Firms play a leading role in the transition to sustainability since their organizational structure, management system, and innovation processes are all key drivers towards sustainability, inclusiveness, and productivity growth. The sectors characterized by a high presence of micro, small and medium enterprises (SMEs) don’t always have the appropriate tools and model to assess the application of sustainable production. To address this gap, ARCO’s Researchers developed and tested a new integrated model, the Small and medium Enterprises Compliance Assessment (SECA) model, to provide SMEs with a tool to detect their compliance with mandatory requirements. The SECA model is detailed in the paper “Measuring the compliance of management system in manufacturing SMEs: An integrated model” published in the Journal of Cleaner Production (Elsevier) and co-authored by Mario Biggeri, ARCO’s Scientific Director, Leonardo Borsacchi, Circular Innovation &Sustainable Commodities Unit coordinator, Andrea Ferrannini, Local Development Unit coordinator and Lisa Braito, University of Florence.
An organization is considered compliant with applicable regulations if it conforms to international and domestic laws, regulations, guidelines, and specifications relevant to its business processes. As outlined in the literature on SMEs, obstacles to a firms’ occupational health and safety performance include: limited human, economic and technological resources, low levels of managerial knowledge regarding the enterprise’s risks, and deficiencies in organizational processes. Since compliance covers several dimensions (i.e., financial accounting, tax reporting, employment practices, interactions with government officials, workplace health and safety, environmental protection, and more), regulatory noncompliance may represent risks for an organization, especially for the smallest ones. Moreover, violations of regulatory compliance often result in legal consequences, which is why entrepreneurs – especially in SMEs – tend to rely on the support of outside consultants and professionals.
Considering the current legislative fragmentation on sustainable production, it is necessary for SMEs to prioritize conducting internal compliance assessments specifically targeting integrated management systems. An integrated assessment model for SMEs which are involved in manufacturing production – i.e. the small and medium enterprise compliance assessment (SECA) – provides entrepreneurs with the necessary tools to detect their firms’ compliance with mandatory requirement on environmental and social issues. It allows for the integrated assessment and promotion of ethical and productive rules as a crucial factor for the sustainability of local production systems and supply chains within the broader sustainable human development perspective.
All in all, the objective of the SECA model is twofold: first, to identify possible non-compliances and risk exposure of enterprises’ production processes with regard to relevant legal requirements; and second, to help the enterprise understand weaknesses, non-compliances, and risks in the management system of its business activity and to devise possible interventions.
ARCO Researchers tested the SECA model in a pilot application based on an analysis of Chinese-owned SMEs operating in the textile manufacturing district in Prato, Italy. These SMEs are characterized by high dynamism and low compliance of mandatory safety and taxation regulations. Although there is a broad literature available on the Prato production system, limited attention has been given to the impacts of ethnic entrepreneurship in terms of the environmental and social sustainability of local production systems. The pilot sample for the study consisted of 99 ethnic Chinese-owned SMEs. These enterprises voluntarily underwent the SECA assessment procedure between September 2013 and September 2015 to measure their compliance with mandatory processes and regulations.
First of all, the application of the SECA model demonstrates its relevance and capacity to assess and understand the degree of SMEs’ compliance with relevant legislation on sustainability matters. In addition, this initial application illustrates the potential for SECA to be adapted to other local contexts and SMEs as required. Second, the overall results that emerge from this application of the SECA model align with the findings from the parallel inspection activity carried out by local authorities. Moreover, the results of this specific case study draw the attention to the relevance of promoting socioeconomic integration, value chain linkages, and industrial collaborations between ethnic and native entrepreneurs as globalization and migration processes increasingly shape local economies.
To read the full article, access Elsevier site here
Read more on our Local Development Unit