Industry initiatives

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Responsible MSMEs in Clusters
Fostering Responsible Behaviour in MSMEs 19th
November,2008 Namit Mutreja UNIDO CDP and CSR
Project
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Structure of the Presentation

• Background
• Objective
• Secondary Research
• Primary research
• Policy Research
• Action Research
• Main outcome of the Project
• Recommendations and Way forward

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Background to the Project

• Global Project
• 4 countries India, Senegal, Ecuador and
  Pakistan
• Duration 3 ½ years May 05 to December,08
• In partnership with SDC
• Why UNIDO ?
• UNIDOs 15 years experience of working in the area
  of MSME and cluster development with mainly
  focus on economic development.
• Shift of Cluster development focus to new
  thematic areas like Poverty alleviation and
  skill development.
• Need to look through the CSR lens for inclusive
  growth.

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Objective

• Immediate
• To explore and start addressing the reasons
  behind seemingly low
• level of participation of SMEs in the CSR
  movement.
• Developmental
• To further enable a greater number of SMEs in
  developing countries
• and transition economies improve their overall
  competitiveness in a
• socially responsible way, and, therefore
  integrate more successfully
• and sustainably into national and international
  supply chains.

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Secondary Research

• Desk-based research to review the available
  literature nationally and internationally with
  respect to ESR, SMEs and Clusters.
• SME clusters and responsible competitiveness in
  developing countries by Accountability (UK)
• Type of responses SMEs tend to have
• Evasion ( widespread)
• Silent CSR (widespread)
• Compliance to standards (limited )
• Market access through CSR (very limited )
• Dynamics of social responsibility in small
  medium enterprises SME clusters, by UNIDO ,
  India.
• Drivers for CSR in SMEs
• Business-case (Profit)
• Stakeholder Dictates (Pressure)
• Ethical Values (Self Motivation)

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Primary Research-1/2

• ESR Mapping of 5 clusters was undertaken
• Moradabad- Handicraft Cluster
• Trichy- Heavy Engineering fabrication Cluster
• Kalady- Rice Milling Cluster
• Ludhiana Knitwear Cluster
• Jalandhar Sports Goods Cluster
• Key Findings
• Perception - No homogeneous definition of ESR.
  Internally -Taking care of the labour and
  Externally Involving in community welfare.
• Drivers- Personal values of the entrepreneur.
• Preference -Individual and internal ESR
  activities (Collective ESR is rare and if any in
  partnership with religious organisations)

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Primary Research-2/2

• Key Findings (contd.)
• Enterprises Economic Size and ESR activity- As
  percentage of turnover, the larger the enterprise
  the smaller its contribution towards ESR,
  essentially pegged below 1 of turnover.
• Type of Market and ESR Activity- Markets and
  more so buyers impose pressure on suppliers,
  which impacts the internal ESR activities.
• Return on Investment of ESR activity-Internal ESR
  seeks to improve business performance or to
  lock-in orders with international buyers.
  External charity driven ESR activities seeks
  emotional returns.
• Entrepreneurial leadership and ESR activity-
  Entrepreneurial leadership determines the
  sustainability and quantum of ESR in a cluster.
• Sustainability of ESR activity-SMEs will continue
  their ESR activities, despite any negative
  changes in their company performance, but will
  change scope, scale and form of implementation.
•  
•  

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Policy Research 1/2

• ESR infusing factors
• Role of FIs SME credit rating agencies in
  shaping ESR in SME clusters
• Role of Corporate Sector and Large buyers having
  SMEs in their supply chain in shaping ESR
• Role of B-Schools in preparing future young
  managers having understanding of ESR in SMEs
• Objective
• Present relationship between these stakeholders
  and MSMEs with respect to ESR.
• Role these stakeholders have been playing in
  infusing ESR in MSMEs till date.
• Present perception of MSME with respect to the
  ESR influence of these stakeholders.

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Policy Research 2/2

• Qualitative Outcome  - These levers can play an
  important role in following ways
• The Government needs to modify the existing
  policies for the development of the MSMEs to have
  components for inclusive growth thorough
  stimulation and regulation.
• The various stakeholders need to take an
  initiative in improving the understanding of
  MSMEs ESR and facilitating their implementation.
• Global Research on trade, a comparative study
  between Jalandhar (India) and Sialkot ( Pakistan)
  Sports Goods Cluster
• CSR related cluster development initiatives need
  to negotiate between the potentially conflicting
  needs of promoting local cluster governance and
  addressing global chain governance pressures.
• An effective engagement between local and global
  actors, in particular between local cluster
  institutions and global brands is the need to
  drive the demands for the CSR compliance.

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Action Research 1/3

• Sports Goods Cluster, Jalandhar (since May 2005)
• In past ,confronted with the problem of Child
  Labour.
• Other challenges Technology and new material
• UNIDOs intervention facilitated
• Scaling up of social initiatives - Education (
  800 children), Health care benefits( 22000
  workers and their family) Self Help groups ( 850
  women) etc
• Introduction of Machine stitched balls ( Rs. 60
  lacs of capital investment ) expansion to
  Screen printing (Rs.3.00 lacs for RD)
• Enabling Compliance through collective working-
  providing necessary skills to SGFI Project
  manager to help SMEs to meet buyers compliance
  requirements
• USP- How Philanthropy can help foster
  responsible behaviour in cluster

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Action Research 2/3

• Heavy Engineering Fabrication Cluster, Trichy
• Challenge- Occupational Health and Safety of
  subcontracted workers floating population of
  15000 injury and accidents
• UNIDOs intervention facilitated
• A Multi- stakeholder initiative on improving
  occupational Health Safety of subcontracted
  workers
• A total of about 24 safety stewards 1 per each
  participating firm trained.
• Program to reach out to 25 of the workforce in
  1 year.
• USP How Large buyers in a cluster can help
  foster responsible behaviour in MSMEs in their
  supply chain

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Action Research 3/3

• Sponge Iron Induction furnace Cluster,
  Rourkela
• Challenge- The manufacturing process leads to
  carbon emission and coal dust in the air that
  adversely effects the human health , vegetation
  and natural habitat and also leads to problem of
  solid waste disposal
• UNIDOs intervention facilitated
• A setting up of a block association Lattikata
  Block Industries Periphery Development
  Society(LBIPDS) , which lead to interventions in
  the area of healthcare (249 free health camps
  -14588 patients), education(2750 students in 54
  primary schools) and basic infrastructure
  development( Rs 50 lacs being invested).
• Expansion to other blocks- Bonai
• USP- How government order can shape the ESR in
  MSMEs through a collective approach

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Main Outcome from the Project 1/2

• UNIDOs Methodology on Fostering Responsible
  Behaviour in MSMEs in Clusters
• Cluster Responsibility Perception Based Score
  card- A diagnostic tool to assess the present
  status of a particular cluster with respect ESR
  issues and activity being undertaken based on the
  perception of the relevant stakeholders.
• A training toolkit prepared for training cluster
  development agents to take up ESR development
  agenda in cluster along with economic development
  agenda.

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Main Outcome of the Project 2/2

• Energy Mapping methodology A cluster approach
  to map energy in cluster developed.
• A community of Knowledge people on Cluster, MSME
  and ESR
• Knowledge and Resource centre-
  www.weplayfair.com

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Recommendations and way forward

• Need to further develop the toolkits and
  methodologies for undertaking sustainable
  multi-stakeholder initiatives steered by local
  industrial associations among MSME clusters.
• Build capacities of the MSME industrial
  associations to undertake socially relevant
  activities in their respective clusters.
• Suitably modify the existing cluster development
  schemes of assistance undertaken by the various
  ministries worth Rs 6,000 crores during the 11th
  five year plan to include socially and
  environmentally relevant activities thus
  fostering inclusive growth.
• Develop a south based CSR policy agenda suitable
  for the developing country context which takes
  into account the local socio cultural context

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Thanks