Recommended actions to foster the adoption of Corporate Social ...

Chapter 5: El Salvador1 Executive SummaryCorporate Social Responsibility (CSR) effortsshould be enhanced in El Salvador since only a fewexporting SMEs, that act as suppliers for largerfirms have recognized CSR as an important factorfor competitiveness in the market. The majority ofSalvadoran SMEs perceive CSR as an important wayto enhance the overall economic growth and benefitsociety at large. However, they do not see CSR as amanagement strategy that can affect their ownbusiness profitability.This analysis shows that Multilateral DevelopmentInstitutions (MDIs) in El Salvador have a strong rolein CSR development, since they already finance andmonitor development policies in several sectors,such as infrastructure, telecommunications andeducation. Since CSR is still a new concept, amongSMEs in El Salvador, MDIs have been proposing newdevelopment policies or including CSR issues intraditional development policies that affect SMEs.MDIs are trying to raise awareness of CSR, financepilot projects and provide technical assistance toSMEs. MDIs can support the public authorities’ rolesby encouraging the application of internationalstandards and promoting public-privatepartnerships. Multilateral Financial Institutions,which are part of MDIs, can also provide financialsupport for some of these activities. MDIs could leadone of the most important roles in CSRdevelopment, which is the development of a“conducive policy environment”, which involvesfacilitating private sector initiatives, encouragingcompliance, supporting partnerships and linkingSMEs to larger domestic and internationalcompanies. MDIs should have a prominent role ininnovative actions aimed at supporting SMEs,through pilot programs designed to help SMEsimplement more strategic management approaches.The central Government has not created incentives tofoster CSR in its own ministries because they haveother critical priorities to address. The public sectortypically plays a catalytic, secondary or supportingrole in CSR (Fox, Ward and Howard, 2002). TheSalvadoran public authorities should be involved inmost of the education and awareness campaigns thatpromote CSR. They may also design awarenesscampaigns on waste and energy management andinnovative education campaigns for NGOs, aimed atincreasing business development services. Finally, thegovernment and local authorities may rewardvoluntary agreements on health and safety proceduresand working conditions in industrial sectors.Salvadoran business associations do not seem to bedeeply involved in CSR and their role inadministrative and business activities seems quitelimited, since they have been quoted neither byinterviewees nor by panelists as a reference forSMEs. They rarely play a leading role, but can makeimportant contributions when involved.In the Salvadoran case, academia and NGOs are theonly active components of civil society. Civil societyhas a supporting role in promoting compliance, forexample, through simplification of processes. Civilsociety can lead human rights and workingconditions campaigns, promote monitoring systemsand environmental assessment campaigns anddesign an NGO-business educational campaign toincrease collaboration and business developmentservices. The Salvadoran civil society may participatein SMEs' or business associations’ stakeholderengagement programs. A leading role can be takenin rewarding responsible market behaviors of SMEsin certain sectors, which would contribute to thedissemination of best practices among SMEs.2 Economic and SocialFrameworkEl Salvador has the smallest area of land and the mostdensely populated land in Latin America, withEl Salvador83