India is a country of Micro, Small & Medium Enterprises (MSMEs). The sector provides employment to over 110 million people. So it is imperative that India works towards making the small enterprises Corporate Social Responsibility (CSR) self-compliant. SMEs need to realize that CSR is the way through which a company can create a balance of economic, environmental and social goals. At present CSR amongst SMEs can be characterized as unstructured, informal and ad hoc philanthropic activity which is also discretionary in nature or religious in spirit.

During our recent study of innovations in SMEs which was supported by the Department of Science & Technology, Government of India, SMEs interpreted CSR as a support mechanism to their employees beyond the legal/statutory requirements. SMEs particularly the profit making do discharge their Corporate Social Responsibility mostly by extending benefits to the employees beyond the rule of the law particularly in the form of medical benefits, supporting housing needs in some cases by lending part funds, training and re-training of the employees, financial support for marriages of their wards particularly girls and sometimes for educational needs, etc. There are umpteen examples one can site as an extension of their social responsibility. Here are a few:

According to T.K. Karuppannaswamy of Barani Hydraulics India Pvt Ltd (BHIPL), Coimbatore, the second largest hydraulic press manufacturer in India, the firm spends nearly 30 per cent of its profit on CSR activities annually. He provides financial help to employees to build their own houses; provides scholarships and benefits to the needy and deserving students; and has adopted a school too.

N.K. Dhand of Micromatic Grinding Technologies Ltd (MGT), Ghaziabad, provides internships to graduate students of local engineering colleges to equip them with practical training to enhance their employability as a CSR activity. Sagar Heavy Engineering Works (SHEW), Ludhiana, has no formal policies in this regard as yet. However, owner Kirpal Singh’s unstated policy is to look after the employees and help them like they are a part of the extended family of Sagar Engineering.

Most of the SMEs are barely making enough money to survive and sustain and have got no surplus for CSR activities. However, many other profit making SMEs are still in their nascent stage in devoting their professional and financial resources for societal needs. However, many contribute just to build their own social status or to satisfy and fulfill their moral and religious obligations. Nevertheless, this religious approach of contributing to the society has limited cohesiveness at the macro level and it does not allow for new ideas to emerge. CSR has to evolve into ISR – Individual Social Responsibility — particularly for SMEs which require commitment of the promoter of an SME for the cause of CSR.

An alliance of interested SMEs can be created. This may be initiated by a cluster association. Alternatively, it can be initiated by an individual SME in case there are only a few units interested in undertaking CSR activities in collaboration. The alliance should then form a steering committee with the representatives from each SME so as to democratically decide on issues. The steering committee should study the institutional method of implementation, i.e. undertaking activities through an established trust, society, a Section 8 company under the Companies Act or forming a new entity or directly managing the funds. The Industrial Estate & SMEs Associations, Cluster Association could initiate ‘Swachh Approach’ to join hands and bring about cleanliness and better maintenance of the infrastructure. In addition, they can build toilets, bathing and other facilities on the ‘Sulabh Model’. Also they can run mohalla clinics/dispensaries and primary schools for the betterment of children of workers. 

Imagine the impact on a society even if 5 per cent of 60 million SME population in India constituting about 3 million small and medium enterprises contribute 2 per cent of their profits for economic and social good of the people. It is the sacred duty of institutions, associations such as AIMA, Chambers of Commerce, PHD Chamber, CII, Regional Chambers, SME associations at state and local level, etc. to inculcate sense of giving particularly for consistent profit making SMEs. If we bring this awakening and motivate them, SMEs will rise to the occasion. We must enable such a revolution, by bringing in the SMEs into the CSR fold in a careful and responsible manner. The rules and guidelines have to be enablers and not irritants for the SMEs.