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Ethical behaviour builds customer loyalty

Nearly half (43%) of Trading for Good members are involved in some kind of social responsibility activity with over 60% making in-kind contributions to local good causes. 

This mirrors a recent EU survey that found that half of European SMEs are involved to different degrees in external socially responsible causes. The degree of involvement tends to reflect the size of the enterprise, ranging from 48% amongst the very small enterprises to 65% and 70% amongst the small and medium sized enterprises respectively. 

Why is the socially responsibility debate important for SMEs?

The social responsibility debate recognises one overriding fact, that there are new issues that businesses need to consider and respond to in order to stay competitive and grow.

Issues such as globalisation, distribution of wealth, governance and regulation, environmental concerns and social expectations may not seem to have a direct impact on the activities of SMEs. But these issues are influencing people’s attitudes towards business in significant ways. 

Recent times have seen the horsemeat scandal, factories collapsing in Bangladesh, banking fraud and child labour abuses. All of these issues have prompted the consumer to question their buying habits.

Trust and integrity in business really do matter. Early business leaders understood that. You only have to think of the founders of Cadbury, Unilever and Marks and Spencer to see that even in Victorian Britain entrepreneurs understood that for capitalism to work, business needs a connection with society.

That connection with customers, employees, shareholders and myriad others depends on trust.
More people want to buy from ethical companies, for example. Consumers want to purchase goods and services from companies who actively state that their objectives are social and environmental as well as economic. 

And that leads to a chain of other imperatives and benefits for companies. Incorporating social responsibility and being openly aware of the new issues facing businesses today can help to control operational risk, thus preserving the value of what a company already does. Applying responsible business practice can also create value, helping a firm to become more cost efficient. Or it can boost revenue, by opening a company up to new ideas of how best to run its core activities. 

From a supply chain perspective, how SMEs deal with these issues may well influence business partners’ decisions on how and where to source materials and products. How a company responds to social responsibility issues could either present an opportunity or pose a threat throughout the supply chain. These days the supply chain has to answer to the retail chain because the retail chain has to respond to consumers. This trend is on the rise at all levels - local, national and international - and concerns all businesses. 

By having a hands on attitude to issues such as how to protect the environment, how to treat people fairly and how to create value and maintain a sense of community, businesses send a powerful message to stakeholders: the key issues facing society are key issues for business too. 

Kay Allen
About the Author

Kay Allen

Kay is the Founding Director of Trading for Good. She is a consultant on Responsible Business advising clients including Fujitsu, who won Responsible Business of the year with BITC in 2015. Previously a Non-Executive Director DWP Pension Disability and Carers Service, Kay is a well networked, high profile ambassador for equality and social action with a proven track record as an outstanding innovator in the private and public sector.

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