Concept of social responsibility
Social responsibility of business is its duty to make decisions and take actions that are good for society, not only for its own profit. It is more than legal responsibility: obeying the law is the minimum, but social responsibility is voluntary action beyond it.
Four kinds of responsibility are often named: economic (make goods society wants and earn profit), legal (obey laws), ethical (do what is right even if no law asks) and discretionary (purely voluntary help, like giving to charity).
The case for social responsibility
- Justification for existence and growth: business survives only if it serves society.
- Long-term self-interest: happy customers, workers and neighbours help the business itself.
- Avoiding government regulation: responsible behaviour reduces the need for strict new laws.
- Maintaining society: people who feel cheated may turn against business; care keeps peace.
- Availability of resources: business has money, skill and managers to solve problems.
- Converting problems into opportunities: like turning waste into a product.
- Better environment for doing business: a healthy society is a better market.
- Holding business responsible for social problems it created, like pollution.
The case against (in short)
Some argue that it goes against profit, puts a burden on consumers (costs may raise prices), business lacks social skills, and business already has too much power. On balance, the case for is stronger.
Responsibility towards different interest groups
Towards owners (shareholders)
Run the business well, give a fair return (profit) and use their money wisely.
Towards investors (lenders, banks)
Keep their money safe, pay interest and repay on time, give true and full information about the firm.
Towards consumers
Supply safe, good-quality goods at fair prices; no adulteration, hoarding, black-marketing or false advertising; handle complaints quickly; respect the consumer's right to be informed.
Towards employees
Fair wages, safe working conditions, chances to learn and grow, respect, and a say in decisions that affect them.
Towards government
Obey laws, pay taxes honestly, follow pollution and safety rules, and not use unfair means to get favours.
Towards the community
Create jobs, help in schools, health and disaster relief, protect local culture, and support weaker sections of society.
Business and environment protection
Industry can cause air pollution (smoke), water pollution (waste in rivers), land pollution (toxic dumping) and noise pollution (machines). Pollution harms health, destroys nature, and can lower the quality of life for everyone.
Why control pollution?
To keep people healthy, cut the cost of damage, improve the firm's image, obey the law, and save natural resources for the future.
What a business can do
- Top managers commit to a clean environment.
- Use cleaner technology, filters and waste-water treatment.
- Reduce, reuse and recycle; cut plastic use; save energy and water.
- Follow all pollution-control laws.
- Take part in government and community programmes, such as planting trees.
- Check the firm's own pollution regularly and teach suppliers and dealers to do the same.
Key formulas and definitions
- Social responsibility = voluntary duty to society, beyond the law.
- Four kinds: economic, legal, ethical, discretionary.
- Interest groups: owners, investors, consumers, employees, government, community.
- Kinds of pollution: air, water, land, noise.
- CSR in India: companies above a size must spend 2% of average net profit on social causes.
Worked examples
1. A soap company prints the true weight and all ingredients on its packs, and replaces faulty packs quickly. Which group is it being responsible towards?
Consumers: honest information and quick handling of complaints.
2. A factory pays wages on time, gives safety gear and runs a training course for workers. Which group?
Employees.
3. A company's average net profit for three years is ₹50 crore. If it must spend 2% on CSR, how much is that?
2% of ₹50 crore = ₹1 crore.
4. A textile unit fits a treatment plant so that dyed water is cleaned before it reaches the river. Which responsibility is shown?
Environment protection (and responsibility towards the community).
5. A business says, "The law does not ban this cheap dye, but it may harm children, so we will not use it." Is this legal or social responsibility?
Social (ethical) responsibility, because it goes beyond what the law requires.
Common mistakes
- Thinking social responsibility is the same as obeying the law. It goes beyond the law.
- Thinking only charity counts. Fair pay, safe products and honest taxes are also social responsibility.
- Forgetting investors are separate from owners: lenders and banks need safety of money and true information.
- Believing pollution control only costs money. It also saves money, avoids fines and improves image.