How SMEs can be the true drivers of an inclusive economy

The private sector is under pressure to take on greater social responsibility in the drive for inclusive growth. But is inclusive growth a luxury reserved only for big businesses with larger margins and more publicity? SMEs still make up the majority of businesses and employment, so they will have a crucial role to play. Here, Roger Warnock of the Young Foundation, a UK think tank, lays out a framework to knit local prosperity and inclusivity into the fabric of SMEs by connecting them to their local government and communities_._

Businesses in the 21st century are under increasing pressure to rise to stakeholder expectations, increase transparency and identify new sources of growth.

As the severity and complexity of societal problems grow, government is increasingly looking to business to help to address them. This would involve reconnecting business success with social progress. This approach has been lost in decades of narrow management approaches, short-term thinking and greed under the ideology of the free market.

There’s nothing new about business striving for both economic and social impact. Many of the great Victorian enterprises, such as Cadbury and Unilever, were set up precisely to achieve this. However, by the end of the 20th century shareholder primacy came to dominate thinking and many companies had lost their social edge, focusing instead solely on the financial bottom line, as opposed to the “triple bottom line” that is social, environmental and financial.

But does business have a legitimate role in tackling today’s many and varied social issues such as youth unemployment, rising levels of antisocial behaviour and mental health? Many argue, as Milton Friedman did, “that there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits”. Or as he put it still more bluntly elsewhere, “the business of business is business.”

In recent years this myopic view of shareholder value has changed and, in reality, companies can no longer afford to monitor only the obvious social impacts of today. Without a careful process for identifying the evolving social effects of tomorrow, firms may risk their very survival.

With my role at The Young Foundation, a UK think tank, I have been investigating how business can help to tackle inequality and develop a more inclusive economy. I have now developed a new “Social Jam” framework that will support business to recalibrate, collaborate and rewire their organisations.

Many businesses are socially outward looking and have focused for a long time on delivering a wider social agenda alongside their bottom line. From the Victorian pioneers to millennial start-up companies there has been acknowledgement that an organisation needs a “purpose". Yet many find that the greatest impediments are the internal barriers and lack of permission to innovate that prevent companies from taking action.

The “Social Jam” framework has been designed to enable business, government and local communities harness the power of social innovation and create a more inclusive economy. It uses a range of tools such as participatory research, empathy mapping, crowdsourcing and design thinking that will enable business leaders to engage with their staff, government and their local communities to align and identify a common purpose, and set in motion a process that will build this new thinking into all levels of an organisation.

Over the past few decades, big businesses have taken to CSR, and they are now getting involved in the inclusive growth agenda alongside government. But it’s not so clear how SMEs, whose margins are that much smaller, are meant to take greater social and environmental responsibility while also staying competitive. Yet in Europe, those SMEs represent 99% of all businesses and provide two-thirds of all private sector employment. With Social Jam, we want to show SMEs how they can work with their local government and communities to contribute to a more inclusive economy.

Our aim is to start by working with SMEs across the UK and Ireland to test the framework. So if you would like to collaborate, test the framework in your organisation, have ideas that may help develop the framework further or just want to have a chat, then please get in touch.

(Picture credit: Flickr/L1mey)