Keeping an eye on goodness
Traditionally, Hong Kong's small and medium enterprises (SMEs) have viewed corporate social responsibility (CSR) initiatives as mere public relations exercises. The Hong Kong Business Sustainability Index (HKBSI) launched last month may just change that attitude.
The index, the result of a joint study of 40 Hong Kong SMEs with strong track records in CSR, was conducted by the Hong Kong Polytechnic University (PolyU) and the Hong Kong Productivity Council (HKPC). It serves as a CSR performance gauge for local SMEs, measured against a set of six indicators - employees, customers, investors, suppliers, community and the environment.
It also presents SMEs with a CSR-based business model linked to sustainability, says Professor Carlos Lo, head of the research arm of PolyU's management and marketing department.
Lo hopes that the index will motivate SMEs to engage in CSR practices. 'SMEs tend to associate CSR with community service (for image building purposes) but not profit-making,' he says.
'CSR is seen as a cost. The index is a message that an SME can be [profitable] while doing something good for society, customers and staff,' Lo adds.
Speaking at the launch of the index, HKPC executive director Agnes Mak said SMEs could boost their competitiveness by using resources more efficiently, building up good relations with stakeholders, adding value to products and services, strengthening their corporate image, and raising the confidence of banks and investors.
The six indicators encompass the entire gamut of SME stakeholders, and their full inclusion is seen as the key to sustainability. 'If you are kind to all stakeholders, you will benefit on the whole,' says Lo. 'For example, if you care about your employees, you will win their commitment and they may work harder for you. If you are kind to the community, you will build a good reputation.
'If you are kind to the environment, in the long run you will save money. If you are good to your customers, you will have their loyalty. So you will benefit from your practices and build your competitive edge,' Lo adds.
The index score averaged at 58.3 on a 100-point scale, indicating that local SMEs are still 'in the initial stage of business responsibility', says Lo. Manufacturing scored 64.72, compared with 55.86 for the service sector. Individual scores ranged from 21 to 91.
'Compared with their overseas counterparts, Hong Kong's SMEs are in the initial stages of embracing CSR practices,' says Dr Pansy Li, post-doctoral fellow at PolyU's department of management and marketing.
Not all the 40 SMEs were able to make the connection between CSR and sustainability. 'Some of our top performers have good policy direction, but others do not,' says Lo, adding that SMEs typically put their CSR initiatives into practice before formulating a clear vision.
'They are responsible for putting it into practice, but they lack a good management and review system. They also tend to focus CSR initiatives on employees and customers - the two most immediate stakeholder options,' says Lo. 'However, environment does not receive too much attention, and the supplier is hardly on their map. That's because they do not have a thorough CSR initiative.'
The index will be updated annually to encourage SMEs to adopt CSR for sustainable development and growth. The next step is to invite more companies to join in, says Lo. There are also plans to set up industry-specific business sustainability indices.
'After we set up the index, various industry sectors contacted us to say they would like to have their own industry index,' says Li. 'So the future direction would be to look for more companies in different sectors so that we can set up industry specific indexes.'
The researchers hope the number of covered SMEs will increase from 40 to 100.
A book of best practices comprising case studies of successful CSR initiatives is also on the cards.
In Hong Kong, SMEs are defined as manufacturers with fewer than 100 employees and non-manufacturing organisations with fewer than 50 employees. In contrast, SMEs in the West are defined as enterprises employing as many as 500 people.
Hong Kong Census and Statistics Department figures show that SMEs form the backbone of Hong Kong's economy. As of September 2011, the city had 300,000 SMEs - more than 98 per cent of total business units and employing more than 1.2 million people, comprising 48 per cent of total employment, excluding the civil service. More than 50 per cent of the SMEs were in the import-export trade and wholesale industries, followed by retail.
Out of the public eye because of their size, Hong Kong's SMEs are a crucial part of the economy and society. 'This is why we would like to focus on them,' says Li. 'From our perspective, we would like to think that their best practices would affect all Hong Kong people.'