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. Social Responsibility of business refers to its obligation to take those decisions and perform those actions which are desirable in terms of objectives and values of our society.
Arguments for social responsibility
There is a need for Social Responsibility of business for Existence and Growth:-
- 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: Social responsibility creates better environment for business operations as it improves Quality of life and standard of living of 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 work places, discrimination etc… Therefore, it is the moral obligation of business to solve such social problems.
Arguments Against Social Responsibility: Major arguments against social responsibility are :
- 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 involves 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:-
Whatever maybe the argument, either in favour of or against social responsibility, the reality is in favour of social responsibility. Let us discuss some of the reason below:-
- Threat of Public Regulations: – Democratically elected governments, through their law enforcing agencies continuously trying to ensure the welfare of the society and thus they have a watchful eye over all business operations. So to avoid government action business organizations should behave in a socially responsible manner.
- Pressure of labour movement: – Labour, is not only the active factor but also activates other factors of production. Nowadays, they are more educated and their movement becomes more powerful in the world. No more hire and fire’ policy will work; this made the businessmen to take up social responsibility towards their employees.
- Impact of Consumer Consciousness:-Consumers are more conscious about quality, price etc. of the product and services. Even for small discrepancies, nowadays they prefer to file a suit in the consumer court.
- Development of Social Standard for business: – New social standards consider business enterprises as legitimate but with a condition they must also serve social needs.
- Development of Business Education:- Business education created much awareness about the social responsibility in the minds of investors, consumers, employees etc. and they became more sensitive towards social issues.
- Relationship between social interest and business interest:- Now people come to realize that social interest and business interest are complementary. This ensures long term benefit of the business.
- Development of professional, managerial class:– Earlier managers of business houses aimed at only profit maximization but professional management educational institutions created a new class of managers who gives equal importance to social responsibility too.
From the above seen ‘Realities of Social Responsibility’ it is clear that business houses must assume social responsibility for their survival and growth.
Kinds of Social Responsibility
- Economic Responsibility: – Maximizing profit by producing and selling goods and services required for the society.
- Legal Responsibility: – Every business needs to operate within the laws of the land. A law abiding enterprise is a socially responsible enterprise as well.
- Ethical Responsibility: – This includes the behavior of the firm that is expected by the society but not included in law. E.g. should respect religious sentiment and dignity of people while advertizing
- Discretionary Responsibility: – This refers to the voluntary obligations that an enterprise assumes. E.g. Charitable contributions, providing relief during natural calamities etc….
Social Responsibility towards different interest groups
Business has Interaction with several interest groups such as shareholders, workers, consumers, government and community. Business is responsible to all these groups.
1. Responsibility towards shareholders:-
- To ensure a fair and regular return on the investment of shareholders.
- To ensure the safety of their investment
- To strengthen financial position of the company.
- To safeguard the assets of the business.
- To protect the interest of all types of investors in the business.
2. Responsibility Towards workers:-
- Providing fair compensation and benefits.
- Providing good and safe working conditions
- To develop a sense of belongingness.
3. Responsibility toward consumers:-
- To supply right quality of goods & services at reasonable prices.
- To ensure regular and adequate supply of products.
- To inform them about new products and new uses of existing products.
- To handle the customers grievance promptly.
4. Responsibility towards Government –
- To pay taxes honestly
- To observe rules lay down by the government.
- To avoid corrupting government employees.
5. Responsibility towards community –
- To make available opportunities for employment.
- To avoid polluting the environment.
- To uplift the weaker sections of society.
Business & Environmental Protection
The environment is defined as the totality of man’s surroundings – both natural and man -made. Natural Resources are land; water, air and man- made are cultural heritage, socio economic institutions and the people.
Environmental pollution means injection of harmful substances into the environment. The greatest problem that industries and businessmen are creating is that of pollution. So, protection of environment is must.
Causes of Pollution: – Many industrial organisations 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 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:-
1. 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.
2. 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.
3. Economic Losses: Pollutants in the environment bringing heavy economic losses for the country, for example Taj Mahal is losing its beauty due to pollution.
4. Improved Public Image: A firm that adopts pollution control measures enjoys a good reputation as a socially responsible enterprise
ROLE OF BUSINESS ENVIRONMENTAL PROTECTION:
1. Eco-friendly and clean or low waste technology should be used by industrial organisation.
2. Industrial wastes should be recycled as far as possible.
3. Plant and machinery should be modernised to minimise pollution.
4. The business houses should comply with the laws and regulations enacted for prevention of pollution.
5. Positive steps should be taken to save environment. These include plantation of trees, cleaning of rivers, ponds etc.
Business ethics refers to the socially determined moral principles which should govern business activities. It 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 jobs. Examples of business ethics are charging fair prices from customers, giving fair treatment to workers, earning reasonable profits and paying taxes to the government honestly.
Elements of Business Ethics
1. 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.
2. Publication of Code – Code of ethics is a formal written document of the principles, values and standards that guide a firm’s actions. It may cover areas like honesty, Quality, safety, health care etc.
3. Establishment of Compliance Mechanism – A suitable mechanism should be developed to comply with the ethical standards of the enterprise; this mechanism should be properly communicated to all in the organisation.
4. Employees Involvement – It is the employees at the lower levels who implement ethical principles, so they must be involved in the process of developing ethical code
5. Measuring Results – Although it is difficult to measure the ethical results but it must be verified and audited that how far work is being carried according to ethical standards.