or SMEs. As revealed by the literature reviewed by the researcher, many companies have thought of throwing away or at least putting to the side CSR practices and programs in favor of focusing on the essential role of businesses – to make profit – during times of economic uncertainties such as recession.

            The world is currently in the midst of an economic crisis, beginning on January 2008 when the New York Stock Exchange began to drop sharply. This was then followed by a series of collapses and many banks’ declaration of massive losses. Hence, the current financial state was seen to have been depressing that many people are comparing it to the Great Depression of the late 1920s. As a result, businesses are now beginning to wonder whether money and time should be devoted to CSR programs or other initiatives by which they could continue to earn income despite the financial crisis. As Sen and Bhattacharya (2001) argues that during economic uncertainties CSR initiatives may eventually lead to financial losses as additional costs are being made to charitable causes rather than developing new programs that would ensure the satisfaction of their customers, thereby enhancing their businesses.

            The respondents acknowledge the abovementioned by responding to the survey in such a way that it reveals that it is weakly experienced in their organization to continue CSR initiatives during recession (mean= 2.38, standard deviation= 0.71). This then concurs with the claim of Sen and Bhattacharya (2001). However, one must also take the results of the correlational research into consideration with regard to the reasons behind the continuous adoption of CSR initiatives even during times of economic uncertainties. This is basically in relation to the discussion made with regard to the importance of corporate social responsibility initiatives to the small and medium enterprises. The correlational research proves that the visionary skills of the leaders and the need to ensure their competitive advantage.

CHAPTER SIX: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

Introduction

            This chapter is devoted to the conclusion part of the study. First, it would summarize the entire study by highlighting the major points provided in the five major chapters that precede this. Second, the conclusion aspect shall provide the answers to the research questions enumerated by the researcher in the first part of the study. These include the following: (1) how do small and medium enterprises (SMEs) construct programs and initiatives related to corporate social responsibility (CSR); (2) how important are CSR initiatives to SMEs; (3) what are the major differences between the CSR initiatives of SMEs and larger multinational corporations; (4) which of the three aspects of CSR are the initiatives of SMEs directed to?; (5) what are the positive and negative effects of CSR initiatives to SMEs; and lastly, (6) does economic uncertainty or recession affect the CSR initiatives of SMEs. Finally, the recommendations portion of this study shall enumerate steps that SMEs must undertake in order to ensure the betterment of their CSR initiatives. In the same manner, it will also feature the steps that the researcher deems necessary for future studies conducted with regard to the topic at hand.

Summary

            This research basically dealt with investigation of the corporate social responsibility initiatives of the small and medium enterprises (SMEs) and its difference with that of the multinational corporations who are more or less the pioneers of the former. Aside from this, this research also looked into the effects of times of economic uncertainties to the initiatives relating to corporate social responsibility, most importantly, that of the SMEs. In order to meet the abovementioned, the combination of qualitative and quantitative methods was used. For the qualitative aspect, the researcher made use of a literature review in order to consolidate all important information published with regard to the topic at hand. On the other hand, the quantitative aspect featured a questionnaire method by which the opinions of one hundred and fifty members of SMEs were obtained.

            The following are the major findings of the study:

Small and medium enterprises, like the multinational corporations have acknowledged the importance of developing of initiatives regarding corporate social responsibility;
CSR initiatives are important to SMEs for it generally enhances their competitive advantage;
The CSR initiatives of SMEs are different from that of the multinational corporations in such a way that it is marred by a number of obstacles that prevent its development and at the same time, vary in scope and focus;
The CSR initiatives of SMEs focus on the employees and at the community, at a smaller scope;
CSR initiatives enhance the competitive advantage of the small and medium enterprises in the same manner as it enhances their reputation. They must however, ensure that they fully incorporate it to their business processes as this would eventually cause losses; and lastly,
Economic uncertainties and recession affects CSR initiatives as this pushes the companies to channel their resources to the improvement of their businesses rather than devoting it to CSR.

Conclusions

This subsection is devoted to the approval or rejection of the hypotheses in order to explain properly the abovementioned answers to the research questions.

The Corporate Social Responsibility Initiatives of Small and Medium Enterprises

            As earlier stated, small and medium enterprises are similar to the large multinational corporations for they too, undertake initiatives with regard to corporate social responsibility. According to the results obtained by the researcher from the use of the questionnaire method, SMEs undertake the said initiatives due to the following reasons: (1) the commitment of the top management to the moral and ethical standards; and the same manner, (2) in order for them to gain a competitive advantage. Because of this then, SMEs were seen to have properly incorporated the said initiatives into their business processes in order to ensure its efficiency in bringing about competitive advantage to the company undertaking the said initiative. As a result, the researcher then rejects Null Hypothesis 1 and accepts alternative hypothesis 1 (small and Medium Enterprises or SMEs focus on relationship building and gaining a competitive advantage in constructing programs and initiatives related to corporate social responsibility or CSR).

The Importance of Corporate Social Responsibility to Small and Medium Enterprises

            As earlier mentioned, corporate social responsibility initiatives are of paramount importance to the small and medium enterprises because of the fact that it brings about competitive advantage to the organization undertaking them. In the same manner, this study has also highlighted the fact that CSR initiatives, when properly incorporated into the business processes can also develop the performance of the entire organization, enhance their reputation, and finally, stimulate confidence and loyalty which is seen to be important in ensuring the stability of the workforce and the development of better relationships with financial institutions, suppliers and other partners. Because of this, the researcher then rejects the second null hypothesis and accepts alternative hypothesis 2 (Corporate Social Responsibility (CSR) initiatives are of vital importance to Small and Medium Enterprises (SMEs) as it ensure their competitive advantage and at the same time, lead to the enhancement of their reputation).

Differences between the CSR Initiatives of the SMEs and the Multinational Corporations

            Three major differences were seen between the corporate social responsibility initiatives of SMEs and the multinational corporations. One of which was the tendency for obstacles to prevent the successful development of CSR programs in SMEs which are often in the form of lack of resources such as time, money and motivation. Aside from this, it was also proven that the scope or focus of the CSR initiatives of SMEs is smaller when compared to the multinational corporations. Because of this, it was said that the initiatives of the SMEs do not usually fall under the definition of CSR used by the larger companies. Hence, the researcher rejects the third null hypothesis and accepts alternative hypothesis three (there are major differences between CSR initiatives of SMEs and larger, multinational corporations).

The Focus of SMEs’ Corporate Social Responsibility

            The corporate social responsibility of SMEs is not directed to the traditional foci of the initiatives – the community, society or natural environment. This is because of the fact that their programs are usually directed only to the lower levels, more often than not, on the improvement of the working conditions within the workplace. In the same manner, as earlier stated, it is often smaller in scale as it does not champion philanthropy. Because of this, the researcher rejects the fourth alternative hypothesis and accepts null hypothesis 4 (the CSR initiatives of SMEs are not directed to all three aspects of corporate social responsibility).

Positive and Negative Effects of CSR Initiatives to SMEs

            Initiatives related to corporate social responsibility bring about many positive effects to SMEs. These usually include the following: (1) competitive advantage; (2) enhancement of reputation; (3) development of performance; (4) the stability of workforce; and last, (5) development of financial institutions with the shareholders. On the other hand, due to the smaller scope of the SMEs, engaging in corporate social responsibility initiatives may lead to the inefficient allocation of resources which may be engaged in other programs for the benefit of the businesses. However, the negative effect must be eliminated for once CSR initiatives are properly incorporated into the business processes so as to ensure their competitive advantages. Hence, the researcher rejects the fifth null hypothesis and accepts the alternative hypothesis (the CSR initiatives pose more positive effects than consequences to SMEs).

The Effects of Recession to the CSR Initiatives of SMEs

            Recession negatively affects the CSR initiatives of SMEs for they tend to disregard these practices in favor of other programs by which they could enhance their performance. In the same manner, it is also during these times of economic uncertainties that most corporations tend to channel their resources for business process rather than charitable acts. On the other hand, however, there are still some SMEs that continue to advocate CSR even during recession for it guarantees their competitive advantage. Because of this, the researcher rejects the sixth null hypothesis and accepts the alternative hypothesis (economic uncertainty or recession affects the CSR initiatives of SMEs).

Recommendations

            To guarantee that small and medium enterprises (SMEs) benefit from their adoption of CSR initiatives, the researcher recommends its proper incorporation into their business processes. Through this, the companies will be able to assure that they do receive competitive advantage because of advocating social responsibility goals. Future researchers, on the other hand, could conduct interviews amongst the administrators of SMEs in order to delve into matters that this research was not able to focus on.

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