A System Approach to Develop CSR in MSMEs

All firms have economic, legal, and ethical responsibilities and they have stakeholders, are part of social contexts with contracts, and need to act in a legitimate way. Micro, Small and Medium enterprises (MSMEs) have been contributing in the process of industrialization, generation of employment, contribution to the export bringing the regional balance. Most of the MSMEs output are used as input in large scale industries. Even though some constraints and challenges faced by MSMEs, but for their sustainability there is need of a system approach to develop Corporate Social Responsibility (CSR) in MSMEs. Business has come under increasing pressure to demonstrably engage in activities which are described as corporate social responsibility CSR. CSR movement has gathered great momentum over the past number of years. It can improve the competitiveness of MSMEs. In addition to their economic benefits, MSMEs are seen as potential contributors to sustainable development. Society's expectations for private companies to manage their societal and environmental impacts and to be involved in addressing public concerns have increased over the years. Through their CSR initiatives and their core business activities, private companies attempt to meet these societal expectations, highlighting their importance as development actors. More companies are encouraged to adopt CSR initiatives for MSMEs development. Through Strategic CSR initiatives that focus on societal and business benefits, some large firms partnered with community groups as well as with micro and small enterprises in the procurement of raw materials, production of goods for exports, distribution of products, and other aspects of their value chain. The government recognizes that encouraging the private sector to contribute to MSMEs development is an important policy direction. However, companies have a wide range of CSR initiatives to consider. For example, education, livelihood and health are well-publicized national needs that management and shareholders of firms can respond to. Although companies may deal with smaller enterprises, for instance, in their supply chains, there is no strong motivation to undertake CSR initiatives in this direction. They have an important impact on the economy, but alongside this, an impact on the social and environmental fabric of society. CSR has traditionally been the province of the corporate sector but recognition of the growing significance of the MSMEs sector has led to an emphasis on their social and environmental impact.