Initiatives to improve working conditions in developing country supplier facilities of global production networks (GPNs) have failed to demonstrate promising impacts. While extensive research has been done to understand the underlying reason, most of it adopts a GPN perspective and fails to take into account a small business perspective. In contrast, by drawing on both the small business and GPN literatures, I develop a multi-level conceptual model of factors shaping working conditions in small businesses in developing countries that are part of GPNs. I ague that working conditions in developing country small businesses that are part of GPNs are shaped by the totality of external contextual factors, internal dynamics and owner-manager-specific aspects, and the interactions between them.
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This chapter presents a case study of a food and drink cluster in England, referred to as the South Midlands Food and Drink Group (SMFDG) for reasons of confidentiality. This is a purposefully formed grassroots cluster organisation primarily comprising small and medium sized enterprises (SMEs), many of them small stockists and producers. Specifically, this study challenges Michael E. Porter’s and Mark R. Kramer’s notion that clustering can ‘create shared value’ (CSV) by using empirical data to determine if clusters can create economic and social value simultaneously. To differentiate this concept from CSV, it is referred to as ‘cluster shared value’ here. Fieldwork was conducted with 34 SMEs, larger firms and partnering institutions of the SMFDG, primarily on businesses sites in the form of semi-structured interviews, and observation of SMFDG related events and meetings. Results indicate that clustering can create economic and social benefits for SMFDG members but these benefits are not inclusive to clustering. Many firms act independently to create positive social impacts in their community. This is indicative of the notion that many SMEs practise corporate social responsibility without recognising it, viewing it as the ‘right thing to do’ while the economic benefits of their collaborations and knowledge sharing can be seen throughout the organisation’s members. However, the interactions between members are not all positive. For example, competition between similar businesses was expressed negatively and some businesses experienced resistance from communities.
Aqueel I. Wahga, Richard K. Blundel and Anja Schaefer
As part of a broader effort to reduce environmental degradation, small- and medium-sized enterprises (SMEs) around the world are increasingly being required by different stakeholders to adopt more environmentally responsible business practices. While there is some research on what motivates SMEs to adopt environmental practices, our understanding of what enables SMEs to engage with environmental issues remains much more limited. Even less is known about motivations and enablers of SME environmental engagement in developing economies. The chapter addresses this gap by exploring the influence of human capital on environmental engagement of SMEs in Pakistan’s leatherworking industry. We found that human capital influences environmental practices in such SMEs in the form of both formal education and informal environmental learning. Environmental interventions by industry associations and other agents, such as chemical suppliers, as well as SMEs’ participation in environmental networks also had an impact on their environmental engagement. Well-designed and executed interventions by third parties have the potential to promote large scale improvements in environmental performance of this industry sector. Furthermore, awareness programmes should aim not simply to educate entrepreneurs and employees, but also to inspire them to pursue environmental opportunities.
Social businesses are unlikely to emerge without a supportive infrastructure. Nepal Social Business is the first social business incubator to enter the remote district of Jumla in Nepal. Four different social business start-ups were selected for incubation between April 2014 and December 2015. Three of these projects dealt directly or indirectly with malnutrition, which is among the pressing issues of this area. Incubation, when working in regions with a lack of basic infrastructure and entrepreneurs with no formal economic education or relevant business acumen, requires a high degree of personal involvement and relatively more resources, than when working with start-ups in a more developed setting.
Mukesh Gulati and Ruchita Sanwal
Micro, small and medium enterprises (MSMEs) have a pivotal role in the socio-economic development of India owing to their vast number and their employment generation potential. However, most of the enterprises are typically small and unregistered. Provision of social security through legal measures is limited due to weak enforcement of regulatory policies and entrepreneurial attitudes. A development project funded by the European Union, ‘Scaling up sustainable development of MSME clusters in India’ (2012–16), undertaken by the Foundation for MSME Clusters (FMC) in partnership with various institutions to promote energy efficient measures in foundry clusters in the states of Punjab, Rajasthan and West Bengal, significantly benefited the foundries economically. As a result of the project, the enterprises were more receptive to the otherwise perceived non-business cases of social issues. Occupational health and safety (OHS) and labour welfare were targeted as part of the corporate social responsibility (CSR) activities adopted in the project. This chapter draws on the lessons learned during this project to highlight key factors that can trigger adoption and scaling up of CSR activities among MSMEs. The chapter demonstrates that entrepreneurs’ lack of awareness about the potential business case arguments for CSR activities is the first hurdle. Second, the role of local industry leaders and business membership organisations is crucial in establishing a business case among industry. Lastly, ensuring continuity of interventions through cost reduction by standardisation of such activities, local institutionalisation, and linking up with other funding options in industrial clusters, is important for scaling up such interventions.
Mukesh Gulati, Peter Lund-Thomsen and Sangeetha Suresh
In this chapter, we investigate corporate social responsibility (CSR) in industrial clusters in the Indian context. We use the definition of CSR as given in the Indian Ministry of Corporate Affairs’ National Voluntary Guidelines (NVGs) for Business Responsibility: ‘the commitment of an enterprise to operating in an economically, socially and environmentally sustainable manner, balancing the interests of diverse stakeholders’. Our choice of India as the focus of our chapter is justified by the fact that the Indian economy has grown tremendously in recent decades. Moreover, not only do Indian enterprises sell their products successfully in international markets, but there is also an increasingly large consumer base within India. Indeed, Indian industrial clusters have contributed to a substantial part of this growth process, and there are several hundred registered clusters within the country. At the same time, several attempts have been made at promoting the adoption of CSR in MSMEs in Indian industrial clusters. In fact, India has proved to be a kind of laboratory for experimenting with different types of cluster-based CSR and is thus an interesting location in relation to the broader aim of this handbook, which focuses on the role of CSR in MSMEs. Hence we contribute to the literature on CSR in industrial clusters and specifically CSR in Indian industrial clusters by investigating the drivers of CSR in India’s industrial clusters.
Emmanuel Benjamin, Ebele Maduekwe, Maarten Punt and Gertrud Buchenrieder
Climate change adversely affects agriculture and thus societal welfare in parts of developing countries. However, despite being credit constrained, some smallholder farmers in developing countries are adopting conservation agriculture or climate-smart agriculture involving agroforestry, which improves environmental quality and makes their agri-enterprise more climate resilient. These actions can be interpreted as corporate social responsibility (CSR), leading to corporate sustainability (CS), which is partly remunerated with payment for ecosystem services (PES). PES, CS, and CSR may have important implication for agriculture financing. This chapter extends the theoretical model set forth by Hediger in 2010 related to capital and welfare theories of CSR and CS. Our model is designed to capture the overlapping concepts of CSR, CS, and conservation agriculture. We express CSR and CS as constrained optimization problems, showing their relations and differences and their link with PES and the quality of land. We also incorporate important smallholder constraints such as arable land size. The theoretical results suggest that in the short term, CSR can be interpreted as a societal welfare constraint on the farmer’s profit maximization objective and that PES alone may not be enough to induce a farmer to observe this constraint. The fact that farmers still observe this constraint implies that they account for other things. In the long run, agri-enterprise CS (land productive capacity) is related to long-term profit maximization given the initial land endowment and land quality. These are important factors relevant to the credit risk management strategy of formal financial institutions in accordance with international banking standards. We argue that farmers who implement CSR and CS, and especially if they go beyond PES, account for more than just short-term profit maximization. They care about reputation and long-term profit maximization. Therefore, we speculate that PES, CSR, and CS can serve as important indicators for banks that they are dealing with responsible, trustworthy, and especially creditworthy individuals.
Patricia Hind and Arnold Smit
This chapter reports the results of a multifaceted and longitudinal research project entitled Enabling Sustainability through Action Research (EStAR). Conducted in two phases, with two separate cohorts of small, medium and micro enterprises (SMEs) in southern South Africa, the research project considered how an action research methodology could support the embedding of sustainable business practices and responsible leadership, first, into a diverse group of unrelated SMEs, and, second, into another group of SMEs working independently within a corporate supply chain. The leaders of the SMEs in both groups initially had a limited understanding of the concepts of sustainability and responsibility, and they also had restricted budgets. The results of the first phase reported in this chapter confirm the potential of action research to help instil responsible business practices into SMEs. It was apparent that, following the project, the business leaders demonstrated good understanding and mastering of the knowledge and skills that such practices require. In the second phase of the research, the methodology was extended to study whether large corporate supply chain investment could be linked to sustainable practices in a way that added value to both the SMEs and the corporate body. The second group of SMEs were also independent businesses but all of were working within the supply chain of a large insurance company. The business stream was short term insurance, so the SMEs represented a number of panel beaters, solar heating installers and insurers. This stage of the research highlighted the additional complexity involved when the business practices contributing to sustainability and responsibility are defined and shaped within the corporate–SME relationship of supply chain dynamics. This complexity appeared to inhibit the contribution the action research process was able to make to the intended business changes.
Anica Zeyen and Markus Beckmann
Small business social responsibility (SBSR) and social entrepreneurship (SE) are two concepts that address societal value creation by small and medium sized organizations. This chapter takes the inherent hybridity of both forms as a starting point to ask where differences lie and which roles these concepts play for society across the globe. We argue that SE in developed countries complements welfare state organizations and serves as a societal R & D department, whereas it tends to substitute welfare state organizations in developing nations. Similarly, SBSR in developed nations has a greater focus on efficiency and ‘no harm’, whereas it places more emphasis on providing public goods in developing nations. We take this finding as a basis to argue for a greater integration of these four strands of research. In doing so, we identify four main insights which include the acknowledgement of multiple layers of hybridity, the integration of an agentic and contextual perspective, the importance of integrating societal impact with internal sustainability, as well as the understanding of when and how cooperation and networks work best for social value creation.
Jyoti Navare and Morrison Handley-Schachler
Business vulnerability is a function of the extent of risks faced and the ability of the business to adapt to adverse changes in circumstances. Financial aggregation arises out of the link between economic interactions at the micro level and their macro based risks. Microbusinesses in developing countries are often highly vulnerable to a range of risks including natural disasters, corruption, poor weather conditions and illness. This vulnerability creates a need for insurance but the ability to take out appropriate insurance is frequently limited by financial resources, availability of insurance policies and information on these policies, and financial education levels. On the supply side, microinsurers are faced with high marketing and administrative costs, and the microinsurance market is further distorted by information asymmetries, adverse selection and moral hazards. This limits interest in the microinsurance market from commercial providers, with microinsurance frequently being available through non-profit agents. This chapter investigates the relationship between vulnerability, risk appetite of microbusinesses and their propensity to insure. In building a conceptual framework, we explore the factors that impact financial aggregation and the uptake of microinsurance. We observe additionally that improved financial education and more effective information may help increase the extent and quality of microinsurance.