NOTICE – Creating Shared Value: An Integrated Platform for SMEs

Ng Hio I, Wendy

Member, Macao Institute for Greater China Corporate Social Responsibility (MICSRGC)

The economic turmoil since the pandemic has highlighted the urgency and need to develop a moderately diversified economy in Macau. “Creating a diversified economy and cultivating new pillar industries in Macau” has been a slogan for years as the current economy in Macau remains too focused on the gaming sector. In fact, small and medium-sized enterprises (SMEs) play a key role in economic diversification and resilience.

In the government’s recently announced gambling law reform proposal, support for local SMEs is one of the six main pillars of CSR to be required of concessionaires. According to a survey conducted by Inside the Asian Game, the effort made by the six gaming operators to support SMEs represented only 7% of their total CSR effort in 2020. Licensees have the opportunity to provide more opportunities to support local SMEs and the The current low engagement rate can possibly be explained by two main reasons. First, from the perspective of these large companies, the lack of an integrated information infrastructure is a barrier to sourcing from local SMEs. The procurement process takes time and, in the context of Macao, involves a relatively high level of uncertainty in determining the reliability of local SMEs. Second, SMEs typically rely on word-of-mouth to build relationships with their customers. Due to financial constraints, SMEs are not always able to afford advertising budgets like those of large corporations. This further limits the reach of customers.

Porter and Kramer proposed the concept of Creating Shared Value (CSV) which is defined as “operational policies and practices that enhance a company’s competitiveness while simultaneously advancing economic and social conditions in the communities in which it operates. operates”. The traditional view of profit maximization considers that the company is only in a discretionary position to “do” CSR or “does it” only to respond to external pressures. For the company, social responsibility activities are costs for it. From a different angle, the CSV concept is all about integrating CSR into business strategies that can increase competitiveness and result in better performance and even growth. CSR has therefore caught the attention of industry practitioners who suggest that one of the main avenues for CSV is to develop the resources and capabilities of local suppliers and distributors; in Macau, SMEs.

An integrated information platform, which acts as a database of SMEs in Macau, could facilitate the realization of CSV and address the low visibility of local SMEs. The platform can increase the partnership between large enterprises and local SMEs, and redefine vertical and horizontal value chain activities and create shared value, both economically (forming an internal economic cycle) and environmental (reduction of the ecological footprint). This integrated information platform would serve as an electronic meeting place between supply and demand. SMEs can use this online platform for product and service exhibitions and provide online business (B2B) opportunities for buyers looking to support local SMEs as a form of CSR engagement. Buyers here are not limited to game dealers, but also large companies that are ready to create and reap shared value through collaborations with SMBs. Since supplier reliability is a major concern for buyers, members of this platform would be SMEs with all the necessary government certifications. In this way, better collaboration and communication can also be achieved between the government and the private sector.

Currently, the SME support program launched by the Macau government mainly focuses on financial stimulus measures such as tax relief and cash transfers. According to the Macau Monetary Authority, outstanding SME loans granted by banks at the end of 2021 amounted to MOP 520 million (an increase of 7.2% compared to 2020). It is important to note that non-financial support, in the form of genuine knowledge creation, transfer and sharing, is insufficient. As the pandemic continues, traditional SMBs are urged to go digital. Government, business associations, banks and SMEs can collaborate and support the realization of the proposed SME Platform which hopefully can eventually contribute to sustainable growth of the economy and society.