productivity as a long-term determinant of economic
growth.4
CSR Definition and Relevance to SMEs
CSR has been defined in many different ways. At
bottom, it refers to companies integrating “social and
environmental concerns in their business operations
and in their interaction with their stakeholders on a voluntary
basis (…) not only fulfilling legal expectations,
but also going beyond compliance.”5 Importantly, the
above EU definition links CSR practice intrinsically to
business operations thus excluding corporate philanthropy
and connecting CSR with the core of a company’s
operations. This emphasis on economic benefits
derived from environmental and social considerations,
is generally referred to as the “CSR business case”.
This “business case” for CSR can be traced to a
number of different motives and mechanisms. These
range from defensive attempts at avoiding financial
losses and protecting image and reputation, to a proactive
cost-benefit calculus that factors in financial
gains from productivity improvements (e.g. resulting
from enlightened human resource management or
from higher energy or material effi ciency) and ultimately,
CSR as the core of a company’s corporate strategy
where CSR itself becomes the basis for brand equity
and the driver of organisational learning, innovation
and technology management.6
However, as stated in the EU Green Paper, CSR
practice has so far primarily been the domain of large
TNCs whereas “its wider application in SMEs including
micro-businesses is of central importance, given
that they are the greatest contributors to the economy
and employment”.7
Indeed, in economic and industrial development, a
critically important role is played by micro, small and
medium enterprises which, on average, make up over
90% of enterprises and account for 50-60% of employment
– in particular in the developing world. While
being important at all levels of development, empirical
studies have clearly shown that at the lower income
levels typical for developing countries, the prevalence
of SMEs is particularly pronounced. Also, as average
income increases, the size distribution of firms typical-