Corporate Social Responsibility and Social Entrepreneurship of

Small and Medium-sized Businesses in Russia: Moving towards

Sustainable Development

Ekaterina Gamova

, Elena Rodionova

and Zhanna Kuzminykh

Department of Finance, Economics and Industrial Engineering,

Volga State University of Technology, Lenin Str., Yoshkar-Ola, Russia

Department of Foreign Languages and Linguistics, Volga State University of Technology, Lenin Str., Yoshkar-Ola, Russia

Keywords: Corporate Social Responsibility (CSR), Social Entrepreneurship, Small and Medium-Sized Businesses

(SMBs), Russia.

Abstract: The article deals with the matters of corporate social responsibility of Russian business, the presence and

operation of social entrepreneurship and enterprises in small and medium-sized businesses, as well as the

formation of corporate transformation strategies for achieving sustainable development in the post-

coronavirus economy. The issues addressed are relevant as the concept of social responsibility in business is

new in Russia, and, thus, it remains insufficiently studied, differentiated, and classified. Related definitions

are vague and have to be clarified; the experience gained domestically needs consolidation and evaluation.

The study analyses the transformation of corporate governance models in the new economic realities.

1 INTRODUCTION

It is believed that the beginning of contemporary

literature on corporate social responsibility (CSR)

was marked by H. R. Bowen's book ‘Social

responsibilities of the businessman’ (1953), in which

the concept was first defined. The publication was

followed by the works of such international authors

as K. Davis (1960), W.C. Frederick (1960), H.L.

Johnson (1971), T.M. Jones (1980), R.E. Freeman

(1983), E.M. Epstein (1987), and others. Domestic

research publications include works by

S. Litovchenko (2003), Yu. Blagov, A. Bukhvalov

(2010), O. Kanaeva (2013), A. Kostin (2013), N.

Krichevsky, S. Goncharov (2016), M. Koniagina, A.

Buga, A. Kirillova, V. Manuilenko, G. Safonov

(2019), K.Yu. Belousov (2020), S.A. Karimova

(2020) and others.

The approach prevailing in contemporary CSR

studies was set forth by A. Carroll, who, in 1979,

proposed to define corporate social responsibility as

‘the economic, legal, ethical, and discretionary

https://orcid.org/0000-0002-4340-7156

https://orcid.org/0000-0003-3174-614X

https://orcid.org/0000-0002-1148-5424

expectations that society has of organizations at a

given point in time’ (Carroll, 1979). The corporate

social responsibility concept is closely related to the

theory of stakeholders. From this perspective,

corporate social responsibility can be seen as a

philosophy, according to which organizations take

into account the interests of the society byaccepting

their responsibility for the impact of their activities on

consumers, business partners, employees,

shareholders, local communities and other relevant

parties (stakeholders).

An attempt to analyze corporate social

responsibility in line with the strategic management

concept was first undertaken in the article by L. Burke

and J.M. Logzdon (1996). The authors rejected the

unconfirmed hypotheses contained in the studies of

the late 1980s and the early 1990s which suggested a

direct correlation between CSR programs and short-

term profits. L. Burke and J.M. Logzdon focused on

exploring the ways for a firm to obtain a long-term

competitive advantage. They proposed to define

strategic corporate social responsibility as not only

Gamova, E., Rodionova, E. and Kuzminykh, Z.

Corporate Social Responsibility and Social Entrepreneurship of Small and Medium-sized Businesses in Russia: Moving towards Sustainable Development.

DOI: 10.5220/0010590503510355

In Proceedings of the International Scientiﬁc and Practical Conference on Sustainable Development of Regional Infrastructure (ISSDRI 2021), pages 351-355

ISBN: 978-989-758-519-7

351

meeting the interests of stakeholders, but, above all,

bringing the firm itself significant sustainable

benefits associated with its business operations, i.e.,

CSR is associated with the company's ability to take

more successful strategic positions (Blagov and

Bukhvalov, 2010). Today, researchers and

practitioners agree on the vital role of corporate social

responsibility in the implementation of the

positioning of modern companies.

While the concept of sustainable development

(SD) and the ‘green economy’ ideas were gaining in

popularity worldwide, an emerging body of research

emphasized the direct link between corporate social

responsibility and the implementation of SD ideas at

the micro level. This is reflected in the international

standard ISO 26000: 2010 which defines social

responsibility as the “responsibility of an

organization for the impacts of its decisions and

activities on society and the environment, through

transparent and ethical behavior that contributes to

sustainable development, including health and the

welfare of society; takes into account the expectations

of stakeholders; is in compliance with applicable law

and consistent with international norms of behavior;

and is integrated throughout the organization and

practiced in its relationships” (ISO, 2010).

The development and elaboration of the ideas of

corporate social responsibility have resulted in the

emergence of the new concept, that of “social

entrepreneurship” (SE), which is associated with the

social function of business operations. The formation

of SE as a special type of economic activity started in

developed countries in the 1970s. The European

approach to social entrepreneurship was implemented

through the creation by civil society actors of new

social enterprises in the segments that experience a

shortage of public services. In the USA, social

entrepreneurship is viewed as a market activity

having also a societal goal, which is carried out in

various sectors by existing enterprises of various

organizational and legal forms (Popov et al., 2019).

2 METHODS

For conducting the present study, the authors have

studied a body of national and international research

literature on corporate social responsibility,

sustainable development, and the transformation of

corporate governance in the context of moving

towards sustainable development.

In order to achieve the goal and objectives of the

study, a set of general scientific methods and special

methods was employed on the basis of the principles

of dialectics as a scientific approach considering the

phenomena under study in their holistic universal

interconnection and interdependence:

At the level of generalization, the following

methods were used: the transition from the abstract to

the concrete, system analysis, generalization, subject-

object, historical and system methods;

At the specific scientific level, theoretical analysis

of the literature on the subject was utilized at the stage

of studying the research problem; interviewing

owners of small and medium-sized enterprises

(SMEs) was also conducted;

For summarizing the research data, the authors

used data analysis and systematization, as well as

analysis and generalization of empirical management

experience.

The selection of the research methods and tools

was based on the principle of their necessity and

sufficiency to attain the research goal, ensure the

required depth and detail of exploring the key aspects

of the tasks set, and reliability of the results obtained.

3 RESULTS AND DISCUSSION

In 2018, the Russian Federation launched the national

project "Small and medium sized businesses and

support of individual entrepreneurial initiatives",

which includes five Federal projects:

1. Improving the business environment.

2. Increasing the access of small and medium-

sized enterprises to financial resources, including

concessional financing.

3. Acceleration of SMEs.

4. Promoting entrepreneurship.

5. Creation of support system for farmers and

development of rural cooperation.

The main goal of the National project is to

propose measures to support Russian

entrepreneurship at every stage of its development,

from the initial process of developing a business idea

to expanding the business and entering export sites.

Performance benchmarks have been set to indicate

the implementation of the National project by 2024,

in particular, increasing the number of people

employed in small and medium-sized enterprises

from 19.2 million to 25 million, or by 30%; increasing

the share of SMEs in the national GDP from 22.3%

to 32.5%; increasing the share of exports by the

entities in the total non-resource exports from 8.6% to

10%.

One of the most significant outcomes of the

Federal project "Improving the business

environment" is the legal establishment of the "social

ISSDRI 2021 - International Scientiﬁc and Practical Conference on Sustainable Development of Regional Infrastructure

352

entrepreneurship" concept. Within the framework of

the Federal project "Acceleration of small and

medium-sized enterprises", we should note the

support provided to social entrepreneurs by the "My

Business" centres, the sites that integrate all the

necessary infrastructure organizations and

development institutions in the regions.

The Federal Law No. 245 “On amendments to the

Federal Law "On the development of small and

medium-sized businesses in the Russian Federation"

in terms of consolidating the concepts of "social

entrepreneurship", "social enterprise" dated July 26,

2019 defined the concepts of "social

entrepreneurship" and "social enterprise" and

incorporated the terms into law (On amendments to

the Federal Law, 2019). As a result of the adoption of

this law, small and medium-sized enterprises can seek

the status of a social enterprise, provided that the

business aims to achieve socially relevant objectives

and contributes to solving the problems of the citizens

and the society.

The need for the legislative regulation of SE in

Russia emerged because commercial organizations

engaged in societal projects were severely limited in

the range of sources available for attracting financing,

and the profitability of such companies was usually

low. Non-profit social organizations, however, did

not suffer from this disadvantage as they had more

opportunities to generate financial resources, such as

donations and grants. To redress the imbalance, the

changes were introduced to the legislation.

In contrast to a non-profit organization, SEis

continuously involved in economic and production

activities, the results of which ensure the company’s

profits and existence. At the same time, the company

as a commercial organization is aimed at gaining

financial results, specifically for solving societal

problems, serving the public interest; thus, the idea of

making a profit appears to be secondary. If a company

obtains the status of a "social enterprise", it can count

on financial assistance (subsidies), property,

information and consulting support from the state.

According to the Federal Law No. 245, small and

medium-sized enterprises that have become social

enterprises must meet the following criteria:

 labour integration (ensuring the employment of

disabled people, single parents or parents

raising three or more children, pensioners and

citizens of pre-retirement age, orphanage

graduates, refugees and internally displaced

persons, low-income citizens or other

categories, provided that their share is at least

50% of the total number of employees, and the

costs on their salaries are at least 25%);

 disposal of commodities produced by

representatives of the categories above (the

share of income from the activities is at least

50% of the total income, and the reinvestment

of profits is at least 50% of the total profit);

 production of goods for persons from the above

mentioned categories in order to compensate

for the obstacles to their everyday activities

(the share of income from activities is at least

50% of the total income, and the reinvestment

of profits is at least 50% of the total profit) in

the following areas: provision of social welfare,

socio-medical, socio-psychological, socio-

pedagogical, socio-labor and other services;

 activities aimed at achieving socially relevant

goals and contributing to the solution of

societal problems (the share of income from

activities - at least 50% of the total income,

reinvestment of profits - at least 50% of the

total profit) in the areas: providing

psychological and pedagogical and other

services aimed at strengthening the family,

family education of children, maternity and

childcare support; organization of recreation

and health improvement for children, services

in the filed of preschool education and general

education, supplementary education for

children, training of employees and volunteers

of socially oriented non-profit organizations,

cultural, educational and other activities and

services.

A social enterprise can not carry out activities

with regard to the production and / or sale of excisable

goods, or the extraction and / or sale of minerals.

The introduction of legislative changes provided

a legitimate basis for involving SMEs in the area of

social responsibility of business, which used to be

mainly within the prerogative of large enterprises and

corporations due to their broader financial

capabilities.

The issue of social responsibility of business in

Russia remains insufficiently studied or differentiated

due to the youth of business itself in the country, as

well as the absence of established historical traditions

of doing business. Moreover, this area is often "in the

shade" because many business people are inclined to

avoid publicity surrounding social project funding;

they tend to provide the latter in a private manner.

Based on the analysis of the period of the

"coronavirus" and "post-coronavirus" economy, the

authors have identified four main problems that

hinder a wider spread of corporate social

responsibility and sustainable development in the

Corporate Social Responsibility and Social Entrepreneurship of Small and Medium-sized Businesses in Russia: Moving towards Sustainable

Development

353

small and medium-sized business sector in Russia and

its regions.

1. A lack of financial capacity to finance social

projects and programs. The coronavirus pandemic has

hit all types of businesses, with many companies

lacking financial resources for their core business

activities. This is especially true for small and

medium-sized enterprises, which appear to be more

volatile. The strategies used by many businesses

today are sequestration and accumulation of financial

resources in order to compensate for the decline in

incomes caused by the pandemic and related

restrictive measures. Funding social initiatives

always means spending on the part of the

entrepreneur; moreover, the expenditures are not on

the list of eligible expenses, and therefore, the income

tax is paid from these amounts. A business can choose

to agree to the expenses and transfer them to the end

consumer in the form of higher prices for goods,

works, and services.

2. The existing paradigm of the development of

social responsibility of Russian business puts

forward, as its main and only type, full payment of

taxes without using informal schemes. Then the state,

redistributing the received tax revenues, holds the

social responsibility before its citizens by financing

the social areas from the public budget.

3. A lack of norms of social and public

supervision over business activities. Carrying out

their financial and economic activities, commercial

organizations are not accountable to public and

civilian control. Inspectors, supervisory bodies, and

fiscal authorities monitor the key activities of

enterprises without, however, dealing with the issues

of social involvement and social utility of the

businesses. In their turn, businesses are not ready to

participate in social activities for which they do not

find themselves accountable.

4. As a result, there is a lack of understanding of

the essence of social responsibility and its

relationship with the outcomes of business

development among the representatives of SMBs;

there is also a deficit of experience in solving social

problems of the city / region, as well as a shortage of

qualified full-time social workers capable of solving

societal problems.

On the other hand, the survival of companies in

the new economic realities associated with the

pandemic is only possible in the presence of well-

established relations with the major stakeholder

groups. Therefore, the concept of corporate social

responsibility remains relevant today and serves as an

important component and theoretical basis of

corporate strategies in the context of moving towards

sustainable development.

4 CONCLUSION

In the Russian Federation, the concept of corporate

social responsibility is still at the stage of its

formation. The initial ideas about CSR as the

implementation of one-time charitable events not

related directly to business objectives are gradually

giving way to a broader understanding of corporate

social responsibility as an integral part of the

enterprise strategy. Through achieving a balance

between the company interests and societal

expectations, the strategy contributes to the

development of long-term competitive advantages of

the business in line with the corporate goals.

Corporate social responsibility can be defined as

a new ideology of sustainable development of an

organization creating a basis for a socially oriented

model of corporate governance and business

development. The legal establishment of the concepts

of "social entrepreneurship" and "social enterprise"

contributes to further development of corporate social

responsibility, its moving beyond large businesses

and spreading among SMBs. Potential challenges

here are associated with the negative effects of the

factors characteristic of the "coronavirus" and "post-

coronavirus" economy. Therefore, of particular

importance for Russia is the state support provided to

sustainable development through various instruments

of financial and non-financial assistance.

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