**2.2 Micro, small, and medium enterprises (MSMEs)**

The characteristics of MSMEs are different in each literature on several sources from agencies, institutions, government regulations, including laws. According to Hernita [18], the main characteristics of MSMEs that distinguish large and medium enterprises are that MSMEs are labor-intensive businesses, are found in all locations, especially in rural areas, are more dependent on local materials, and are the main providers of essential goods and services for low-income or poor people. According to him, the general description of MSMEs is described as follows:


Under Law No. 20/2008 [19] Concerning Micro, Small and Medium Enterprises, MSMEs are expected to increase the position, role, and potential of MSMEs in realizing economic growth, equity and increasing people's income, creating job opportunities, and alleviating poverty. The empowerment of MSMEs is carried out by the Government, Regional Governments, the Business World, and the community by developing a conducive climate, providing business opportunities, support, protection, and business development as widely as possible in a comprehensive, synergistic, and sustainable manner. The classification of MSMEs based on Law no. 20/2008 [19] is as in **Table 1** as follows.

### **2.3 CSR practice orientation**

As stated by Cohen [16] that sometimes companies do not realize that they have implemented CSR. However, this does not mean that companies that provide contributions or other benefits by not solely seeking business profits can be considered not to have a CSR orientation. This is because CSR orientation and CSR practices are interrelated. In some companies, the orientation of CSR practices is carried out by preparing a Sustainability Report. Some literature explains that the Sustainability

*CSR Practical Orientation in Small Medium Enterprises (SMEs): A Case Study in Solo City… DOI: http://dx.doi.org/10.5772/intechopen.99859*


#### **Table 1.**

*The classification of MSMEs based on law no. 20/2008.*

Report is known as the Triple Bottom Line Approach, which reflects the orientation of CSR practices in a simple way, namely Productivity issues, Environmental Responsibility, and Social Domains.

Another study on the orientation of CSR practices, as presented by Harto [14], is the orientation of CSR practices described based on four components of corporate social responsibility, including the first, namely the orientation based on economic responsibility, where businesses must be productive and profitable to face competition. The second CSR practice orientation is based on legal/legal responsibility, which views that the business must comply with applicable laws and regulations. The third orientation of CSR practices is based on ethical responsibility, which is the obligation to run a business ethically, obey the rules even though they are not written, follow the norms and values of the community. Furthermore, the fourth CSR practice orientation is based on discretionary responsibility in which companies must voluntarily provide benefits according to community expectations without any coercion. This CSR practice orientation has not been specific or focused on MSMEs but still applies to companies at all scales, large and medium, small and micro. In this study, further references are needed that only focus on the orientation of CSR practices for MSMEs.

Based on other literature [10], several orientations of CSR practices in Europe have been found that specifically focus on Small Medium Enterprises (SMEs), which can be equated with SMEs in Indonesia. The impact of CSR practices on MSME often cannot appear immediately, and sometimes it even takes a long time to obtain. The orientation of CSR practices is often carried out using a practical approach to not causing many costs. These approaches include employee-oriented, community-oriented, market-oriented, environment-oriented, and general or comprehensive oriented.

According to Das Maitreyee et al. [20], CSR practices in Asia are conceptualized based on recommendations derived from the Western context that have been developed. The reason is that they have started earlier than in Asia. However, in terms of economy and culture, CSR practices for MSMEs in Asia are unique in that they are still traditional and dominated by culture, which tends to be in the form of philanthropic activities that benefit their local communities. Asia is different from the West in terms of the economy, which tends to use market orientation to build a good brand image. In Asia, many family business owners feel that social value is more important to be remembered by their income and what they do for society. MSMEs practice CSR in donations to various charity hospitals, religious organizations, schools, or orphanages, or it can be said that CSR is more ethical and philanthropic oriented and dominated mainly by culture. The role of the Government is to determine the implementation of CSR practices in Asia; in this case, the Government understands the potential of MSMEs in economic development, thereby facilitating the control of loan interest rates, making environmental-related policies through regulations from local governments, and providing support through promotions to encourage SMEs to collaborate in running their business.

The implementation of CSR practices in Indonesia is not much different from that carried out in Asia, more specifically for the Surakarta City area; policies still influence the orientation of CSR practices through government regulations. These regulations include Central Java Provincial Regulation No. 2 of 2017 concerning Corporate Social and Environmental Responsibility (TJSLP) [21], in addition to Surakarta City Regulation No. 2 of 2015 concerning Corporate Social Responsibility [22], and Surakarta Mayor Regulation No. 3-A 2016 concerning Instructions for the Implementation of the Surakarta City Regulation No. 2 of 2015 [23].

In addition to the influence of government policies, the implementation of CSR is also influenced by organizations engaged in economic, social, and environmental changes. For example, as presented by Kharisma et al. [24], the Organization for Economic Co-operation and Development (OECD) sets international standards for various fields, from agriculture and taxes to chemical safety, which also influences flexible Good Corporate Governance related to conditions, culture, and traditions in their respective regions.
