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Corporate social responsibility and corporate governance in Italian SMEs: towards a ‘territorial’ model based on small ‘champions’ of CSR? Mara Del Baldo Department of Business Studies, University of Urbino ‘Carlo Bo’, Via Saffi, 42, Urbino 61029, Italy Fax: +39 0722 305541 E-mail:
[email protected] Abstract: Does a positive relationship between the adhesion to a culture of social responsibility and evolved systems of governance exist? And is such correlation more or less significant for small- and medium-sized firms with respect to large-sized firms? This paper winds itself around these questions and describes the principle findings that have emerged from the qualitative investigation focused on a selected group of ‘cohesive’ Italian small- and medium-sized businesses (SMEs), in which the nexus between the evolution of corporate governance and socially responsible management practices were examined. The concluding reflections trace the features of a territorial model of socially responsible orientation centred on the best practices of SMEs, ‘convivial enterprises’ who are excellent examples of ‘spirited businesses’. Keywords: corporate governance; CSR; corporate social responsibility; small and medium enterprises; sustainable territorial model. Reference to this paper should be made as follows: Del Baldo, M. (2010) ‘Corporate social responsibility and corporate governance in Italian SMEs: towards a ‘territorial’ model based on small ‘champions’ of CSR?’, Int. J. Sustainable Society, Vol. 2, No. 3, pp.215–247. Biographical notes: Mara Del Baldo is an Assistant Professor in the Department of Business Studies at the University of Urbino “Carlo Bo”, Italy. She teaches Small Business Management and Accounting. Her main research interests are in small business economics and management with particular focus on corporate social responsibility and small entrepreneurs/SMEs’s business ethics. Currently, she is involved in diverse research and seminar projects on those topics. She has published in Italian journals (Piccola Impresa/Small Business, Sinergie, Economia Aziendale Online) as well as in numerous national and international conferences’ proceedings.
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Introduction
Businesses are increasingly finding themselves reflecting on the possibility of embracing social responsibility as an opportunity and a challenge around which they can transform their governance. If it is true that the consideration of ethical principles in a business’ choices and policies are particularly important for large businesses that are organised and Copyright © 2010 Inderscience Enterprises Ltd.
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run as public companies, then it is likewise true that in small- and medium-sized businesses (SMEs), the dedication to, and articulation of, socially responsible management philosophies must reverberate directly across a plurality of ‘intangible’ components: the company’s strategic profile, the culture of the enterprise, the processes of accountability and systems of corporate governance. It is this totality of factors that reflect the specific nature of the SME: the convergence around the mission and value-set, facilitated by the proximity and by the direct involvement of the owner and/or the entrepreneurial family in managing the business; the simplicity of its organisational structure, which allows direct and frequent rapports between the corporate actors and its rooting in the surrounding territory and socioeconomic context. This last factor assumes particular importance in driving the business towards forms of corporate social responsibility (CSR) that share a common thread – namely, they all possess values that typically express a particular sociocultural and economic tradition of the territory in which they are embedded. Where an adhesion to multiple declensions of CSR is present, corporate governance positions itself at the centre of relations between stakeholders, strategic profile and internal processes, human capital (Gazzola and Mella, 2006) and is experienced as enlarged governance (Sacconi, 2008). A necessary condition is the involvement of top management and/or the entrepreneur for the reorientation of the firm’s mission, from its maximisation of profits to gain value that comes from economic performance and finds a source in the modification of the business direction and the rules that govern it. In this context, is it possible to affirm that socially oriented businesses are characterised by the ‘best’ systems of governance? Does a positive relationship between the adhesion to a culture of social responsibility and evolved systems of governance exist? And are such correlations more or less significant for SMEs with respect to those large-sized firms? And on which specificities of SMEs is the evolution of socially oriented management philosophy based? This paper winds itself around these questions, which forms a part of a more robust research project based on the qualitative and quantitative study of a sample of Italian SMEs, started in May 2008. The work is articulated in four principle parts. The first section traces its theoretical and empirical context; the second provides a description of the methodology (survey research conducted through a semi-structured questionnaire on a sample of SMEs in the Marches Region). The third part describes and interprets the principle findings that have emerged from the qualitative investigation focused on a selected group of ‘cohesive’ Italian SMEs, in which the nexus between the evolution of corporate governance and socially responsible management practices were examined. The last section closes this paper with concluding reflections. The analysis of such cases also allows one to develop more general reflections on the importance of a business’ social responsible orientation and of the social statement and commitment. It also permits one to empirically verify the interpretative potential of the references presented in the literature (Adams, 2002; Lamont, 2002; Matacena, 2008; Molteni and Lucchini, 2004) and to trace the features of a Marchegian model of socially responsible orientation centred on the best practices of SMEs who are strongly embedded in their surrounding territory and who are excellent examples of ‘spirited businesses’.
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Business ethics, social responsibility and governance in large companies and in small- and medium-sized businesses: background and conceptual framework
The nexus between corporate governance and the management’s and/or the entrepreneur/business owner’s responsibility is a theme that is placed within the context of the theoretical debate on the social responsibility of a firm, which for over 30 years has involved academics from diverse disciplines. In the beginning, the debate connected the theory of CSR with that of pure economics. After the work of Friedman (1962), whose notable contribution falls under the umbrella of instrumental theories, the field of analysis that recognised the social and ethical dimension of business activity produced a vast body of literature outlining different approaches and focusing on multiple aspects of society (economics, politics, social integration and ethics) (Garriga and Melé, 2004). Some examined the role of business and of rights/needs which connect them and on the responsible use of power in political and social arenas (political theories; Davis, 1960, 1973; Donaldson and Dunfee, 1994, 1999). Others considered the necessity of corporate management to take into account social demands and integrate them in such a way that the business operates in accordance with social values (integrative theories). A fourth line of inquiry (ethical theories) understands that ethical values are embedded in relationships between business and society, leading to a vision of CSR and sustainability from an ethical perspective. In this context, we can distinguish the following approaches: the stakeholder normative theory (Donaldson and Preston, 1995; Freeman, 1984); the human-rights-based approaches (UN Global Compact, 1999); the sustainable development approach (World Commission on Environment and Development, Brundtland Report, 1987) and the approaches centred on the common good of society (Catturi, 2006; Maritain, 1966; Melé, 2002; Sacconi, 2004, 2008) and on the civil economy (Bruni and Zamagni, 2004; Zamagni, 2003). Thus, from the liberal model based on shareholders and from the instrumental use of CSR (‘good ethics is good business’), for which ethical behaviour positively reflected on the economic performances of the firm,1 in recent decades, the theme has moved to the forefront and has fully merged into the ethics of responsibility theory: “the duty of management is to actualize a balance of interests among all stakeholders, and social responsibility can (and must) be redirected towards the emersion of moral preferences and their connection with particular types of businesses (civil and social businesses) or, in lucrative firms, towards particular mechanisms of governance in which a relational perspective prevails” (Zamagni, 2007).
According to such notions, CSR is an instrument of governance that facilitates the compliance of a possible ‘social contract’ among actors inside/outside the firm, and governance become simplified when trust in the management and/or the entrepreneur increases. Such a perspective signals the passage from governance centred on managerial and entrepreneurial aims to a multi-polar or holistic model which considers all who ‘matter’ to the company and provided the foundation to a responsibility composed of economic and social demands, which provoke new problems. The problems of governing a company touch on both the firm’s structural profile as well as its processual profile. In the latter decades, the two-part questions ‘who effectively governs’ and ‘for whom’ were enriched with the addition of a third question:
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‘which interests should be favoured’, rendering insufficient, from a normative point of view, the responses that come from the agency theory. Such conceptual limitations were in part overcome by the stakeholder theory which adheres more closely to the role of such activity in the socioeconomic context and gives relevancy to the motivations of business actors that guide the choices and objectives. These last factors have and ‘have to do’ with altruism, moral gratification, the ‘logic of happiness’ (Baldarelli, 2005, 2007), satisfaction, gratuity and gifts and the honour of such behaviours. One can consider a company as a sort of ‘independent stakeholder-subject system’; all stakeholders tend to pursue a dynamic equilibrium between themselves based on ‘minimum mutual acknowledgement’ (MMA); the business is considered as one element within a broader network, confirming the importance of relationships and trust between diverse interlocutors (Rusconi, 2006). Stakeholder theory, which introduced the concept of equity (fairness) and the just treatment of diverse interlocutors, ‘also becomes an ethical theory, in which values and principles of moral nature are recalled’ (Sciarelli, 2007, p.13). Ethics among strong and weak interests, inasmuch the doctrine and practice are oriented towards the decision between right and wrong, represents an effective and necessary response to real demands of present and future corporate governance. The concept of fairness recalls principles and values of a moral nature, which are necessary to supplement or integrate scarcity in a form of governance that is not effectively disciplined towards a juridical orientation and towards prominent market forces, so as to balance the conflicting interests of diverse participants. This approach opens the way towards an application of ethical values in corporate choices. This is translated into the model of CSR-social-responsiveness-issues management,2 in which the principles of solidarity and trustworthiness are reconciled and enmesh themselves in diverse levels of commitment correlated with the typologies of relations with stakeholders. Nevertheless, such a theoretical framework rests on the disassociation between ownership and government of the company, which is typical in the USA but rare in other contexts – especially in Italy. In other words, this corpus of theories primarily referred to, and continuously refers to, large-scale businesses. A systematic analysis of the possible transferability of these concepts to small- and medium-sized businesses, and the discovery of SMEs-specific patterns, constitutes a gap in research which needs to be filled (Lawrence et al., 2006). For this reason, Section 2.1 presents a reading of some aspects that more closely pertain to the specificities of small businesses.
2.1 Stewardship theory and the theory of social success: values and behaviours of the small entrepreneur A contributions that help to explain the relationship between CSR and governance and that offer an interpretative key regarding SMEs come from the stewardship theory, based on an orientation of cooperative and non-conflictual government, founded on trust and oriented towards the long term. “Founded on psychological and sociological traditions, stewardship theory represents an alternative model of motivations and managerial behaviours” (Davis et al., 1997, p.43). It is based on a concept of man that is diverse from the theory of rational choice, moved by a complex of motivations that are at once economic (extrinsic and tangible), social and emotive (intrinsic and more difficult to quantify). The link, the degree of commitment and of identification with the firm and the way of exercising power in the organisation (in agency theory power is institutional and
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derives from a covert role; in stewardship theory power is personal because it is founded on the authority assumed by the steward) constitutes the two subjective factors that distinguish the manager from the steward. Under the objective aspect, the difference is one between a directional philosophy founded on control and one founded on involvement, such as between an individualistic culture and a cooperative (collectivist) culture, and a greater level of democracy (distribution of power inside the firm). Thus, the authors’ principle contribution is that of developing the theme of motivation and of having substituted deterministic conclusions with situations that vary according to the choices made by the owners and the mangers. Such a situational approach can be adapted to SMEs in which the contingent variable linked to the entrepreneur influences the nature of the relationship of government inside and outside the firm, and on the governance of the company itself. Attention shifts, in fact, to motivational and relational aspects (this last one is enriched by communicating the social commitment), which is well adapted to the vision at the core of a firm’s mission, and of the system of government typical for small businesses that are socially oriented. In this context, the vision of the problems of corporate governance is strongly linked to human nature or, rather, to how he who governs reads the values of the human beings who are committed to the business. “To evaluate the conditions on which the firm can cultivate an ethical and collective conscience, one must start from the motivations that inspire entrepreneurial or managerial behaviour” (Sciarelli, 2007, p.110). Therefore, it becomes essential to pay attention to the goals of the entrepreneurial subject and the distinctions between the diverse characterisations of the motivations of those who govern large companies and SMEs. With respect to the manager, the entrepreneur is rarely motivated by purely economic factors. More often, (s)he experiences more ample stimuli under the social profile, is characterised by a strong identification with the organisation and is given personal power linked to authority, as is typical in stewardship relationships. Subjective variables lie at the core of entrepreneurship, which serve to explain behaviours, returns to personal characteristics and motivations of a psychological and sociological nature (Marchini, 2000). In the sphere of typology matrix, studies on entrepreneurship numerous classifications of entrepreneurs have been drawn based on the types of objectives and personal characteristics they possess. Strategic models have been proposed which place the objectives of the entrepreneur among the key variables that influence strategy next to organisational factors, the environment (intended as global society and as sectors of activity) and production activities. Values nourish the organisation and enhance the spirit of entrepreneurialism (Lamont, 2002). Values3 and attitudes towards the social context are central factors in the strategic system, which is guided by the entrepreneurs’ goals; they are expressed by the vision, the ‘entrepreneurial formula’ (Coda, 1989). They are like roots, which inspire the strategic orientation of responsibility and constitute the most important source of identification inside the firm and the primary basis of external legitimisation. Competitive positioning of the company springs not only from adapting to the binomial trade/mission but also “from the business’ capacity to open itself up to ethical values dominant in society, to the resulting roles and responsibilities and thus to the necessity of a legitimacy in which factors of valorisation of its image” (Marchini, 1995, p.114). Entrepreneurial motivations and aims are placed at the base of the theory of social success of the entrepreneur (Sciarelli, 2007). His understanding that the solidity of the
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firm’s success and the consequent relapse in terms of social power is also founded on respect for both economic balances and on moral values (Quinn, 1997). Success is measured not only by the results achieved by the enterprise, but also by the achievement of respect gained from the surrounding community. Social leadership represents an endpoint of entrepreneurial activity and social power finds its counterbalance in social responsibility attributed to, and embraced by, the entrepreneur. Profit falls at the bottom of the ladder of entrepreneurial goals, followed by market power. Prestige, rather than profit and competitive leadership (economic and competitive success), is in an instrumental position. In other words, the economic ends can and will transform themselves into a means of reaching moral and social goals. “One can argue, in fact, that while behaviour oriented towards power (economic and that of the market) surely does not present connotations of maximizing ethics with regard to that of maximizing profits (or to the creation of economic value over the long-term), that translates into social prestige, whose most efficacious synthesis of success is certainly attributed of a heightened ethical value. This is because prestige derives from a recognition that it is reconnected to the interior of the collective, and not to the environment of the business and of the market it serves.” (Sciarelli, 2007, p.123)
SMEs are synonymous with entrepreneurship: SMEs are normally legally and economically independent and are typically family-owned enterprises, frequently characterised as having a strong integration of enterprise and owner. The owner-manager is personally responsible for corporate activities. Thus, a close social link of employees to their organisational unit is a precondition, as well as an increasing willingness to identify with the business objectives that are not inevitably growth oriented. Normally their simple organisational structures support informal relations. SMEs are also accredited as having vast innovative energy and an intensive, personal customer contact. SMEs are seen as especially ‘rooted’ in their respective region. Long-term established mechanisms and rules such as management traditions, working routines and customs often exist (Leborgne and Lipietz, 1990, 1991; Storper, 1995a–c). Trust is built both on geographical closeness and on common history and joint activities as well (Peredo and Chrisman, 2006). Therefore, although the ethics corporate culture is not born in the environment of small firms, which have been given less attention in ethics literature (Spence, 1999; Spence and Schmidpeter, 2003), it finds its own matrix in the very specificity of the motives and the values that guide the policies and the actions of the small-scale entrepreneur. There are three essential motives: the influence of the subjective sphere, which in the small firm is maximised, the importance of relating to the internal and the external, proclaimed by its limited dimension and the social rooting of the small business and of its creator (Del Baldo, 2006). On the one hand, the ‘personal’ element in small businesses is more contiguous (‘closed’), because of the tight framework of interpersonal relations that is held together by the entrepreneur and/or the family-owner, which stratifies itself inside and outside the firm. The relationship which stands out is, in fact, the distinctive aspect of the small business owner and of the small-sized business (Birley, 1985), and is the driver of specific business strategies. These same strategies of the small firm are not always, nor necessarily aimed at, quantitative development. They diverge from the ‘biological’ models of life cycles of the firm (Churchill and Lewis, 1983) and focus instead on the forms of particular developments in an environment in which those centred on an
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orientation towards CSR and sustainability merge. Indeed, one can talk of strategies of qualitative development (Marchini, 1995) such strategies are based on the capacity to weave the systems of informal, familial and social relationships that constitute the framework on which inter-organisational relationships are incorporated (agreements, internal and external networks). The simplicity and the centrality of the SME’s organisational and directorial structures based on direct and verbal rapports the ownerentrepreneur and members of the administration are seen as actors in these networks. This relationship inside the firm contributes to the formulation tied to strategic and operational decisions. Towards the external facilitates the creation of personal relationships with diverse stakeholders based on reciprocity. This mode of interpreting and of living the role of a small-scale entrepreneur is centred on the value attributed to interpersonal relationships. These relationships are at the base of the concept of ‘relational goods’ (Gui and Sugden, 2005) or, rather, of immaterial goods, as well as at the base of the dimension of reciprocity which considers them as goods that the traditional economy does not acknowledge (Bruni, 2007). On the other hand, in small-scale firms, the institution of the business is nearly always linked to the institution of the family, which is essentially composed of a human reality, a civil cell, over the socioeconomic entity. Where the family is virtuous and cohesive and places itself at the service of the firm, family ties become the firm’s resources and contribute to the growth of both its credibility and its reputation in the eyes of the stakeholder. Finally, small entrepreneurs are active members of a territorial activity, which represents their ‘creative soul’, to which they are intimately linked and in which they often reinvest part of their economic wealth generated and of their energies. The smallscale business owner can become a privileged ‘witness’ of CSR thanks to a strong rooting in the socioeconomic environment which formed his very behaviour and, after moulding it, serves in a reciprocal relationship. In large companies, the different interests of the owner and the management elicit problems of practice and of control of the proxy, inside of which the system of shared values becomes central. The search for the values that provides the foundation to the proxy manager and to how his decisions are put into practice has recently tended to view ethics as the key factor. But even if top men in large firms consider it a factor of success, demonstrating sensible towards social responsibility and business integrity (Longenecker, 1989; Longenecker et al., 2006), trust is cemented in the achievement of durable economic results for the shareholders, often negating the ‘luxury’ of ethical principles and objectives in the company’s management. And short-termism is privileged over the construction of long-term values. Regarding ethical principles, the manager may not have much discretion or may encounter limits. For the entrepreneur, the pervasiveness of ethical values in the company’s decisions is maximised. In SMEs, the owner–manager is both the driver and implementer of values (Hemingway and Maclagan, 2004). This aspect, together with other mentioned factors typical of SMEs (independence, polyvalence, the prevalence of personal and informal relationships) render the path from the ethics in the firm to the ethics of the firm more arduous for large-sized companies. This also stems from the fact that examples of top managers capable of arousing emulative behaviours and of transmitting to the whole organisational body values coherent with social and ethical profiles are less visible. And while there is a lack of will at the top of the enterprise, typical, instead of SMEs is to measure the long-term benefits.
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In small businesses, the transmission of values is simplified by the flexibility and thinness of the organisational structure. The ethical principles are diffused through decisions of people who are influenced by strong moral values (trust, loyalty and equity), and who often have an innate attitude to evaluate the sustainability of their ethical choices for maintaining the firm’s equilibrium. Attitudes further strengthen the adhesion to the practices and the instruments formalised by the CSR (codes of conduct, ethical codes, social, environmental, sustainability reports, etc.) that perform a plurality of roles: communication, organisational and managerial hiring, and identity (reinforcement of the organisational culture), institutional audit (measurement of the coherence between mission and management). Their strength and their ability to become real tools to govern relationships depend, however, on the spirit with which they are realised, how they are morally sustained, and how they are codified. In large businesses these instruments, together with the institution of specific figures (ethics committees, sustainability controllers, ethics or CSR officers) often represent the only means of creating consent around the correct delegation of powers, to develop an ethical means of training employees, to create a space of dialogue and of comparison and to establish emulative processes, overcoming bureaucratic obstacles and the logic of the budget, while the social orientation of the firm and its reflection on accountability (Gray et al., 1996) is simplified in SMEs, to see to it that the principle font of value and values are less invisible to accounting.
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Governance and CSR in SMEs: brief notes about the empirical context
The increased attention towards CSR and SMEs is attributed to a more generalised interest in sustainability that promulgates socially responsible management at the global level. On the one hand, this interest was heightened at the European level after the Council of Lisbon in 2000, which specifically addressed SMEs. On both the national and international levels, there emerges the need to deepen the understanding of the motivations of the small firms’ commitment to CSR (Morsing, 2006; Nielsen and Thomsen, 2006) and to provide guidelines and instruments to aid SMEs adopt and communicate socially oriented policies (Castka et al., 2004). At the same time, the need to adopt a diverse perspective with respect to conventional theories is confirmed and the necessity to bring to light specifics of SMEs (Jenkins, 2004; Spence, 1999; Tilley, 2000). SME-compatible sustainability strategies and practices have so far remained widely unknown (Revell and Blackburn, 2007). One relevant aspect that emerges from the researches conducted on the diffusion of CSR in SMEs (European Commission, 2001, 2002a,b; European Union, 2004; Joseph, 2000; Molteni et al., 2006b; MORI, 2000) is, on the one hand, that the process of orientation towards CSR is normally promoted by the top members of corporate government and, in particular, by the owner–entrepreneur and depends on his ethical orientation and values (Jenkins, 2006; Spence and Lozano, 2000; Spence et al., 2000; Vyakarnam et al., 1997). The primary reasons for such SMEs to adopt CSR practices are ethical values as well as improved customer loyalty. Better relations with the community and public authorities are also considered (EU Commission, 2002a,b). A second element of interest is the influence of the practices of CSR on the strategic profile, which is manifested overall in terms of the development of a culture of responsibility. Direct involvement in such problematic helps to elaborate or to rethink the
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mission, to formulate new strategies towards certain categories of stakeholders, to stimulate the introduction or the revision of the ethical code, to increase the attention paid by the board of directors towards the themes of CSR, to promote modifications to the internal audit system or to introduce new organs of control. A third trait is the capacity of the instruments of CSR to act as a driver for sharpening certain aspects of the system of corporate governance, for responding to the demand for accountability and for developing a strategic information system. On the other hand is the importance of peculiar approaches to CSR, centred on a logic of SMEs’ involvement in networks or based on membership in specific districts (Baldarelli, 2007; Battaglia et al., 2006; Fugazza et al., 2006; Kromminga and Dresewski, 2006; Molteni et al., 2006a; Ørskov, 2006). The participation of the SME in networks characterised by the presence of a plurality of interests, both public (local organisations, chambers of commerce, universities and research centres) and private (trade associations, non-profit organisations, credit institutions and professional orders), facilitate the implementation of actions and programmes of socially oriented development of SMEs and of the local environment in which they are inserted (Lepoutre, 2006). Some particular aspects emerge from the research conducted in this regard. The first concerns the importance of an entrepreneur’s sense of belonging and membership in the community, which behaves like a launch pad for the experimentation of policies imprinted by CSR; the second concerns the importance of support by institutions, local authorities and trade associations to create a platform for the sustainable development of the local community. Regarding the performance indicators expressed through international and national standards (CSR – Social Statement Project promoted by the Italian Ministry for Labour and Social Policy, 2003; GBS, 2001; GRI, 2002, 2008), concerning the effects of CSR on corporate governance, positive signs emerge, especially in terms of the space given to the representation of minority shareholders and to independent directors, frequency of meetings of board of directors, renewal of organs of government, exceeding the level of compliance and protection of the petitions of stakeholders. These traits make the divide between the large and small businesses’ involvement in CSR less profound and significant. Although, the path towards an emersion in best practices must be intensified, most small firms already ‘do the right thing’ or, at least, ‘do many good things’, adopting mild instruments and instituting simple rules that establish the beliefs of the firm, predispose rapports on best practices or articulate a code of responsibility and principles of governance. And where the communication of CSR is more structured, as in the actual experiences of the firms analysed below, they help to overcome the limits of financial and economic information of balance and the fragility of traditional accounting and informative systems, and open new paths of growth. In conclusion, Table 1 offers a summary of the most relevant aspects and the context of the research focused on SMEs.
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Table 1
The research on the diffusion of CSR among SMEs
Object of study
Authors
The need of different approaches that account for the specific nature of SMEs
Spence (1999), Tilley (2000), Jenkins (2004), Castka et al. (2004), Lawrence et al. (2006), Revell and Blackburn (2007)
The motivations of SMEs’ commitment to CSR (based on the ethical orientation and values of the small entrepreneur)
Vyakarnam et al. (1997), Spence et al. (2000), Spence and Lozano (2000), Jenkins (2006), Morsing (2006), Nielsen and Thomsen (2006)
Particular approaches to CSR centred on a sense of belonging to a community and to a specific territory, (embeddedness) and on the participation in local networks
Molteni et al. (2006a), Battaglia et al. (2006), Fugazza et al. (2006), Lepoutre (2006), Ørskov (2006), Kromminga and Dresewski (2006) and Baldarelli (2007)
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Some experiences of excellent stakeholders relationship and social engagement profiles in Italian SMEs
4.1 Research objectives The scope of the following study is to individuate the particular traits of the mission, systems of governance and of accountability that characterise the SMEs which carry a business culture in which social responsibility is lived within the governance of the firm. The explication of the research question can also be articulated this way: to individuate the relation between social engagement, social commitment and governance in SMEs. Firstly, this requires attention to be focused on the elements of the trinomial missioncorporate governance-accountability and on their reciprocal relations, departing from the assumption that “in every business there must be an explicit and coherent coordination between mission, governance and accountability” (Matacena, 2005a, 2008). He distinguishes ideal types of businesses in terms of one-to-one relationships between mission and corporate governance.4 Such relationships define the level and content of accountability of every specific ideal type of business. Mission is used here to mean an explication and a synthesis of the company’s aims; corporate governance as the command structure and of the government present in the company; accountability as the informative responsibility of the company. This model (that provides interpretive cues on how to maintain equilibrium between productive systems and human systems, which are particularly brought close together in small- and medium-sized firms) can be applied to different typologies of businesses, including small- and medium-sized firms, which are the objects of this study. Secondly, this implies that one must identify those aspects of the system of governance in SMEs which draw on the positive actions that orient the models of behaviour of the firms who are capable of realising sociocompetitive synthesis (Molteni, 2004), derived from a stable and structured approach to CSR, incorporated in its own strategic orientation, in its underlying mode of governance and its system of internal and external reporting. The empirical study also try to investigate if the diffusion of CSR is tied to the entrepreneur’s values and orientation to the local socioeconomic environment from which he comes. The study of the field first attempted to identify the central value present in the companies interviewed, its translation into a mission, its connection with the firm’s
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socially responsible orientation, the presence and the depth of its philosophy of socially oriented management and, consequently, the impact on its relationships with stakeholders, its reflections on the structure of government and the presence of instruments of accountability. The typology elaborated by Molteni and Lucchini (2004) was utilised to place the behaviours of the firms in the sphere of a grid of codified readings. Lamont’s (2002) theoretical diagram was employed to individuate the most relevant aspects of a ‘spirited business’. The underlying hypothesis is that where CSR is a characteristic trait of corporate culture – promoted and shared by the top members of the company who guide the firm in its development of a socially responsible management style and towards the adoption of instruments of communication (social statement) – the structure of governance and its qualifications encounter less tensions and can orient energies towards the good of the company, of its human resources, of the society and the environment in which it is found. Specifically, the hypotheses posited at the base of this study are the following: Hypothesis 1: CSR reinforces and facilitates the convergence between mission, governance and accountability; the orientation towards CSR is therefore reflected positively on the governance of SMEs. Hypothesis 2: Among SMEs, the orientation towards CSR begins with the entrepreneur and is a manifestation of both the values tied to personal goals as well as the values tied to cultural and social variables in the territory from which he comes.
4.2 Methodology The following study was developed according to a qualitative approach and a methodology based on field case studies. Specifically, it was centred on the analysis of seven case studies relative to the Marchegian SMEs5 that represent the entrepreneurial and economic fabric of the region. The fieldwork approach, as suggested in the literature (Adams, 2002), facilitates the involvement of the researchers of business economics in the actual activities of the companies to study the processes and the organisational practices of social accounting. This methodology consists of individuating the internal factors (organisational structures, internal micro-processes, attitudes, points of view and perceptions) that, together with the corporate characteristics (size, sector, age of the business, etc.) and the general contextual factors (economic, political, cultural, etc.), explain the complexity of the social statement and that other than influencing the nature and the extent of the corporate social reporting and of the social engagement profile, impact the system of governance. The case method (Eisenhardt, 1989; Yin, 1994) constitutes a precious instrument for ‘capturing’ the diverse manifestations of socially responsible government and to utilise the results both with a cognitive aim as well as with normative merit; such ‘cases for CSR or normative cases’ can indicate best practices and to suggest criteria for further action (Craig, 2003). The analysis was based on the collection of information acquired (May 2008) from diverse interviews with the top entrepreneurs/managers, on direct observation during the visits to the selected enterprises, and on the analysis of available documentary sources (content analysis). The phases across which the empirical study was implemented and the decisions formulated are represented in Table 2.
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Table 2
The phases and the choices of the empirical study
Phases
Object of the choices
Motivations of the choices
Specifics of industrial sectors referenced
Wood furniture interior decoration; paper industry; engineering, machine tools-components, metallurgy industry; electrical and electronics equipments, automatic equipment and plants-design-robots (high technology); financial and banking services
Traditional and mature sectors, and emerging sectors, characterised by different social and environmental impacts, representative of the entrepreneurial fabric of the Marches Region (Italy)
Choice of the enterprises
Small and medium firms
Cohesive/multi-certified firms
Selection of areas Top level of the company Entrepreneurial/managerial team and organs on which (entrepreneur -founder/successor -, directly involved in corporate attention was managing director, general manager) governance focused Structure of the Administration of a semi-structured research instruments questionnaire (paper and pencil interview method), prepared interviews, note-taking, tabulation, transcription, validation and correction, telephone conversations and contact by e-mail
Qualitative/quantitative analysis and triangulation of methods
The enterprises were selected based on the following criteria: x
those following strategies of social responsibility with an adhesion to CSR codes
x
those adopting processes of social and environmental certification
x
those (regularly) publishing their social and environmental reports
x
those with ample and significant of initiatives of social responsibility both on the national and international level
x
those who obtained recognitions/awards for their robust activities of social responsibility.
In short, these aspects refer to the following declinations of CSR: x
presence of a philosophy of governance and of socially oriented management, which is reflected in its mission and its governance
x
production of initiatives and strategies of CSR and sustainability
x
communication of CSR and development of systems of accountability.
The principle attributes of the seven enterprises are synthesised in Table 3.
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Characteristics of the firms
Company title – registered office – year of constitution – sector – corporate purpose – employees – total sales (2007) – economic subject BoxMarche Spa, Corinaldo (AN); 1969 Paper industry: design and production of packaging in food and houseware sectors
Instruments of implementing and communicating CSR, year introduced ISO 9001, year 2001; OHSAS 18000-SA 8000, year 2003; Social report, year 2003; Global report, year 2006
50 employees; 11,000,000€; open family-owned business Banca di Credito Cooperativo di Gradara, Gradara (PU); 1911 Banking services
List of company values (‘charter of values’), year 2002; Social report and mission statement, year 2002; Code of ethics, year 2004
94 employees; 16,200,000€; co-operative society Gruppo FAAM Spa, Monterubbiano (AP); 1974 Engineering, metallurgy industry 230 employees; 60,000,000€; diffuse shareholding (not cited) Gruppo Fbl Spa – Della Rovere Spa, Pesaro (PU); 1976
Quality certification ISO 9000 and Vision 2000, year 1997; Code of ethics, year 1999; Environmental certification EMAS/ISO 14001, year 1999 (first in its sector in Europe); Social report, year 1999; Environmental report, year 2001 Certification ISO 14001, year 2001; Social report, year 2005
Wood-furniture-interior decoration 137 employees; 38,000,000€; open family-owned business Gruppo Loccioni, Angeli di Rosora (AN); 1969
List of company values (‘charter of values’), Electrical and electronics equipments, automatic year 1969; Code of ethics, year 1996; Social report, year 1997; Intangibles impact, year equipments and plants -design-robots (high 1997; Cause Related Marketing, year 1999 technology) 290 employees; 45,000,000€; open family-owned business PRB Srl, Fermignano (PU); 1972 Metallurgy industry (metal galvanising)
Environmental certification EMAS/ISO 14001, year 2001
160 employees; 20,000,000€; closed familyowned business (first and second generation) TVS Spa, Fermignano (PU); 1968 Metallurgy and mechanics industry 276 employees; 57,000,000€; closed familyowned business (first and second generation)
Quality certification ISO 9000 and Vision 2000, year 1999; Social Accountability Standard-SA8000:2001, year 2004
4.3 The manifestations of social engagement The first level of analysis was focused on the identification of common lines relative to the core values and to the behaviours of the entrepreneurs and top-level managers, to the reflections on their mission, to the presence of instruments of accountability and reporting of CSR, to structural characteristics and dynamics of governance. Table 4 summarises the most significant elements pertaining to the relationship between values,
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mission, social engagement and commitment, and qualification of governance. These factors distinguish the firms in which the approach to CSR and sustainability is the result of a synergy between the interests of diverse stakeholders inside and outside the firm, and of economic, social, ecological and environmental priorities. The centrality of CSR with respect to the development of those companies allows one to connote them as ‘spirited businesses’ (Lamont, 2002) or as ‘CSR enterprises’ (Kvåle and Olsen, 2006),6 high-performing companies where competitive success grows out of their commitment to values and to the human spirit. ‘Spirited businesses’, in other words, are ‘company with a soul’ (Catturi, 2006). They are passionately committed to people and wisdom. The ‘soul’ is the fruit, above all, of values and principles founded in its mission and translated in its governance. A ‘spirited business’ company focuses on vision and values, communication, top-level management commitment, effective tools and mechanisms of stakeholder engagement. Important principles include trust, vision, courage, community, creativity, patience, humanity integrity, diligence, enthusiasm and openness (Lamont, 2002). All the selected companies espoused such principles when entrepreneurs/managers discussed what CSR meant and everything that they make is marked against those touchstones. They exemplify a strategic and structured approach to CSR and align business values, purpose and strategy with the social and economic needs of stakeholders, while embedding responsible and ethical business policies and practices throughout the company. CSR is experienced as a ‘way of doing business’; is about operating and managing the business in a way that is sensitive to the external and internal environment. Everyone in such enterprises is aware of the company’s commitment to CSR. They have an internal change-agent, a ‘champion’ in their owner-management team, whose own values influence the strategy. The top management is directly responsible for directing the CSR principles and activities of the business and moulding the company culture in his personal values and beliefs. All interviewed felt that their values were essential and a powerful driver of ethics and standard in the company. The entrepreneurs are also strongly involved in the well-being of the local community where they lives and where the company are found. Table 4
Attributes of a ‘spirited business’
Play factors 1. Mission connoted by strong values (ethical, moral, social, as well as economic) 2. Values guide the decision-making process in adherence to the socially oriented vision and create an entrepreneurial vocation that makes all the difference 3. The attention to people’s lives creates a supportive environment and renders possible the maximisation of creativity 4. Inserting everyone into the centre of the company and rendering it a protagonist of CSR 5. Holistic approach to CSR 6. Development of intangible resources 7. The generation of profit is necessary to the success of CSR, but its maximisation is not the raison d’être of the business 8. The owner–entrepreneur is responsible for the principles and the actions of CSR Source: Our adoption of Lamont (2002).
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To explain each of the attributes reported in the table, it is opportune to let the protagonists ‘speak for themselves’ by providing excerpts from their interviews, below: 1. “Perhaps it’s a little presumptuous, but we love to define ourselves as the agents of civilization. The small entrepreneur is a builder (of systems, of men, of wealth); he relates himself to the world, to his clients, to his community; he lives his passions, hopes, dreams, plans. The enterprise has a narrative identity, it tells a story, it constructs its own self. For this reason, it has a soul and it has those intangible assets linked to the spirit and to the dignity of the person. The soul represents shared values, the firm’s identity, climate, mission, our capacity to express equilibrium, beauty, ethics, efficiency, our capacity to dream and to live through our emotions above all else; everything that makes us individuals and human beings. Not an individual but ‘that individual’, not a person, but ‘that’ person (…) Our Global Report is not only a report of numbers, but also of values. It permits our stakeholders to have a dependable idea of how the business fulfils that sort of delegation that civil society has conferred to produce a better world for all, goods, services and human relationships. (...) First CSR, which is a fact of ‘faith’, then good governance, which is its outcome” (T. Dominici, Managing Director, BoxMarche) 2. “Values sustain actions; actions that are positive and responsible generate a type of development that respects humans and the environment. (...) Large businesses ‘look to the quarterly reports’ and are not disposed to sow the seed for the long term, to live on trust.” (E. Loccioni, entrepreneur of the year 2007, Ernst and Young Award for Quality of life, Gruppo Loccioni) “Values that constitute the firm’s Culture, and, therefore, have their own value, their own richness, they are their own intangible goods, which strengthens faith and certainty in the business.” (S. Pierfederici, President BoxMarche) 3. “The technology we are most proud of is the one that comes home in the evening.” (T. Dominici, Managing Director, BoxMarche) “We are a company made up of people. Strong human relationships unite the network, which throughout the years has been consolidated, transmitting experiences and visions that are at the foundation of our success. Our activity is the carrier of change both in the lives of our clients and around our team.” (Roberto Forni, General Manager, Gruppo FBL-Della Rovere) “Ours is a mode of being an open enterprise from the very beginning, born to welcome interlocutors as carriers of value; formation, collaboration, team work are our practices. (...) From a strong shared culture and from driven human resources can raise the commitment for the Common Good and the strength to face the market.” (E. Loccioni, Gruppo Loccioni) 4. “From the very beginning I have felt welcome, like a part of the family, and I’ve been given the trust necessary to grow. I’ve done, and I continued to do, my best to personally embrace those same values and to experience the company like a communal good, recognizing the entrepreneurial spirit that I’ve had the good fortune to know (…) The entrepreneur determines the vision, and indicates the path to follow through his leadership. But if the vision isn’t shared by the collaborators, the conductor will find no one behind him. So, a huge involvement of personnel in the mission, in the vision, formation on the themes of environment and CSR but also in the organisation, on the
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objectives of the firm, intellectual growth by offering courses, development of participation to the firm’s objectives through constant information on the outcomes achieved. Giving merit to those who achieved them.” (Tonino Dominici, Managing Director, BoxMarche) 5. “The company acts as an interpreter of social and environmental concerns, making good of its own job, generating profit in a responsible way with respect to its economic partners, its community and its environment.” (F. Paolini, female entrepreneur, President Gruppo Giovani Confindustria Pesaro-Urbino) 6. “Our intangible values: imagination (to know how to create), energy (to achieve our dreams), responsibility (for the air we breathe, the land we walk on, the resources that we utilize, the trust that we gain.” (E. Loccioni, Gruppo Loccioni) 7. “The firm is the carrier of responsibility that doesn’t get used up in the creation of projects, wealth and jobs, values that also we must keep in mind, but the activities of the company extend also to the development of actions aimed above all at the territorial context in which it operates and to the ensemble of all of its interested parts.” (T. Dominici, Managing Director, BoxMarche) “There are three ways of being a leader: through price, through technology, through intimacy. This is our way. My greatest satisfaction is when I see others happy.” (Roberto Forni, General Manager, Gruppo FBL-Della Rovere) “Our bank is leveraged on one attitude: proximity, which is physical, relational, familyoriented, oriented to our associates, to the personalisation of products and services. That means identifying oneself with the local economy, starting from the region and having the capacity to render it a protagonist. The components of board of directors are exponents in the areas in which BCC operates and it has committed itself on its own honour to create social values for its associates and for the community.” (Luigi D’Annibale, General Manager Banca di Credito Cooperativo di Gradara) 8. “He who has the economic power must be the one most responsible. We are certain that CSR grows stakeholder value, social consensus, economic value, originating more trust and understanding and the best transparency to governance. In this sense, what’s central is the example top management sets.” (G.Arvizzigno, Director of Product Development, Quality Control and Social Responsibility, TVS) “It is an important responsibility that which we call our business inasmuch as we have inherited the land from our fathers, but we also have on loan from our children. We believe in sustainable development, which comes from an understanding of the environment, that is, clean water and air and a complete understanding of the territory and its society, that is, conscience, solidarity, ethics, respect for humankind. The passion for doing things and the love of our land has pushed us to assume this important responsibility: bringing together all stakeholders to create true richness through the lens of sustainable development, through human values and through our own work.” (T. Dominici, Managing Director, BoxMarche) As exemplified by the quotes above, Table 5 synthesises the aspects of social commitment that distinguish the firms in this study, and that are at the base of excellent stakeholder relationships and of social engagement profiles.
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Key attributes of social commitment and engagement
Key characteristics
Links
Strong system of values
‘Values nourish the organisation’ (Lamont, 2002): diligence, labour, equity, trust, honesty, simplicity, integrity, parsimony, sense of family, team spirit, enthusiasm, energy, responsibility, communicative nature
Presence of a cohesive economic subject around base values
Orientation towards CSR strongly desired The top-level entrepreneurial/management by the entrepreneur, visible and integrated commitment and engagement represented in ‘the first in the enterprise, tendency to social best practice’ success Affiliation in geographical zones Rooted and engaged in spreading well-being in the historically characterised by a solid rural local community in which the firm is located tradition, typical expression of Marchegian culture Decision-making process based on Organisational strength: participation. Climate is social and organisationally spread. Values, mission, collaboration, sharing and transparency. Relational approach centred on trust value objectives constantly reinforced across the culture and processes, articulated in a flexible and organic structure Instruments of accountability and communication of the socially oriented commitment
Values and mission explicated and communicated that ensure consistency in decision making and avoid value gaps
Cohesion to stakeholders as a source of mobilising resources with far-reaching consequences
Growth of intangible capital
Affiliation in local, national and international networks of CSR
Desire to testify and understand best practices adhering to multiple occasions of exchange and comparison (workshops, forums, meetings, testimonies, etc.)
The second level of analysis is relative to the definition of the positioning of the firm with respect to the map of orientations towards CSR. The firms considered (Table 6) possess characteristics of ‘cohesive’ firms and of ‘multi-certified’ firms7. Table 6
Types of orientations of the firms
BoxMarche Spa
Cohesive firm
BCC Gradara
Cohesive firm
Gruppo FAAM Spa
Cohesive firm
Gruppo Loccioni
Cohesive firm
Gruppo FBL-Della Rovere
Cohesive firm
PRB Srl
Multi-certified/naturally cohesive
TVS Spa
Multi-certified/naturally cohesive
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In the first group of companies, CSR is strongly translated into business principles. CSR is the practical implementation of a company’s ethos. Both the fronts of engagement and the forms of communication of CSR are systematic and creative and manifest themselves in a variety of forms, which are briefly commented on below. Regarding the internal dimension of CSR, one finds an elevated level of involvement in the evaluation and formation of employees, in the valorisation of the dignity of dependents, such as the capacity to manage conflicts. Also regarding internal organisation, such firms are distinguished by the actualisation of best practices for the organisation of labour, for emphasising flexibility and professionalism of workers and collaborators through transparency in processes and in the modes of governance and the presence of formal and informal instruments and procedures for internal and external informative disclosure, for disseminating a culture of constant improvement throughout all levels and all contexts of the organisation. Another aspect is their attention to the quality of their products/services and of their productive processes: operating with excellence, exceeding the client’s expectations, fostering collaboration with clients, offering high-value products and services through innovation and excellence and the manufacture of products of social and environmental merit. Both internally and externally, the importance attributed to relationships, which translate into multiple forms of partnerships that are based on stable and durable collaboration (with customers, providers, financial partners, research centres, universities, schools, non-profit organisations and associations, etc.) stands out. Regarding the external dimension of CSR, the firms are distinguished both by their attention to the global environment, across the activation of procedures and programmes of environmental protection and of quality of life (recycling trash, reduction of emissions, saving energy, participation in initiatives and projects of environmental sustainability at the local, national and international levels), as well as by their involvement in a vast range of operations with the local community (donations, sponsorships, promotion and production directed to projects of social, cultural, environmental, etc. merit). The latter strongly emerges when analysing the cases herein, and translates into the concrete commitment to become a reference point for all businesses in the region with respect to the environment, to commit themselves to sustainable development, conforming to laws and going beyond the standards, orienting, raising awareness and including clients, dependents, providers and seeking out new opportunities with respect to the environment, instilling a relationship of trust and transparency concerning the firm’s activities among the local community and the public administration. On the whole, such behaviours increase the level of reputation and of consensus, and augment quail-quantitative development; the understanding of benefits extracted counterdistinguish the Corporate Social Opportunity mentality (Grayson and Hodges, 2004; Jenkins, 2006). Eventual forms of incentives are not important: these firms ‘run by themselves’, they follow a path, understood the fact that ‘things can be seen with different eyes to obtain great outcomes’ (P. Picasso). The firms that fall into the second group are located among the ‘multi-certified’. The typical forms are found in their client offerings and in their requests to their own suppliers for ethical, social and environmental guarantees (green purchasing – ISO and Vision certification, quality of products, etc.). Although, the orientation is more focused on procedural forms, diverse dynamics appear: they are multiplying the fronts of engagement towards CSR; they research more structured forms of communication (projects to implement their social and environmental reports); they implement
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modifications to their system of government (familial succession; new top figures – outside of the family – general manager, managing director). The providing of measures of support (fiscal incentives, ratings for the participation in public competitions and bands for favourable financing, personalised consultancy, adhesion to moments of exchange of good experiences) can accelerate their development.
4.4 CSR’s effects on governance The third area of reflection more closely concerns the aspects connected to governance, which are presented below. Where there exists a family-based economic subject, even the non-‘director’ share moments of reflection around values, strategic orientation of the firm and the rapport among members of the family-based government and stakeholders. Nearly, in all of the cases there was a strategic committee, in whose meetings those with distinctive competences who are responsible for the firm’s functioning participated. Managers outside of the family were present (even in the position of shareholders): the figure of an authorised and ‘illuminated’ general manager/managing director performed with efficacy the role of the entrepreneur’s alter ego and participated in the definition of strategic plans in which CSR was a substantial element. Even in the absence of a supervising organ on the governance (audit committee) there were forms of ‘social control’. More precisely, the presence of a solid and shared framework of values (milestones or, in other words, cardinal rules) and the direct and personal understanding between internal and external interlocutors guarantee respect for equity and correct behaviours. Value orientations and ethical principles that guide strategic decisions constitute the principle facets of the process of social accountability and reinforce the organisational culture. Even in the absence of specific centres of responsibility (CSR committees), limited to a few figures or operative ‘nodes’ of social management (i.e. TVS’ working group social lab), the flexibility and cohesion of the structure, together with the direct involvement of the entrepreneur – the first ‘managerial agent’ – makes the process of corporate social reporting and the development of specific skills easier. Some enterprises matured in their understanding of the necessity of separating the ownership from the firm’s organs of governance, which contributes to the structure’s managerial evolution. Indeed, the presence of independent consultants inside the board of directors, who are not aligned with the ownership and/or who do not have family connections, grows (i.e. BoxMarche). In diverse cases, the cohabitation and the generational passage were facilitated by a sharing of personal and familial values, as well as values of the firm, that found their synthesis in practice and in the instruments of social responsible management (i.e. in the case of TVS and Gruppo FBL). The frequency of meetings of board of directors is directed towards minimising clashes and put to weekly meetings. The board of directors look inside to independent councillors and minority shareholders (including women) and is extended to representatives of dependents. Retribution and the compensation of business administrators, such as the distribution of profits, are illustrated in detail in the production statement and in the allocation of value added.
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Tax breaks and services for partners and shareholders (specific initiatives, promotions, dedicated services and products; one can point out, for example, projects of formation on themes such as generational passage, tutoring activities – i.e. FAAM’s business school – or the benefits institutionally provided to cooperative credit banks clients). Forms of participation in capital on the part of dependents are favoured; spin-off processes such as the Gruppo Loccioni’s way of growth, in which the birth of new enterprises often comes through coopting talented business collaborators and supporting them in assuming entrepreneurial roles. Multifarious are other initiatives, of which one can report the most relevant, aimed to make the function of the government house organs more transparent, beyond the aforementioned adoption of the cited instruments of CSR. For example, in order to share all of the management data with associations/shareholders/financial partners BoxMarche presents an ‘enrichment’ of the Global Report8 addressed to the banks containing the prospective triennial economic plan. Other forms of stakeholder involvement are represented by the open-house meetings during the year, assemblies aimed at specific categories of stakeholders, as well as the regional and local meetings or the stakeholders forums, which are precious occasions in which the results achieved in the past financial year are presented and objectives for the future are discussed. Finally, the instruments of accountability facilitate the transition from a state of listening to a proactive state (entrepreneur/management guided by stakeholders).
4.5 The ‘convivial enterprises’: taking root in the local context There are, essentially, three strong points of Marchegian SMEs: a rootedness in the territory, familial synergies and tenacity. Among these the first, which finds expression in the adhesion to and in the social consensus of the territory, construct an emblematic aspect that makes the Marches a territory of ‘genius loci’. The cases considered present evident profiles of that ‘genius loci’ marked by work ethics, by a strong sense of feeling like active members of one community in which each person rediscovers the taste and the utility to work with trust. This mode operating (‘of doing and of being a business’) characterises the many enterprises who were born under intensely local conditions but who serve as carriers of Italian creativity and talent into the world at large. They plunge their roots into a territorial model based on ‘holy agriculture’ (Fuà and Zacchia, 1983) that has characterised the Marches Region from the first half of the 1800s to the post-WWII era. These ‘champions’ of CSR, inserted into a territory rich in testimonies of socially responsible behaviours many of whom must yet emerge, are also due to their ability to communicate their own engagement and to their ability to manage relationships with multiple stakeholders. They demonstrate themselves capable of influencing and of moulding the socioeconomic terrain from which they come. And this comes from the richness and the appeal of their own virtuous testimony, called to ‘imitate the virtues’. Indeed, the thoughts of one entrepreneur interviewed articulates this best: “We have an emotional tie with the territory. We want to use our abilities to sustain the local economy. Absolute priority is given to values, to human relations. Our activities are not only business choices. Our ability, though we are a small firm compared to other companies, is to card threads (through the determination to follow the ‘dream’ of an enterprise and of the environment in which it is inserted), is to pull thread (through
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cohesion and collaboration inside and outside of the firm) and to stretch thread (through the motivation that feeds creativity, understanding, sensibility, the capacity to listen) of a network. A network made, in primis, by Men.” (T. Dominici, BoxMarche) Regarding the stakeholders, it is all about sociality and ‘is strongly inspired by a sentiment of collaboration, of ‘conviviality’. This is a manifestation of an attitude of learning by interacting, which translates into planning, innovation and more generally, the capacity to improve relationships and the territory itself, by tying multiple interlocutors together in a network that sees a good part of its actors coming from the same territory. For example, client relationships are characterised by an attention that goes beyond customer care; those with dependents go beyond ‘paternalism’: the Marchegian entrepreneurs who have been able to create a community of people who work passionately, are also loved by those who have the fortune to work with them. Also in relationships with local and political organisations, the search for collaboration feeds a dialectical comparison. The relationships are never (or almost never) separate from the ‘person.’ This is one of the most important elements that represents humanistic management, and is at the base of the economic model founded on the perspective of Civil Economics and on the ‘common good’ (Bruni and Zamagni, 2004; Zamagni, 2007), achievable through the development of tacit understanding, of circular subsidiarity and civil welfare. These aspects refer to the active involvement of the enterprise in local development, because the business’ success comes from the same steps as that of the territory. This translates into the creation of functional networks among businesses, Chambers of Commerce, trade associations, banks, non-profit and local organisations – which all become nodes of a cooperative network whose end is to develop the territory. Alongside, the desire to invent new products and to make a profit, one of the principle motivations of Marchegian entrepreneurs is the desire to do something useful for its own community. This is because the histories of their businesses have been always founded on ‘passion’ rather than merely on calculations. Enterprises are considered spaces to consolidate and nurture a passion for quality, for understanding, for a form of development that engages and respects the surrounding environment. The socially oriented entrepreneur is moved by the reciprocity of the exchange, enriching the territory in the form of jobs, business opportunities for other subjects, cultural initiatives, promotion and the development of the place of origin. The profiles of ‘convivial enterprises’ (Balloni and Trupia, 2005) that emerge do not correspond to a codified managerial model, but to a business ‘way of being’ in which conviviality is not merely a sentiment, but is an operative practice for organisation and governance. In such contexts, the capacity of individual initiatives, in absence of rigid forms of hierarchical coordination, remains vibrant. It is spurred on by the sense of belonging (the status of the collaborators prevails in the organisational arrangement) and on diffuse empowerment and it appears more effective with respect to the forms of government that privilege the achievement of objectives in the logic of ‘executiveness’ based on a system of checks and balances. The socially oriented philosophy and the adoption of the relative instruments of accountability, which institutionalise and give representation and transparency to the qualities of the company, generate a sort of ‘enlarged’ governance (Sacconi, 2008) and of stakeholder democracy (Zamagni, 2007). The communication of CSR (and the implementation of accountability documents) signals the passage from one model of informal responsibility, still prevalent in the universe of small-sized firms, towards a new, proactive model ‘from the concept of enlightened entrepreneur to CSR policy’.
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An examination of the economic realities of the Marchegian territory, formed predominantly by SMEs, and which attempts to understand the essence of the people and their history, allows one to more closely view an entrepreneurial system constructed on solid principles, capable of marrying ethics and business and of confronting the challenge of globalisation. And it allows one to discover evidence of a ‘gentile capitalism’ (Bonomi, 2007; Cianciullo and Realacci, 2005),9 which expresses itself in a development model founded on the synergy between the recuperation of the past, defence of traditional understandings, of local culture, of the quality of the landscape and its protection for the future through research by advanced sectors and care for the environment. It also allows one to discover an indirect but important protagonist: the territory of the Marches. The Marches appear as a region of ‘100 cities’ (Bo, 2001; Sichirollo, 2001) in which even the roads are ‘designed’ by the businesses found on them, and where doing business still means taking account ancient infrastructural and logistical difficulties. The Marches are at the forefront of Italian classifications for the diffusion of small businesses and craftsmen, which have developed in many different districts within the region. Diverse studies have analysed the processes of industrialisation diffuse in the CentralNorth-East Italy within which lie in the Marches. Some have identified factors such as the culture, history, institutions, beliefs and communal convictions, like a sort of humus of the intangible assets of the context, difficult to define and to quantify (Cipolla, 1990). The intangibles or social capabilities thus correspond to a ‘genius loci’, connected to a particular place. It is revealed in the way of living and being a community and therefore even of the business and that from which it comes. The analyses have portrayed Italian districts as a type of humus fertilised by previous manufacturing experiences in the medieval era (from the 13th to 15th centuries). From this perspective one finds a justification of the birth of local systems of production (or ‘industrial districts’, Becattini, 1979) that are based on forms of collaboration and trust between firms inside a division of labour often organised around a company that acts as a ‘leader’, just as labour had been organised and subdivided among members of rural families (Paci, 1999). In the Marches, such proto-industrial activities inside numerous small- to medium-sized towns across the territory (which are called ‘cities’ despite their low populations) were artisan in form. It is precisely in such Italian villages that economic historians have found the roots of diffuse entrepreneurship that has characterised the development of the ‘Third Italy’ (Bagnasco, 1977; Moroni, 2001, 2002; Sabbatucci Severini, 1996) or North-Eastern Central Italy (Fuà and Zacchia, 1983). The socioeconomic texture, defined in terms of ‘social capital’, social capabilities or civicness is enriched by values, cultures and traditions tied to a specific community space. Therefore, it is important to also look at those intangible factors that favour the development of CSR and to the sustainability of the SME. It is thus this fusion of immaterial, sociocultural factors that determine the collective behaviours and outlooks favouring diffuse social responsibility. Such sociocultural factors, as has been noted above, are elements that form and evolve in the long term. Numerous scholars, historians, social theorists and economists have expressed themselves in the same way, underscoring the active role of the entire local society in favouring ‘unfractured’ development (Fuà and Zacchia, 1983) that have characterised the economic model of the Marches and, more generally, the ‘Third Italy’. Economic history, in particular, has been directed towards the analysis of regions in the long term. Such a lens allows one to individuate ‘multiple local models of development’ (Pollard, 1984, pp.188–206). Putnam (1993) underscored the importance of a diffuse associational fabric,
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which contributes to the formation of social cohesion and promotes political and administrative efficiency; Trigilia (1986) explored the role of the region’s political subculture (Catholic and social communist) in promoting less conflictual relationships between capital and work; Bagnasco (1988) revealed that the objective of reconciliation and cooperation has saved social cohesion and, at the same time, guaranteed the growth of a diffuse economy. At the same time, research and reflections on specific models of local and endogenous development10, on autocentric and ‘ground up’ development (Stöhr, 1978), and on the territorial and ‘agro-political’ development (Friedmann and Douglas, 1975) have created a new understanding of the importance of space, intended not only as distance between sites, but also as strategic factors for new opportunities. Some effective examples of what has been written above are manifested in the words of the Marchegian entrepreneurs: The ‘message’ of Gruppo FAAM provides an exemplary introduction. Gruppo FAAM decided to close its plant in Eastern Europe and reopen it in its home territory, and maintained its plan in its motherland so as not to ‘spoil’ the local context, which has a heritage of local knowledge and competency: “Every day we repeat to ourselves that we only need to move 15 kilometres to enter into the area covered by the Cassa per il Mezzogiorno,11 but we have renounced such financing to stay within our own territory. Monterubbiano is a beautiful town. To construct a productive plant in Monterubbiano means providing more possibilities to its inhabitants, to the town itself. And in fact, today some have come [to the town], some have come back; the population has risen 25% and we have even given it a healthy contribution when we said to ourselves, ‘we’re able to do business here,’ in the place where we were born. We have helped Monterubbiano, but Monterubbiano has also helped us because we haven’t assumed 88 salaried employees but 88 collaborators which have participated fully in this FAAM gamble – guys formed at our expense, who have repaid us with motivation and a will to work, without which we could never have arrived at this point. (…). Now there are 220 of us in FAAM, we call everyone by name, we use the informal tense when speaking to each other, and in thirty years there hasn’t ever been a fight. (…) Businesses have to always follow a plan of expansion that is in strict rapport with the territory to which it refers. The territory is a precious resource.” (F. Vitali, President of Gruppo FAAM) “What counts is the passion with which we do our work. It’s this principle that allows us to grow throughout the years, to arrive at places we never would have thought possible the day that we founded this business. We couldn’t do this, however, without thinking of our identity, by never forgetting where we come from and where we live.” (G. Bini, Lordflex spa) “We have the privilege of working in this territory and we have never once thought about moving. We want our competence to be used to support the local economy. We have an affective link with the territory, and the historic seat of the Varnelli distillery, in the small mountain village of Pievebovigliana is a distinctive element.” (O. Varnelli, Varnelli spa) “Our group has an original history that cannot be repeated, in that it was founded on the desire to construct an opportunity for many and which comes from a part of the territory in which the metallurgy industry has always played a central role, an emblem of work and of development. The firm has always followed a path that considered three foundational elements: the dream, opportunity, responsibility, which together provide the push to live the experience of the business in the most ardent manner possible within the
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Protagonist of the European trade fair for deluxe packaging (Principality of Monaco) BoxMarche has exhibited not only its own products, but also those of its territory (Corinaldo) to allow the visitor to understand that “a box of perfume or a bottle’s packaging is as they see it – elegant, coloured, fascinating – because it is born from an idea germinated in an environment which pays attention to, and cares, for beauty, for the capacity to bring together the particularities, that has a taste for things and which searches for quality. We also want to make our own territory seen, with its traditions, with its culture, with the beauty of its locales and with the values of our people. BoxMarche recognizes Corinaldo and its people as valuable company resources.” (T. Dominici, Managing Director)
4.6 From CSR to TSR – territorial social responsibility Another development in the CSR debate can consider the following question: ‘Do best practices of CSR increase social capital of the territory?’ If yes, then what role do SMEs play in constructing the structural components of the territory? Social responsibility of the territory is a concept that has thus far not been adequately studied. From the concept of social responsibility of the business, the perspective shifts to a vision of the collective. No longer is responsibility solely the realm of the individual firm, which is called to put itself in relation to the collective, but rather it is the whole community, the territory, which comes to be conceptualised as a unicum. The application of social responsibility of a business to the territory finds force in the objective of improving the community’s quality of life and of marrying economic events with social and environmental attention through the lens of sustainable development. Social responsibility of the territory is founded, therefore, on the rediscovery of shared values that the territory’s economic, social and institutional actors know how to reinforce, thanks to solid networks of relationships. Today, the Marches offers an interesting laboratory to study not only the extent of CSR, but also social responsibility of the territory. The initiatives of the Marches Region (i.e. the SIRM project – system of responsible business for the Marches Region – created between 2005 and 2006 constitutes a primary ‘ethical territorial network’) and of the state legislative bodies, in particular, have advocated both for paying close attention to civil society through corporate responsibility and for favouring the adoption of best practices on the part of individual firms. The best practices of socially oriented Marchegian SMEs contribute to a model of territorial development that progresses in the particular socioeconomic context of the region. This possible way of experimenting with CSR in the territory points above all to the value of participation, respect and the recognition of roles, starting with the SME and the socially oriented entrepreneur. The model’s protagonist, therefore, is an ‘enlightened’ entrepreneur, who – other than generating opportunities for work and creating highquality products – fosters the sustainability of a collectiveness in the territory in which it lies. Marchegian SMEs that create distinctive features of CSR in their own mission, governance and accountability release energies and are orientated towards sustainable development. They represent actors who enter into relations with all of the realities that
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participate in the construction of welfare and to the production of wealth, dominated by a paradigm of CRS focused on its more ample diffusion. Recognising the cultural dimension of CSR, its connection with anthropological and environmental factors present in the given territory (such as the Marches), therefore widens the field to a dimension that is not only operative, but also strategic when the relationships between actors in the territory’s network are oriented towards affecting responsible, equal and sustainable development, which involves and benefits all of the subjects who operate in a territory (and not only them). The environment is not only simply a sidebar, objective and external, but also an active force that influences the characteristics of the firm (especially of SMEs). ‘Environment’ is used here not only to denote geographic space – the physical dimension of the area – but also the area’s social organisation and its system of relations. In the territory, local actors play an essential role in promoting processes of auto-organisation that activate modes of development aimed at increasing the competency of every single participant. In this context, the strategic instrument is essentially relational. Shared values and behaviours, the creation of a collaborative climate and of dialogue, and the linking of rapports among diverse protagonists generate the relational infrastructure of the territory, its contextual social capital. The territory thus becomes the place in which avenues of sustainable development can be concretely constructed. Beyond the network actors, the enterprises play the role of active promoters, a propulsive role. In all these cases emerges the value of the producer of tangible effects at the local level, in terms of quality of life of the people and of functions of local welfare: work, home, help, social services, health, services for workers and training. In this context, one well understands the dimensions of freedom, solidarity and shared responsibilities put into motion a mechanism that mobilises the intelligences and creativity, and which goes beyond economic data and provisional balances of the firm. Too often the preoccupations of the manager focus on satisfying the majority shareholder. CSR of the ‘territory’s SMEs’ is intended to better articulate the participatory dimension: not only the shareholders are to be satisfied, but also the citizens and the territory in which the business demands, as well. The territory therefore becomes a terrain on which reciprocal approaches can be forged. It becomes a subject and a protagonist. And the network that developed activates new mechanisms of participation and planning, and allows for the recuperation of its territory’s identity. Territorial networks can become drivers for the development of CSR and the context where mechanisms of plurilateral plans can be experimented and where protagonists do not work against national and supra-national sustainable development programmes, but also integrate (or sometimes even substitute) them. Finally, the ample size of CSR also involves a spatial dimension. This latter also has a local aspect, which can synthesise itself with the theme of the territory which, in a robust sense, serves as both the main judge and, at the same time, the main beneficiary of the socially responsible components. Socially oriented ‘country governance’ or ‘local governance’ (Balloni and Trupia, 2005) is made possible by an integrated representation of social, economic and institutional communal feeling, not only sectorial like in the districts, but also like that of a territory. Throughout the years, in diverse districts, the deterioration of the sociocultural (and not only industrial) atmosphere has made the relationship between economy and society, and between the firm and the environment, more difficult. When small and
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medium centres search for rapid and extensive development, they have mutated their own nature, and, at the same time, lost part of their social ties and their local identity, because of a decline in social consensus with regards to industry and industrialisation. Only in those territories, like in the Marches, developing networks between economic actors and actors coming from civil society and from local politics, territorial closeness will concretise in terms of reciprocity of exchange, of tradition, trust, identity and will create a heritage of understanding, relationships, of images and values that are rare ‘goods’ in an era of globalisation, to be stewarded and grown, able to stop injustice and insecurity in moments of difficulty like today.
5
Conclusive remarks: mission, governance, accountability in ‘spirited businesses’
The benefits of CSR are not always easily quantifiable. For that reason, one can say that the adhesion to a philosophy of socially oriented management is above all an ‘act of faith’, but these benefits closely touch on governance and, especially in small firms, the link among philosophy centred on sharing CSR, strategy, governance and accountability is even more significant. Firstly, because the process is desired by the entrepreneur and reverberates across his style of government, each expresses the will of the firm and translates it into the operations of the business. Secondly, because the influx on the strategic profile is manifested above all in terms of development of the culture of CSR. It is a process that seems to be the fruit of the entrepreneur’s intense and sincere involvement in the multiple manifestations of socially responsible actions. Finally, this is because the accountability and the communication of the firms’ CSR engagement creates effects on the organisational structure: it influences the micro-processes of the firm and produces effects induced by the governance, in terms of transparency of the decision-making process, the sharing of corporate policies, the diffusion of the instrument of delegation, greater team participation by the top of the decision makers in the firm and the multiplication of formal and informal occasions for reflection and for comparison. From the cases considered in the empirical study, a model characterised by forms of stakeholders relationships based on instruments that provide for transparency and representation of those qualities of the firm and its principle actors arises. Through this way, one can view the copenetration of the two drivers of socially oriented governance: discipline and commitment. The first is formalised and codified, the second is informal, emergent and value-based (Minoja and Romano, 2006, p.3). Regarding the first hypothesis posed at the base of the study, we can argue that CSR reinforces and facilitates the convergence between mission, governance and accountability; the orientation towards CSR is therefore reflected positively on the governance of SMEs. The social strategy of the enterprises observed is based on an effective government of systems of relations within the firm whose principle actor is the ownerentrepreneur/manager. The successful entrepreneur always appears to be the one who helps to rediscover values, and who is capable of creating solid rapports and ‘true’ relationships with interlocutors. The focus is on his moral level and on his capacity to realistically create an ethical corporate culture, a unified cultural environment, a common language and, in other words, a socially oriented governance. Beyond the formal
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application of formal methodologies those businesses are able to taking on efficacious forms of engagement and stakeholders relationships, so that they are capable of ‘grasping their essence’, pinpointing their expectations, responding to and offering solutions, and creating cohesion around projects and values of ample breadth. These are testimonies of entrepreneurial passion; they are given organisational strength and intangible riches. Regarding the second hypothesis posed at the base of the study, we can argue that among Marchegian SMEs, the orientation towards CSR begins with the entrepreneur and is a manifestation of both the values tied to personal goals as well as the values tied to cultural and social variables in the territory from which he comes. The best practices of socially oriented Marchegian SMEs contribute to a model of territorial development that progress in the particular socioeconomic context of the Region. In this meaning, this model of sustainable development that appeals to the ‘territory’s businesses’ is premised on a challenge: the capacity of the whole productive, associative, unionised, entrepreneurial and institutional world to act and to be made to act in socially responsible ways, and thus capable to be territorially characterised in a unified sense. In the face of large-scale corporations’ power and impact, however, one cannot mention the possible new and important role of small- and medium-sized businesses in providing examples of, and ‘driving’, real means of good governance – many of which truly spring from that family-based and ‘local’ world of capitalism, often criticised –, which hosts precious testimonies of integrity strategies (Paine, 1994), capable of generating trust towards the firm and the entrepreneurial conduct. This permits us to affirm that between CSR and corporate governance there exists a successful nexus. SMEs are especially revelatory, because it is not only essential that the extraordinary or eclectic actions are prominent, but also rather that those exemplary ones stand out, they bear small things with great intentions. This also permits us to conclude by affirming that the local dimension of sustainability offers a possible response to new needs of individuals, which take the form of increased specific, differentiated and intensely local social requests for ‘goods’ that are easier to find in low-density areas, characterised by rhythms of life that are more mediated and by systems of relationships that are more authentic and less hasty – and to share this affirmation: “If the markets are contractual instead of communitarian, this means that they solicit our solitary egos but leave our desires for communion unsatisfied, offering material goods and fleeting dreams but not a communal identity or collective membership” (Barber, 2002, p.231).
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Notes 1
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For a precise elaboration and a historical analysis of the concept of social responsibility in lucrative enterprises (see Matacena, 2005a,b). Issues management as an instrument for improving the capacity of the firm by discovering the emergent social problems and responding to them with specific programmes of activity (Carrol, 1994). “Values are abstract ideals of those that are considered ‘good’, desirable, preferable; they don’t have a specific object or situation and construct models that guide and determine action, scope, attitudes, ideology or representation of itself in terms of others. Even the attitudes are beliefs possessed by people, but are less stable and always refer to a specific object or situation. Values and attitudes influence individual and collective behaviour in many ways in the field of strategic management; those possessed by the entrepreneur or by the management are considered among the principle factors that determine the strategic decisions of the enterprises” (Marchini, 2000, p.92).
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The author distinguishes, on the one hand, between lucrative businesses, cooperative and mutual businesses, social businesses (non-profit enterprises) and small and medium ‘territorial’ businesses. For the first type, social responsibility is considered as a specific quality for entrepreneurial activities. In the second and third, the mission is prevalently concerned with social solidarity. The third type is characterised by territorial vocation, that is, by the fact that their relationship with their surrounding environment and the coordination with all actors in the market is a condition of their own economic development. 5 In the definition of an SME, along with the attributes defined by the Recommendation of the Commission of the European Community on 6 May 2003; 2003/361/CE, the qualitative parameters were considered (independence of the economic subject, connection between ownership and control), following a setting diffusely adopted in the studies and in the research on small-sized businesses. 6 Based on empirical research conducted between 2005 and 2006 on a sample of 51 SMEs from diverse European countries the authors distinguished three categories of businesses: “the business strategy enterprises”, which are making a conscious effort to implement CSR and have adopted CSR as a part of their business strategy; “the intuitive enterprises”, which are “doing” CSR without having made a conscious decision to do so. Their normal business practices coincide with CSR indicators; “the raison d’être enterprises”, which are “doing” CSR because it coincides with their business concept, i.e. the actual business concept is philanthropic” (Kvåle and Olsen, 2006, p.7). 7 Molteni and Lucchini (2004) identify a typology of orientations among Italian firms, based on two coordinates (intensity of the phenomenon – i.e. the socially responsible behaviour – and qualitative aspects linked to the practice and to corporate behaviour): cohesive firms, multicertified, aware, able to be mobilised, sceptical. 8 The Global Report contains asset and liability statements, social and environmental reports, and an analysis of intellectual capital. 9 Italia Symbola, Foundation for the Italian qualities, brings together Italian protagonists from the economic social, institutional and cultural world. Through conferences, studies and publications, this foundation aims to promote exemplary case studies and experiences from diverse Italian territories, and of products under the new ‘Made in Italy’ brand – which all come from a fusion of traditional knowledge and technological innovation. www.symbola.net;www.softeconomy.it. 10 The model of endogenous development guarantees autonomy and solidity to processes of transformation of local economic systems based on the following essential factors: specific local resources (work, entrepreneurship, specialised understanding of productive processes, professional capabilities, material resources, capital historically accumulated); local control of processes of accumulation and innovation; existence and development of productive intra- and intersectorial interdependence at the local level. On the phases of endogenous development and on the typologies of local models of development See Garofoli (1991). 11 The state-funded financing plan for the perennially impoverished Southern Italy.
