Small businesses are vital drivers of global economies. In 2021, there were more than 332 million such businesses worldwide and, as their collective impact on society grows, they face increasing pressure to demonstrate social responsibility. Implementing responsible business practices can be complex and multi-faceted, and it is particularly so for small enterprises given their limited resources and capabilities. Small businesses are distinctive unto themselves and therefore face unique challenges when it comes to implementing priorities, and might even operate with hybrid models that blend various approaches depending on evolving circumstances. It is therefore important to understand how different types of small businesses approach the implementation of their corporate social responsibility (CSR) priorities so that effective support mechanisms and policies can be developed and implemented.
There is also more informality within the operations of small businesses, where decisions are often made directly by the owner or manager – and are often unstructured in their delivery – and this shapes how the company approaches these responsibilities. Many owners of small businesses pursue non-financial goals focused on lifestyle or family values, which can naturally lead to responsible business practices that benefit both their communities and the environment. However, without thoughtful planning and clear prioritization, these well-intentioned efforts may be inconsistent or fail to effectively balance competing stakeholder needs.
Furthermore, traditional CSR frameworks often fail to resonate with small businesses. The term “corporate” itself may lack relevance to small business owners and employees, and CSR concepts, in general, are rarely expressed in ways that reflect the realities of small businesses. This raises an essential question: how can we better support small businesses in implementing their responsible practices that address both environmental and social commitments while keeping in mind their unique characteristics and stakeholder relationships?
To better understand how small businesses implement social responsibility in practice, with my coauthors Barbara Tomasella and Devi Gill of Derby Business School, we studied small, independent food service businesses, looking specifically at the owners and managers of these enterprises. For these businesses, the important stakeholders include the suppliers who source local and ethical food options, employees who deliver hospitable customer service, and their local community. We found three types of business orientation that shaped how these small businesses approached their social responsibility: growth, value, and social entrepreneurial.
Growth-oriented businesses viewed social responsibility primarily through the lens of profitability and compliance. These businesses looked at their economic survival as something that sustained other organizations: as they became more established, they could invest more in rewarding and developing staff, which they considered as ultimately benefitting the wider society. Therefore, for these businesses, partnerships with other businesses, whom they consider their primary stakeholders, took priority because these relationships supported their economic ambitions.
Success in social responsibility requires recognizing the unique context of small businesses.
Value-oriented businesses approached social responsibility differently, choosing to focus on meeting the needs of those for whom they have a directly responsibility. Rather than prioritizing economic growth, these businesses emphasized achieving a particular lifestyle and family-oriented reputation. Thus, their social responsibility was most evident in their desire to create a friendly or family-like work environment. This approach was based on the belief that employees who feel cared for by their employers are likely to have higher job satisfaction and would extend the same kind of care to customers, leading to both higher job satisfaction and better customer service.
Social entrepreneurial businesses viewed their social responsibility as a vehicle for creating meaningful societal change. Unlike those small businesses focused on growth or value, these enterprises focused on confronting social challenges within their community. Their mission extended beyond traditional philanthropy to tackle specific issues, such as food accessibility in deprived areas and social inequality. These businesses prioritized community stewardship, deliberately creating inclusive spaces that welcome marginalized groups while providing essential services like affordable, healthy food options.
Of course, no business can meet the needs of all stakeholders simultaneously, and trade-offs always exist. This is particularly true for small businesses, which inevitably face the dilemma of many competing priorities. Understanding this reality helps small business owners and managers make informed decisions about their priorities and practices.
Success in social responsibility requires recognizing the unique context of small businesses. Crucial to this is acknowledging how owners and managers view their key stakeholders – whether family, employees, local community, or business partners – and how their business orientation shapes these relationships. The close connection between the owner or manager and their stakeholders should not be ignored, as it serves to create deeper, more meaningful relationships that influence how social responsibility is implemented. It can also help small businesses adjust their business practices to contribute more positive social change.
Employees emerge as particularly important stakeholders, especially in service-oriented businesses. Their role extends beyond delivering services to fundamentally shaping how the business engages with social responsibility and ultimately determining the success or failure of engagement. Supporting employees effectively means going beyond traditional training and reward systems to create meaningful work in a positive environment that reflects the business’s values and priorities.
Due to the nature of their operations, these small businesses are embodying hospitableness which is “the willingness to be hospitable for its own sake, without any expectation of recompense or reciprocity.” This fosters a welcoming, authentic, and friendly environment for stakeholders beyond the economic business exchange.
The burgeoning implications of climate change and ensuring we live and operate in a fair and just society places an imperative on all businesses. For policymakers and industry associations, these insights suggest the need for a more nuanced approach when working with small businesses.
Headway is being made. The SME Climate Hub and The Federation for Small Business provide tailored advice on achieving net zero with a focus on areas such as reducing food waste, developing good supply chains, and saving water and energy. The Small Business Charter provides leadership training to support small business growth with purpose. Businesses themselves are also leading this shift with the growing prominence of BCorps, which is a certification for business excellence in social and environmental performance, and the campaign for the Better Business Act asking for businesses to account for its social and environmental impact.
These actions are a step in the right direction, however the small businesses narrative must not be left out. Small businesses want to act, but bureaucracy, resourcing, and time investment can be barriers. Rather than applying the corporate-style frameworks and terminology, guidance should be developed that reflects the reality of the small business experience. This means using language and concepts that resonate with small business owners while acknowledging the different ways these businesses deliver on their environmental and social agenda.
Looking ahead it’s clear that one size does not fit all, and greater support is required in emboldening small businesses in their social responsibility efforts. It requires an open dialogue and recognizing their uniqueness. Different business models and orientations require different types of support to help them deliver on their responsible commitment. Our research has shown that despite the complexity and idiosyncrasies of these small businesses, they are embracing their social responsibility, showcasing a way for better business. Hence perhaps it is time to step back and re-focus. Lessons that can be learned are re-assessing the pursuit of non-economic goals (people and planet) which can deliver positive actions and, in turn, create loyalty and deliverables for the financial return (profit).
If there is one small change that can be learned from this research, it is perhaps to start embracing hospitableness in business operations for a better future.
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