Strategy, Leadership & Development

5 Reasons Why SMEs Have Greater Potential For Social Impact

4 months ago

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5 Reasons Why SMEs Have Greater Potential For Social Impact

When it comes to making the world better, it’s easy to think that only large companies can manage it. After all, they’re the ones with all the influence and resources, right? Sadly, because of this, many people completely overlook SMEs as a vehicle for driving change.

However, SMEs actually hold a considerable amount of power.

Yes, their resources might be limited.

Yes, their operations might be more localised.

But neither of these things actually matter.

To prove it, here are my 5 reasons why SMEs actually have the greatest potential for delivering social impact.

Why SMEs can deliver social impact | Jason Wicks

1. SMEs Are Simpler Organisations

One of the biggest obstacles for CSR and social impact is the structural complexity of the organisation itself.

Every layer of management and every individual department significantly reduces flexibility and responsiveness.

You can have the best ideas in the world, but by the time you’ve jumped through all the necessary hoops, they’re outdated and obsolete.

SMEs don’t suffer from this anywhere near as much. With fewer employees and managerial layers, ideas and decisions can be implemented much quicker.

On top of that, because the scope of an SME’s operations is usually narrower, there are far fewer pieces that you need to slot into place.

They can effectively bypass one of the biggest challenges that larger organisations are faced with.

2. A Blank Canvas

Broadly speaking, SMEs are pretty close to the start of the ‘growth journey’, while multinational companies are obviously at the end.

While this many limit the resources available, it does provide SMEs with an invaluable blank canvas to work with.

The vast majority of large companies didn’t get to their current position by prioritising social impact and responsibility.

That means that for them to now meet customer expectations they have to effectively tweak and change all their existing processes. With the scope of their operations being so large, this is an enormous challenge, and is often why big companies usually adopt an incredibly slow, incremental approach to CSR.

SMEs on the other hand are in a better position. As they grow and expand, new processes can be created with social impact in mind, which is much easier that introducing it retrospectively.

In essence, it’s must less work to create something great from scratch, than create something average and try and make it great later on.

Why SMEs can deliver social impact | Jason Wicks

3. Lower Customer Expectations

Interestingly, the smaller the business is, the less consumers expect in terms of CSR.

Think about it.

When we look at companies like Primark, Facebook and Apple, we think that with the money they have, there is no excuse for them to not behave responsibly.

With great power comes great responsibility, after all.

For SMEs though, it’s a very different story.

Customers acknowledge that the smaller a company is, the more volatile their chance of survival will be, so the more understandable it is for companies to prioritise it over impact.

Don’t get me wrong, this isn’t a free ride for SMEs to behave how they please, but it certainly eases the pressure.

It’s this reduced pressure that really counts.

Without customers constantly pulling in different directions, SMEs can focus on delivering social impact on their terms, without having to cave into demands that arguably lie outside of their strategic remit.

4. Innovation

As I highlighted in my article about creating impact with a shoestring budget, limited resources can actually be a good thing.

In big companies, having large budgets can make it very tempting to just throw money at social impact, especially when consumers are angry.

It can very quickly lead to PR stunts and marketing gimmicks just to get the public back on side.

On top of this, it can also encourage innovative laziness.

When resources are plentiful, companies almost just consider it to be philanthropy, and just accept that they won’t see a return on investment.

No matter how big the company is, this approach is unsustainable, and goes against what CSR is all about.

SMEs are therefore in a fantastic position. By being frugal and smart, they will naturally be forced to stay innovative. They will be more likely to design programmes with a ROI in mind, and they’ll be able to create truly sustainable change.

5. They’re The Majority

Finally, it’s impossible to ignore the very obvious reasons why SMEs are perfect for social impact.

In the UK at least, SMEs make up over 99.9% of businesses.

I highly doubt that this number is much lower around the world.

Because of this, the opportunity for social impact is huge. Surely, if all SMEs strived to have a net positive effect on society, we’d be far better off than if we just left it to the larger firms.

To me at least, it just feels more achievable.

Why leave the future of society in the hands of so few?

If we spread it out, each individual business has less to do, and we can all be better off.

Naturally, you could argue that SMEs must prioritise survival over impact, but research actually shows that socially responsible companies have a much higher survival rate.

Summary

As I hope I’ve demonstrated in this article, we need to ensure we’re looking at social impact in the right way.

It’s not, as many believe, measured simply by the scale of a company’s achievements or resources.

It is about whether a business is having a net positive effect on society.

Because of this, the size of the business doesn’t actually matter at all.

After all, a large company that only contributes to society half of what it takes, is far from responsible. Even if what it gives is technically much larger than smaller competitors.

For that reason, I firmly believe that SMEs will need to play a big part in creating the new ‘norm’ for business.

As far as social impact goes, maybe the best things really do come in small packages.

FREE Strategy Guide

Do you own or manage an SME? Why not download my FREE 14 page strategy guide. In it, I highlight the 3 components of a successful impact strategy, ensuring you can use your values to attract conscious consumers and make more sales.

Hi! I’m an author and blogger within the fields of social impact and responsible business. I believe that businesses can be a force for good in the world, and this website contains my thoughts on how that can work.

One Comment
  1. Robert H. Scarlett

    Jason - I agree, totally. I support your rationale for suggesting the SMEs have greater potential for positive social impact in the world. I have worked with micro-, small- and medium-size businesses for my entire career (in the NGO world and in business). As you have already pointes out, Micro-Plus-SMEs make up the majority of business units in the world (perhaps 99.7%). Because of their small size and head-count and their dependence on local family and community relationships - for staffing, sourcing, serving, selling, etc., they are more likely to already be very conscious of their social impacts and feel much more accountable to their stakeholders - than do their large-scale counterparts. It is the large-scale businesses (the 0.3% of all business units) that have lost that sense of accountability; and therein lies the problem. That's one way of reading the situation, anyway.

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