SME's environmental CSR investment: evaluation, decision and implication

Corporate social responsibility (CSR) is a voluntary yet competitive activity which affects business value. Together with growing concern towards CSR related to environmental issues such as climate change, environmental CSR has attracted many to involve especially small-and medium-sized enterprises (SMEs) as they are seen as the best entity to perform it compare to large corporations. As a primary contributor to green house gas (GHG) emission, SMEs have bigger responsibility to participate for cleaner environment. However, with limited capacity, it is difficult for SMEs to decide between social responsibility and profitability. Limited investment valuation methods add to the complexity. To overcome such barrier, this paper builds up a proposal based on real option valuation (ROV) as a solution that improves small businesses decision making processes in choosing investments that deal with both issues: profitability and CSR, with focus on climate change, a branch of environmental CSR. By incorporating uncertainties and providing flexibility, ROV is able to balance up SMEs' profitability and CSR activities through the creation of strategic options. Based on a case study, it is hope that findings of this paper lighten up these dilemmas and none of SMEs' objectives is sacrificed