Listen to this article
Italy is the home of small companies, so it is only natural that some of the best work on small- and medium-sized enterprises in Europe is being done on the peninsula.
One almost untouched field is corporate social responsibility (CSR). Francesco Perrini, who is 40 and the resident expert at Milan’s Bocconi University, estimates that less than 10 per cent of CSR studies look at small companies.
From one perspective that is understandable. CSR projects tend to make one think of multinational corporations tackling world hunger or pollution in the company of Bono and Bill Gates. Global issues are, naturally, not often tackled by small companies with limited resources.
But small companies still employ the overwhelming majority of workers throughout the world. Some of Prof Perrini’s research cites data showing that less than 20 per cent of Italian industrial companies have more than 250 employees, compared with a European Union average of 34 per cent. Overall, Italy’s 6m or so companies employ an average of just 3.9 workers compared with 6 in the EU as a whole.
If large companies have learnt that CSR makes good business sense, then a modified form must also be good for small companies. Prof Perrini is one of the first to look at the small enterprises that have realised this, and to explain how their approach to CSR typically differs from multinationals.
The main difference, he says, is that large companies have a strategic vision of CSR which looks at stakeholders and addresses each: employees, customers, suppliers, owners; and at the levels of corporate governance, community work, the environment and so on.
Prof Perrini says that small company CSR is rarely as formal and does not cover every area. Studying it is made harder by the fact that companies may have programmes without classing them as CSR. In Italy, they tend to focus on the community side because, he says, 98 per cent of companies are based around one plant, so are a strong presence in their local area.
“Small companies are actors strongly embedded within their local communities,” one of Prof Perrini’s papers says. “In fact, medium-sized Italian firms often hire the majority of the population in their area, and therefore exercise a strong influence on the community’s well-being.”
Prof Perrini told the Financial Times in an interview that companies were starting to evolve their strategies so that they looked after the community instead of just employees. The crucial point is that, by caring for staff and their families, CSR becomes a greater benefit for current employees and a lure for future ones.
“The small entrepreneur in the past would say that organising a party or a charitable donation was CSR. Now, ethical or environmental considerations need to be integrated into their operations. There is a change from just philanthropy or marketing,” he says, citing examples of companies that build nurseries for small towns instead of just their factories, improve local roads, build sports centres and sponsor local teams, providing clothing and equipment.
Prof Perrini says: “We discovered some cases of small companies in which the most important goal was welfare before profitability.”
One such example is Foppa Pedretti, a furniture company near Bergamo in northern Italy. “We went to visit the plant and they don’t use chemical solvents, only water-based materials. It’s much more expensive …Nobody was fired, they left only when they retired and their children got the job.”
Managing a company like this may not look like a meritocracy, and there could be clear problems in not reaching maximum productivity and profitability. But he sees it nonetheless as virtuous, with happy and relaxed employees boosting productivity by being healthier and rarely absent.
Another initiative in small companies, he says, is flexibility over working hours. Italy is behind many other countries on part-time work but small firms are better than large ones, Prof Perrini says. Flexibility in hours is another way to promote “a better environment, better health, less employee turnover, lower costs, higher productivity and smaller legal bills”.
There are a number of external factors pushing small companies into CSR too. Some banks are scoring corporate clients on their ethical and CSR programmes and holding out the possibility of better credit terms. Ethical consumers, particularly in areas such as food, are starting to pick and choose. Local governments are demanding CSR certification before tendering processes.
The effect is that companies themselves are pushing ethical considerations down their own supply chain, particularly within the local clusters of business for which Italy is famous.
Perrini’s next task is an overview of pan-European CSR. With colleagues in other universities, he is planning to monitor and benchmark CSR practice in companies of 10-250 employees, and he wants to research the US and Australia.
“We have to work on communicating the benefits of CSR to small companies,” he says, adding: “We have to convince companies that CSR is an investment not a cost.”