SOCIAL RESPONSIBILITIES OF BUSINESS AND BUSINESS ETHICS
Concept Of Social, Responsibility:
A business is a part of society. So, a business enterprise should do business and earn money in ways that fulfill the aspirations
of the society. Thus social responsibility relates to the voluntary efforts on the part of the businessmen to contribute to the social
well being. The businessmen make use of resources of society and earn money from the members of society so they must do something
for the society.
♦ Need for Social Responsibility:
• Improving Company’s Brand Image: Being socially responsible is of utmost importance to build company's image and brand.
By portraying a positive image, a firm can build a name for itself for not only being financially profitable, but socially responsible
as well.
• Engaging Customers: A company's social responsibility policy may impact customers' purchasing decisions. Some buyers may pay
a greater price for a product if they know a portion of the profit will be donated to a worthwhile cause.
• Retaining Top Talent: Many employees desire to be a part of something bigger than themselves. Employees with a sense of social
responsibility can use the tools available to them at work to help others.
• Helping Company Stand Out of Competition: Companies that are involved in the community set themselves apart from the competitors.
Improving the brand's image by cultivating relationships with customers and their communities.
♦ Arguments in favour of Social Responsibility:
• Justification for Existence and Growth: Business is the creation of society therefore it should respond according to the demands of the
society. To survive and grow in society for long run the business must provide continuous services to the society.
• Long term Interest of the firm: A firm can improve its image and builds goodwill in the long run when its highest goal is to serve the
society. If it indulges in unfair Trade Practices e.g., adulteration, hoarding, black marketing, it may not be able to exist for long.
• Avoidance of government regulations: Business can avoid the problem of government regulations by voluntarily assuming social
responsibilities.
• Availability of resources with business: Business has valuable financial and human resources which can be effectively used for solving
problems of the society.
• Better environment for doing business: It is the social responsibility of business enterprise to provide better Quality of life and standard
of living to people. So, business will get better community to conduct business.
• Contribution to social problems: Some of the social problems have been created by business firms themselves such as pollution, creation
of unsafe workplaces, discrimination etc, Therefore, it is the moral obligation of business to solve such social problems.
♦ Arguments Against Social Responsibility:
• Profit Motive: A business is an economic entity that is guided by profit motive. It should not waste its energies and resources in fulfilling
social responsibility.
• Burden on consumers: Involvement of business in social responsibilities involve a lot of expenditure which will ultimately be borne by
the customers.
• Lack of Social Skills -The business firms and managers have the skills to handle business operation. They are not expert to tackle the social
problems like poverty, over population etc. Therefore, social problems must be tackled by social experts.
• Lack of public support: Generally public does not like business involvement in social problems. Therefore, business cannot fulfill social
responsibility because of lack of public confidence & cooperation.
♦ Reality of Social Responsibility:
In reality, social responsibility receives only lip service. Some business houses fulfill its legal responsibility in the name of social
responsibility. There are some factors and reasons which have forced and persuaded business organizations to fulfill their social
responsibility which are as follows:
• Threat of public regulation: India is a democracy where Government is expected to be welfare state. If any business organization acts in a
socially irresponsible manner, then an action may be taken against them to safeguard people’s interest. In reality, business houses do not
assume their social responsibility on their own but due to threat of public action.
• Pressure of labour movement: In the last century, labour movement for extracting gains for the working class throughout the world has
become powerful. Labour laws are also followed not out of a sense of social responsibility but because of increasing pressure of labour
movement.
• Impact of consumer consciousness: Consumers are also becoming aware of their rights since enactment of Consumer Protection Act,
1986. Under this Act, consumers are entitled to file a case if he is cheated in any ways.
• Development of social standard for business: As per new social standards, a business is considered to be legitimate only if it fulfills its
social responsibilities. No business can be done in isolation with the society. The performance of a business is judged on social standards.
• Development of business education: Nowadays businessmen are professionally qualified due to changing pattern of form of business. It
is also making it socially more responsible. Education has made people more conscious as employees, customers, investors and owners.
• Relationship between social interest and business interest: Businessmen are able to find that social interest and business interest are
correlated. The concept which existed earlier that no business can grow without exploitation of others does not exist anymore.
• Development of professional, managerial class: Professional management is also educated of the benefits it can get by fulfilling its social
responsibility. Professional managers are more interested in satisfying a multiple group of interest groups in society for running their
enterprises successfully than attaining goal of profit maximization only.
♦ Kinds of Social Responsibilities:
• Economic Responsibility: In an economic responsibility, business is expected to produce goods and services that are beneficial for
society and society which wants and sell them at a profit.
• Legal Responsibility: Every business enterprise is expected to operate within the legal framework of our society. A law-abiding enterprise
gets no interference of government and is considered as a socially responsible enterprise.
• Ethical Responsibilities: Ethics is much more than law, while behaving ethically businessmen should not be involved in adulteration, black
marketing, etc.
• Discretionary Responsibilities: This responsibility is purely voluntary. This includes contribution in charity. Participation in social
service projects, setting up educational and training institutions etc. helping people affected by flood, earthquake etc.
♦ Social Responsibility Towards Different Interest Group:
Once the social objective of business is recognized, it is important to know to whom and for what the business and its management are
responsible. Obviously, a business unit has to decide in which areas it should carry out social goals.
Some of the specific responsibilities and enterprise may be outlined as under:
• Responsibility towards the shareholders or owners: A business enterprise has the responsibility to provide a fair return to the
shareholders or owners on their capital investment and to ensure the safety of such investment. The corporate enterprise on a company
form of organization must also provide the shareholders with regular, accurate and full information about its working as well as schemes
of future growth.
• Responsibility towards the workers: Management of an enterprise is also responsible for providing opportunities to the workers for
meaningful work. It should try to create the right kind of working conditions so that it can win the cooperation of workers. The
enterprise must respect the democratic rights of the workers to form unions. The worker must also be ensured of a fair wage and a fair
deal from the management.
• Responsibility towards the consumers: Supply of right quality and quantity of goods and services to consumers at reasonable prices
constitutes the responsibility of an enterprise toward its customers. The enterprise must take proper precaution against adulteration,
poor quality, lack of desired service and courtesy to customers, misleading and dishonest advertising, and so on. They must also have
the right of information about the product, the company and other matters having a bearing on their purchasing decision.
• Responsibility towards the government and community: An enterprise must respect the laws of the country and pay taxes regularly
and honestly. It must behave as a good citizen and act according to the well accepted values of the society. It must protect the natural
environment and should avoid bad, effluent, smoky chimneys, ugly buildings dirty working conditions.
Business and environmental protection:
♦ Meaning of Environment:
The environment is defined as the totality of man’s surroundings: both natural and man-made. Natural Resources-all land, water, air
and man-made: cultural heritage, socio-economic institutions and the people.
♦ Meaning of Environmental pollution:
It means injection of harmful substances into the environment. The greatest problem that industries and businessmen are creating is
that of pollution which is the result of industrial production. So, protection of environment is must.
♦ Causes of Pollution:
Many industrial organizations have been responsible for causing air, water, land and noise pollution.
• Air Pollution: Due to smoke, chemical emitted by factories, vehicle. It has created a hole in the ozone layer leading to global warming.
• Water pollution: Due to chemicals and waste dumped into the rivers, streams & lakes. It has led to the death of several aquatic animals
and posed a serious problem to human life.
• Land Pollution: Due to dumping of garbage and toxic wastes which affect the fertility of land and makes it unfit for agriculture.
• Noise Pollution: Caused by the running factories and vehicles. Noise pollution can be responsible for many diseases like loss of hearing,
violent behavior and mental disorder.
♦ Need For Pollution Control:
• To ensure healthy life: Many diseases like cancer, heart attack and lung complications all caused by pollutants in the environment.
Pollution control is must to keep a check on these diseases.
• To ensure safety: Due to environmental pollution and smoke, the visibility is reducing due to which chances of accidents have been
increasing. To reduce the number of accidents there must be a check on pollution.
• Economic Losses: Pollutants in the environment bringing heavy economic losses for the country, for example Taj Mahal is losing its
beauty due to pollution.
• Improved Public Image: A firm that adopts pollution control measures enjoys a good reputation as a socially responsible enterprise.
♦ Business and Environmental Protection:
A business organization or the businesses around the globe can take the following steps in order to reduce environmental pollution and
thereby protect the environment:
• Companies involved in the production of various utilities or products can go for eco-friendly, low waste and clean technology for
equipment used in such industries.
• Industrial wastes should be recycled every time so that it minimises the chances of pollution.
• The machinery should be upgraded so that it complies with the pollution norms, which will be beneficial in reducing the levels of pollution.
• Conduct quarterly/ yearly audits for checking the effectiveness of the pollution control programs and making changes so as to bring about
more success in pollution control programmers.
• The companies and industries should comply with the rules laid down by the government with respect to prevention of environmental pollution.
• The businesses should take steps to save the environment by setting up campaigns of planting trees, cleaning of rivers.
Business ethics:
Refers to the moral values or standards or norms which govern the activities of a businessman. Ethics define what is right and what is
wrong. By ethic we mean the business practices which are desirable from the point of view of Society. The purpose of business ethics is
to guide the managers and employees in performing their job. Example of business ethics are charging fair price from customers, giving
fair treatment to workers, earning reasonable profits and paying taxes tithe government honestly.
♦ Elements of business ethics:
• Top management commitment: The CEO and higher level managers must be committed to ethical norms of behavior. This would
set an example for all employers and encourage them to follow ethical practice.
• Publication of code: Code of ethics is a formal written document of the principles, values and standards that guide a firms actions.
It may cover areas like honesty, quality, safety, health care etc.
• Establishment of compliance mechanism: A suitable mechanism should be developed to comply with the ethical standards of the
enterprise. The mechanism should be properly communicated to all in the organization.
• Employee involvement: It is the employees of the lower levels who implement ethical principal so they must be involved in the
process of developing ethical code.
• Measuring results: Although it is difficult to measure the ethical results but it must be verified and audited that have for work is being
carried according to ethical standards.`