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Why be a responsible small business

5th August 2016 By Kay Allen in Small Business News

Through their local operations, small businesses are making a strong contribution to socio-economic development at a local level and in most of the cases small business act responsibly. Much of the evidence on the social good created by small businesses is anecdotal and instinctively believed to be correct. We take a look at why small businesses have an instinct about behaving responsibly.

Ownership structure: Small businesses are more intuitive about the benefits of responsible business. This usually comes about because the owner or founder generally manages the small business. This can lead to a profound difference in commitment and connection to being ethical and responsible. It’s not just a business reputation – it’s a personal reputation.

Employee Influence: A key driving force for responsible behaviour in small businesses are the small number of employees that will want to work for a good businesses and who will want to get involved in local issues. Employees are more likely to have strong personal relationships inside the small business, which drive loyalty to the local area.

As a result of the above two factors, employees and owners find themselves part of a strong value stream where reputation matters a great deal, as does the strength of personal relationships. This creates a natural pressure to behave responsibly.

Networking: Small businesses rely a great deal on word of mouth and networking and strong personal relationships usually with the owner / founder. It’s this reputational tie that often wins and retains businesses. Networking often takes place at charity events or other public functions. Having a narrative about your ‘good deeds’ is much more engaging than just your core business message. It’s a great conversation starter.

Supplier influence: Small businesses that are also part of a larger value chain as a supplier are facing growing expectations to show their credentials and respect for society and the environment. Small businesses feel the downward pressure from larger corporates who in turn are feeling the pressure from customers and stakeholders to behave responsibly.

The educated customer: People are now much more sensitised to ethical business behaviour. The headlines may relate to big business but TV shows such as ‘rogue trader’ also highlight bad behaviour. This is all becoming unacceptable to the consumer who has the power to choose. Given choice between good and bad – Good will win.

Procurement Standards: Increase in guidance on standards are also taking a firmer approach with ISO26000 expecting larger firms to do more to support smaller organisations. Public Sector procurement has targets to open up its opportunities to small businesses whilst holding firm to CSR principles’.

As a result of the above changes many small businesses are evolving and actively following what corporates would label ‘CSR principles’. However they go beyond legal requirements, through their everyday actions, even if often they do not consciously or formally fit these into a structured CSR approach.

This approach appears to be confirmed by Eurobarometer survey in 2013, which shows that 71% of Europeans say that SMEs make efforts to behave in socially responsible ways, while 48% say this about large companies.

What are the real business benefits of CSR for small businesses?

Responsible Business can create real advantages for smaller businesses. This is not a short cut to business success, but an investment that can pay off in the longer term. Responsible Business practice is about continuous improvement and should be seen as part of the modern model of business excellence, in particular for smaller businesses. This must not be seen as forced or a compliance issue – but as a natural organic part of doing business well.

These business benefits are very real and measurable. By addressing their social responsibility enterprises can build long-term employee loyalty, which drives down retention costs and increases productivity, Consumer and citizen trust reaches a wide audience and helps attract new revenue. Higher levels of trust in business more generally in turn helps to create an environment in which enterprises can innovate and grow.

The economic crisis and its social consequences have to some extent damaged consumer confidence and levels of trust in business. World events have focused public attention on the social and ethical performance of enterprises. This can be a positive opportunity for small businesses to recapture the hearts of consumers to shop local. Smart local businesses are owning this narrative space in local media stories.

Small business must be given the flexibility to innovate and develop a responsible business approach that is appropriate to their business and their circumstances.

Many enterprises nevertheless value the existence of principles and guidelines to benchmark their own policies and performance, and to promote a more level playing field.

Consumers and investors are in a position to enhance market reward for socially responsible companies through the consumption and investment decisions they take.

The media can raise awareness of both the positive and negative impacts of enterprises.

All of the above demonstrates why small business instinctively behave responsibly and reap the benefits of employee engagement and customer loyalty that corporates can spend a great deal trying to achieve through impressive glossy CSR strategies.

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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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