Academic journal article Journal of Emerging Trends in Economics and Management Sciences

Corporate Social Responsibility in Small and Medium Enterprises (SME) in Sri Lanka

Academic journal article Journal of Emerging Trends in Economics and Management Sciences

Corporate Social Responsibility in Small and Medium Enterprises (SME) in Sri Lanka

Article excerpt

Abstract

Corporate social responsibility (CSR) remains a broad, complex and continually evolving concept that encompasses a variety of ideas and practices. Practice has so far primarily been concentrated on the large multinational enterprises, but its wider application in SMEs is of central importance, concerning their contribution to the economy and employment performance and to contribute to the economic development of the society. Concerning the growing importance of the SME sector in Sri Lanka, this study mainly focus on gaining an initial insight to the nature, perception and the extent of the application of the CSR concept in the small and medium enterprises. The concept was measured through four dimensions of stakeholder theory derived from the literature namely environment protection, employee care, Community care and employee concern. Fifty number of semi structured questionnaires were collected from owner/managers of small and medium sized firms operating in Western province, spanning a variety of industries and the data was analyzed using non parametric statistics. Results revealed that majority of firms believe that they should pay attention to their social and environmental responsibilities. The familiarity with the term CSR, involvement and the regularity of CSR activities undertaken were high in medium size firms than in smaller ones. The community was the most cited stakeholder, followed by the environment. Customers and employees in their definition of CSR. All industries in the sample indicates that the motivation factor for adapting CSR is to improve firm's reputation, employee motivation and to improve economic performance while ethical and moral reason reserves the least importance as a motivating factor for CSR. The main barriers were lack of money and attitude of no benefit in short run.

Keywords: corporate responsibility, SME, reporting practices, social responsibility, ethical practices

INTRODUCTION

There has been a significant increase in interest in Corporate Social Responsibility (CSR) in recent years (Young and Thyil, 2009; Park and Lee, 2009; Gulyas, 2009; McGehee, 2009) and it is now regarded to be at its most prevalent. (Renneboog, 2008) representing an important topic for research (Burton and Goldsby, 2009). Recent corporate scandals have attracted public attention and highlighted once more the importance of CSR (Annelids, 2008; Evans and Davis, 2008). It has been noted that research on CSR in SMEs is quite scant in developing countries (Burton and Gold by, 2009; Cilberti et.al, 2008). Small and medium enterprises (SMEs) have been identified as an important strategic sector for promoting growth and social development of countries. Over the years, SMEs have gained wide recognition as a major source of employment, income generation, poverty alleviation and regional development. SME sector in Sri Lanka has received the attention of the government as an important sector in the development of the country. Sri LankaMahinda Chintana Plan (2006-2016), the current framework for macroeconomic policy, strives for the development of a competitive, innovative and technologically strong SME sector, capable of meeting the increasing demands of globalization and intensifying competition. Policy initiatives has been designed to develop the SME sector and further entrepreneurship development, promotional measures on enterprise support services, enhancement of competitiveness, and development of micro enterprises have been emphasized.(Central Bank of Sri Lanka Annual Report,2009).

More importantly, CSR is considered as a mean to corporate sustainability. Hence the purpose of the study is to ensure whether the SME sector in Sri Lanka is aware of and currently practising the CSR concept for their sustainability. In spite of the growing importance of the SME sector in Sri Lanka, there is a lack of understanding concerning CSR in SMEs and hence this study aims in enriching the existing body of knowledge by answering the following research questions. …

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