International Conference “Fair and Learning Business”, Kaunas, Lithuania Corporate social responsibility: strategies and practices used by SMEs in Cyprus Celia Hadjichristodoulou (PhD cand.) General Manager GrantXpert Consulting Ltd

Introduction to the CSR topic CSR and SMEs: a literature review SMEs in Cyprus Research Methodology Main findings from focus groups Discussion Conclusions and recommendations Presentation Overview

3 CSR defined in different ways, derive the meaning from manager’s perceptions Differences and peculiarities of CSR application in SMEs (different ethical, social problems and dilemmas, financial constraints) Role of owner/manager/leader in performing CSR activities Reasons for adopting CSR activities (reputation issues, perceived risk of brand image tarnishing and legislative pressures, marketing) Differences in CSR issues based on company size and industry Relevant theories: stakeholder analysis theory (role and impact of groups that affect and are affected by the firm) and social capital theory (connections of individuals in networks of interpersonal relations) Useful theories, combined with national and regional context of SMEs: institutional theory (impact of legislation and local business plactices/norms) CSR and SMES: a literature review

4 In Cyprus the vast majority of companies are classified as SMEs. According to the survey of the Statistical Service of Cyprus conducted in 2008, SMEs represent 99,9% of companies. Small companies, employing less than 10 employees, represent 94,8% of SMEs in Cyprus. In Cyprus the concept of CSR has proliferated quite widely in the past few years Cypriot companies has started developing CSR programmes more intensively in the past 5-10 years CSR practices were firstly introduced and taught by multinational companies Cypriot companies follow the CSR practices used in Greece and other EU countries SMEs and CSR practices in Cyprus

5 Focus Groups methodology The paper refers to the identification of the perceptions and requirements of SMEs regarding CSR issues. Main purpose: understand the CSR issue from the manager’s point of view. The emphasis on the perceptions of O/Ms regarding CSR requires a qualitative methodology. The methodology that was selected is that of mixed focus groups, as it has some advantages against individual interviews: interaction between participants and the exchange of ideas and viewpoints. Interaction may also lead to stimulation of ideas, criticism of the views of others and surfacing of disagreements on certain issues. Cannot avoid the problem of social desirability bias expected, but may reduce it to some extent in comparison to individual interviews (Worthington et al, 2006).

6 Focus Groups Two focus groups were organised on the 23 rd of January 2009 Focus Group Participants In total 14 people took part in these discussions. Participants in the two focus groups that took place were SME owners/managers, consultants, academics, and trade union representatives One moderator for the discussions, one observer The purpose was to ask for views, perceptions and feelings, discuss specific CSR actions as markers of social responsibility sense-making.

7 Focus Groups’ details Duration of discussion: one hour Venue: conference room at EUC The conversation was recorded-transcript of 30 pages for each. The researchers then read the transcripts, exchanged views during several meetings, and coded the material according to some main themes. Then they looked for patterns and theme categories in the data. Additional data obtained: A) five individual interviews with SME O/Ms B) meetings with members of the advisory board for the project and C) during discussions in a seminar focused on CSR in small firms. D) The national reports of all countries participating in the project and especially the synthesis report (Krauss, 2009) were also used in order to discuss the comparative aspects of the research.

8 Profile of participants from Focus Group 1

9 Profile of participants from Focus Group 2

10 Agenda with indicative research questions What are the most pressing problems that your firm faces now? What are the main resources of your firm? How does the firm deal with its impact on others (employees, customers, communities, etc)? Are there policies to deal with special staff groups like workers with family, senior employees, employees with special needs? What is the situation of training in your firm? Are you able to attract enough qualified staff and /or candidates for training? What is your understanding of CSR issues? How do you deal with environmental issues within the company? Are you involved in any philanthropic work as a company? What suggestions can you make so that CSR practices to be used more widely in Cyprus?

11 Findings The main problems and concerns of SMEs: Finding and retaining suitable personnel, especially qualified technicians. The adverse effects of the financial crisis, which have been particularly acute for certain sectors like construction, tourism, retail. Liquidity problems related to delays by debtors in paying invoices. Relationships with government (legislation, bureaucracy, government support and grants). Relations with government represent a major preoccupation of SME owners/managers. Quotation: Louis (business consultant): “My position is that the government, the state, is one of the main concerns of SMEs in Cyprus.”

12 Findings Most small firms do not have strategic plans or have only unwritten, informal ones. Concern with operational problems, focus only on survival. Interested in long term strategic and other issues, including ones related to social responsibility, at relatively good times. Maslow’s hierarchy of needs seems to be in operation. George (business consultant): “When you are hungry you do not think of higher level issues. A firm under survival pressure will not think of ‘you’. It shall feel socially responsible when basic needs are covered.”

13 Table 2 Patterns of integration of CSR into SME strategy

Workshop participants Sigma Television Ltd: one of the major television broadcasting stations in Cyprus. It ranks number 1 among all tv channels in Cyprus. Sigma is a commercial network in Cyprus that commenced broadcasting in Elmasco Ltd: small company that employs 40 people and was established in 1957 by three owners. It provides its costumers with electrical equipment, components and other relevant parts. L. Papettas and Sons Ltd: small family-owned business in the heating and air- conditioning industrial sector. It is over 30 years old and well known in the market. The company is owned and run by the three sons of the founder. P.T.Hadjigeorgiou & CO Ltd: a pharmaceutical company, owned and managed by Mr. Panicos Hadjigeorgiou. The company is situated in Limassol. Renos & Demetris DIY & Construction Materials Ltd: a family-owned business that was founded in Nicosia in The owners of the company have great experience from Cyprus and Arab countries in construction materials and in general the construction industry. 14

15 Discussion Considerable variation in the scope and scale of CSR activity as expected in a heterogeneous group of firms. CSR in Cypriot firms is mainly informal in nature, apart from some firms where it is part of their strategy due to the nature of their products (energy saving, etc.). It was recognized that pressure from consumer, citizen and other non-governmental groups is currently relatively low. The “education” of these stakeholder groups about their rights would increase CSR by pushing indifferent firms to recognize and respond to their social responsibilities (e.g. use of ecological products). There is also a preoccupation of SMEs with issues of employee motivation, training, and retention.

16 Conclusions and recommendations Cypriot SMEs are still at a relatively early stage regarding awareness of CSR issues. The institutional framework of Cyprus is pushing SMEs to the adoption of CSR at a slow pace. Major factors affecting the motivation and behavior of SMEs regarding CSR issues: a) a social contract among government, employer organizations and trade unions and b) the deficient environmental protection culture. Intermediary organizations like chambers of commerce should use a managerial approach focusing on CSR outcomes, like reputation and competitive advantage, issues more easily understood by SME O/Ms. Promoting publicity of the CSR activities of leading companies that are exemplars of CSR among SMEs may help to increase awareness of the other firms. Preparation of a document with simple guidelines about the key steps in CSR adoption would also be helpful (simple language, practical). Government policy should focus on the lack of concern of the impact of business activities on others and the creation of an overall responsibility and accountability societal culture.