1. Meaning of Social Responsibility
Social responsibility refers to the obligation of business leaders to make decisions and take actions that enhance the welfare of society along with the interests of the organization. Unlike legal responsibility, social responsibility is voluntary.
2. Arguments for Social Responsibility
Why should a business be socially responsible? Here are the key justifications:
- Long-term Interest of the Firm: A firm can only survive in the long run if it gains the support of society.
- Avoidance of Government Regulation: Socially responsible businesses face less interference from legal authorities.
- Maintenance of Society: Business uses society's resources; therefore, it must solve social problems like pollution or unemployment.
- Converting Problems into Opportunities: Business has the capital and expertise to turn social problems into profitable ventures.
3. Responsibility Towards Stakeholders
A business is accountable to various groups. This is often referred to as the "Stakeholder Theory."
| Stakeholder Group | Responsibility of the Business |
|---|---|
| Owners/Investors | Providing fair return on investment and ensuring safety of capital. |
| Workers/Employees | Providing fair wages, safe working conditions, and growth opportunities. |
| Consumers | Supplying right quality products at fair prices; avoiding adulteration. |
| Government | Paying taxes honestly and following all environmental laws. |
| Community | Protecting the environment and creating employment. |
4. Business Ethics
Ethics is a Greek word 'Ethikos' meaning character. Business Ethics refers to the socially determined moral principles or values which should govern business activities.
Elements of Business Ethics:- Top Management Commitment: Ethical behavior must start from the CEO and top executives.
- Publication of a ‘Code’: Formal written documents (Codes of Conduct) covering safety, quality, and honesty.
- Establishment of Compliance Mechanisms: Systems to ensure that employees follow the ethical code.
- Involving Employees: Workers should be consulted while making ethical policies.
- Measuring Results: Periodically auditing if ethical standards are being met.
5. Business and Environmental Protection
Industrialization has led to Air, Water, Land, and Noise pollution. Business firms have a moral and social duty to protect the environment.
Role of Business in Pollution Control:- Developing a corporate culture of environmental protection.
- Installing pollution control equipment (e.g., chimneys, water treatment plants).
- Using eco-friendly raw materials and manufacturing techniques.
- Complying with government laws like the Environment Protection Act.
Important Board Questions
Answer: Legal responsibility is mandatory and enforced by law (e.g., paying GST). Social responsibility is a broader, voluntary commitment to act for society's welfare beyond what the law requires.
Answer: CSR is a concept where companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. In India, under the Companies Act 2013, certain companies must spend 2% of their average net profit on CSR activities.
Answer: Ethical businesses build a strong brand image, gain customer loyalty, and attract high-quality employees. While shortcuts might give short-term profit, only ethical conduct ensures sustainable growth and public trust.
