Compliance to CSR codes a big block

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: One of the biggest challenges we are facing in exports is meeting newer and stricter demands from our buyers under corporate social resp-

onsibility (CSR) codes. Whereas there is lure for greater volumes, their demands are becoming frustrating. What is the way out of this complex problem because we cannot take on these large buyers alone?

—Several exporters from Jalandhar, Ludhiana & Tirupur

This is the challenge that increasingly will be faced by Indian SMEs supplying to value chains of global production networks whether buyer-driven chains—garments, footwear, toys etc., or producer- driven chains—auto, air craft etc. The competition at SMEs’ doorstep is global and participation in the globalised economy is no more a choice. Large integrated supply networks is the growing trend. SMEs are responding by becoming vendors to these complex networks owned by large international supply chains. These networks have increasingly come under the pressure of ‘anti-globalists’ pushing the social agenda.

The challenge for SMEs has become compounded because this social agenda is ‘top down,’ demands conformance to standards in a fashion ‘one size fits for all’ and does not consider the SME perspective. SMEs are, however, the second name of heterogeneity: from size to formality and from level of expertise to access to resources. Whether majority of firms in a country would be in the formal sector, or would be functioning in the informal sector, would depend on host of factors—society’s attitude to entrepreneurship, cost of compliance of regulatory environment, level of economic development, judicial system, laws related to land and ownership, banking and financial system etc.

Moreover, the multiplicity of codes or standards is expanding at a frightening pace. Standards differ across buyers, products, sectors and even countries. The expectation of compliance ranges on issues from labour standards to environment; from bribery to poverty reduction; from human rights to technology. A few years ago, OECD mapped some 246 codes; SMEs are still counting. Cost of compliance is a major issue.