Non-governmental organizations and the sustainability of small and medium-sized enterprises in Peru : an analysis of networks and discourses

 

The importance of small and medium-sized enterprises (SMEs) in terms of employment and income generation has been recognized worldwide. In Peru, SMEs are responsible for 85% of the employment at the national level and they represent 98% of the total companies registered. Around 12% of SMEs, organized in associations, clusters, and cooperatives or as single companies, are dedicated to productive actives; the others are engaged in commercial and services activities. However, next to their positive economic role, SMEs are also responsible for significant disturbances of nature, environmental degradation and threats to human health. Environmental pollution related to the increase of productive activities has become evident in Peru and the entire region of Latin America.

                                               

The thesis aims to provide a better understanding of the changing roles of NGOs in promoting sustainability of SMEs in Peru, using the perspectives of networks and discourses. It focuses on three domains, which together are characteristic for promoting of SME sustainability in Peru: organic production (the first case study), business social responsibility (the second cases study) and sustainable production (the third case study). Three research questions have been outlined for this research: First, what are the networks of NGOs promoting sustainability of SMEs involved in the domains of organic production, business social responsibility and sustainable production in Peru, and what are the main changes in time in these networks? Second, what are the main discourses fostering sustainability that prevail and are articulated in these networks of NGOs and what are the main changes in time in these discourses? And finally, how to understand and assess the actual, new and potential roles of NGOs in promoting sustainability of SMEs in terms of network society theory and ecological modernization theory?

 

In this study the universe of NGOs is narrowed to NGOs operating in Peru that provide support (a) to medium and small scale producers and producer associations to bring organic products to local and global markets, (b) to urban and rural small scale enterprises to adopt cleaner production and appropriate technologies, and/or (c) to SMEs to upgrade social and environmental standards within value chains involving large companies. Some SMEs are concentrated in the main cities of Peru such as Trujillo, Arequipa and Lima, while other SMEs, such as organic food producers, are spread all over the country. In any case, SMEs under this research have collaboration ties with the NGOs to be studied. The research questions were investigated by means of more than 28 interviews with representatives of local NGOs, international NGOs, local SMEs and the national government, carried out in the period of 2006 to 2010. Additionally, documents and internet sources were consulted.

 

The networks involved in promoting the sustainability of SMEs are: the agro-ecological network, the organic market network and the ecological farming network in the first case study; the social justice network and the business network in the second case study; and the eco-efficiency network, the appropriate technology network, the cleaner technology network, the technological innovation network and the urban cleaner production network in the third case study.

 

The main actors identified in the networks of the organic production domain are: the Ecological Agriculture Network of Peru (RAE Peru), Grupo Ecologica Peru and the National Ecological Producers Association (ANPE). RAE Peru consists of 16 individual NGOs operating throughout Peru and has led several initiatives (i.e. Biocanastas, Bioferias, Biostores) to develop the organic market in Peru. Grupo Ecologica Peru consists of 5 NGOs and 24 producers, including associations and individual producers, and it commercializes organic products at local competitive markets (i.e. the Bioferia Miraflores farmers’ market) and provides the supply of organic food to supermarkets. ANPE Peru consists of 22 organic small scale producer associations (including small food processers and family small-scale enterprises). ANPE’s constituencies produce and commercialize organic food in 13 farmers’ markets throughout the country.

The main actors identified in the business social responsibility networks are: the Labor Advisory Council of Peru (CEDAL), the Center of Studies for Development and Participation (CEDEP) and Peru 2021. CEDAL and CEDEP promote business social responsibility for urban and rural small enterprises in Peru in order to meet national regulation and international standards on labor rights and good environmental practices. CEDAL has been collaborating with 60 small enterprises of garment and handy craft makers, organized in clusters, who commercialize their products directly to consumers or business intermediaries oriented at domestic and foreign markets. CEDEP collaborates with small and medium-sized agri-industries, small garment workshops, shoemakers, metal workshops and bakeries to adopt business social responsibility principles by improving working conditions for their employees and sustainable production practices. Peru 2021 collaborates only with SMEs that are providers of larger companies in value chains promoting social and environmental standards.

 

The main actors involved in the sustainable production networks are: the Eco-efficiency and Social Responsibility Center (CER), the Institute for the Transfer of Technology for Marginal Sectors (ITACAB), the National Council of Science and Technology (CONCYTEC), the Centers of Technological Innovation (CITEs) and the Peruvian Institute of Social Economy (IPES). While CER, IPES and most of CITEs are NGOs, ITACAB and CONCYTEC are (inter)governmental agencies. CER provides consultancy for small scale suppliers of larger domestic companies and single SMEs exporting to international markets. Through the projects EcoADEX, EcoHotels and EcoParks CER aims to reduce greenhouse gas emissions, increase eco-efficiency, optimize production and services processes and reduce operation costs in SMEs. ITACAB promotes technological transfer to small scale rural enterprises through the Center for Technological Transferring Resources. CONCYTEC promotes technological transfer for SMEs but it is currently dispersed into several institutional programmes. CITEs provide production technologies services to SMEs. In total there are 13 CITEs throughout Peru, each one specialized in particular type of products (i.e. leather and shoemaking, wood and furniture, wine and horticulture, tropical fruits and medicinal plants, garment, agro-industry, textile, logistic and tracing, software and forest wood). Finally, IPES promotes cleaner technologies in small scale industries and workshops located in urban areas. During the last year, IPES is focusing on the establishing of recycling SMEs of electronic waste. As this overview shows, in the sustainable production domain, not only NGOs perform central roles but also governmental agencies. In some cases, quite close cooperation occurs between NGOs and governmental agencies.

 

In all three cases, networks of sustainability of SMEs are structured as interlinked platforms operating at local, national, Latin American and global level. For instance, in the organic production networks the Bioferias are at the local level, the Peruvian Agroecological Consortium at the national level, MAELA and GALCI at Latin American level and IFOAM at global level. Platforms include civil society, market and state actors. For instance, in the business social responsibility networks the civil society actors are CEDEP and CEDAL, in the organic production networks the market actors are the small scale enterprises affiliated with ANPE and Grupo Ecologica Peru, and in the sustainable production networks the state actors are CONCYTEC (governmental agency), ITACAB (inter-governmental agency) and the CITEs central office (OTCIT). Coordination and channeling of resources in the network platforms are performed by key actors, such as RAE Peru, Grupo Ecologica Peru, ANPE, Peru 2021, CEDAL, CEDEP, CER, CONCYTEC, ITACAB, OTCIT and IPES.

 

The ten networks are composed by diverse types of NGOs. Next to conventional NGOs as key actors, producer NGOs, market NGOs, business NGOs, technocratic NGOs and government organized NGOs (GONGOs) have emerged. Although NGOs are central in most networks, (inter)governmental agencies (GONGOs) are also central in the cleaner technology network, the appropriate technology network and the technological innovation network. CONCYTEC, ITACAB and the CITES’ central office (OTCIT) are agencies that are part of the governmental structure, but they operate in practice pretty much as NGOs. Hence, NGOs and these (inter) governmental agencies perform similar roles in the networks, compete for funding and operate projects funded by international cooperation agencies. Therefore, the (inter)governmental agencies (GONGOs) that are part of these networks of sustainability of SMEs has been found out to be less effective in promoting sustainability of SMEs than more typical NGOs. As a result of this diversification of NGOs the struggle for leading positions in the network platforms and the competition for scarce funding and operate projects of international cooperation agencies have also intensified. This diversification of NGOs and, above all, the increasing of service-like NGOs aim to fulfill the business growth and market demands of SMEs in collaborating with market actors. Hence, new types of NGOs emerge to fulfill market demands.

 

The discourses that NGOs and SMEs endorse in the networks of sustainability of SMEs are: market adaptation, market access or market democratization in the first case study; business upgrading and corporate responsibility in the second case study; and cleaner production and appropriate technology in the third case study. NGOs and SMEs involved in the networks of organic production endorse one of the following three discourses: market adaptation, market access or market democratization. The main storyline of the first discourse is that NGOs and small scale producers are forced to get new capacities and to adapt to the free market. Small scale producers do not have the competences to adapt to the free market by themselves, and NGOs play a crucial role in assisting them. The main storyline of the second discourse is that small scale producers are eager to move to competitive markets. Support is needed from specialized agents in managerial and technological issues to organize supply to competitive local and international organic markets. The main storyline of the last discourse is the prioritization of making the organic market also interesting for low and medium income consumers. Rather than adapt or access to the free market, small scale producers intend to build up a fair relationship with the market by making organic products available to all income groups.

 

NGOs and SMEs in the business social responsibility networks endorse one of the following two discourses: business upgrading or corporate responsibility. In the first discourse, business social responsibility is seen as a strategy to match economic and social rights with sustainability of small scale enterprises. Connecting small scale enterprises with larger companies and influencing them to become sustainable is central in the discourse. In the second discourse, business social responsibility is seen as a business strategy that contributes to sustainability of larger companies and their supply value chains. Only small providers of large profitable value chains have the capacity to adopt social and environmental standards.

 

NGOs and SMEs involved in the networks of sustainable production endorse one of the following two discourses: cleaner production or appropriate technology. In the first discourse, cleaner production is seen as a business strategy to make SME production more efficient and sustainable. Allocating the most up-to-date modern technology is considered as the best way to reduce environmental impacts and increase competitiveness. The discourse focuses on SMEs that are well established in the local market and have the capacities to reach international markets. In the second discourse, appropriate technology is seen as tailor-made technology adjusted to the needs of SMEs, particularly of micro and small enterprises. Low capital, small scale and suitable technology for the local social, economic and cultural setting are central in the discourse. The discourse highlights the use of renewable energy, development of local markets and poverty fighting.

 

The seven discourses emphasize either market justice or sustainable market. This means that the discourses are different in their position towards social movement and the market. The discourses of sustainability of SMEs have evolved from long-standing antagonist discourses: the liberal market discourse on one hand and the social movement discourse on the other hand, which can be considered as the ‘mother’ discourses of the discourses of sustainability of SMEs. While the cleaner production discourse and the corporate responsibility discourse have their origins in the liberal market discourse, the market democratization discourse, the market adaptation discourse, the market access discourse, the business upgrading discourse and the appropriate technology discourse have their origins in the social movement discourse. Hence, the discourses of sustainability of SMEs share views with their mother discourses. Only, the market access discourse strongly diverges from its origins. The difference between market justice discourses and sustainable market discourses has to do with their interpretation of environmental reform and sustainability.

 

In sum, the identified changes are expressed in new roles for NGOs. Next to the usual ‘watchdog’ roles, NGOs are developing roles of ‘helper’ in order to answer to the market needs of SMEs. The new roles are performed not only by new types of NGOs but also by ‘reoriented’ conventional NGOs. Consequently, NGOs have become market agents as a result of their new roles. Finally, the findings contribute to the theoretical debates on network society theory and ecological modernization theory. The analysis of networks promoting sustainability of SMEs helps to understand more deeply the way non-state actors cooperate, and challenges Castells’ scheme of space of flows versus space of place. Both spaces are connected and integrated in aiming for sustainability. Actors use rationalities, logics and power resources related to both spaces. Amending ecological modernization theory, the analysis suggests that it is needed to consider both ecological rationality and social rationality in order to advance environmental reform of SMEs in developing countries. The research also sheds light of issues of power. NGOs are becoming more collaborative and less confrontational, more conciliatory and less dogmatic towards market actors, but they remain rather conflictive and competitive towards fellow NGOs. Power of SMEs is not acknowledged in most discourses. However, SMEs show their power either by accepting or denying engage to the networks, either by collaborating or pressuring key actors and either by subscribing or being indifferent to the discourses. This power of SMEs pushes the networks to become more inclusive, participatory and valuable for SMEs. It rests on the capacity to be anchored within local social networks.