Notes - Social Responsibility of Business
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7.1 Social Responsibility of Business
Social responsibility refers to the obligation of business towards various groups in the society. As per the concept, a businessman should not only consider his own interests, but he should keep in mind the interests of the society, as a whole. Social responsibility of business implies that a business should respect the aspiration of society along with its profit interest. It involves element of voluntary action on the part of business for the benefit of society.
According to H R Bowen “Social responsibility of business is to pursue the policies, to make decisions or to follow the lines of action which are desirable in terms of the objectives and values of our society”.
7.1.1 Kinds of Social Responsibility
It is broadly divided into four categories:
(i) Economic Responsibility: A business enterprise is basically an economic entity and therefore, its primary social responsibility is economic i.e., to produce goods and services that society wants and sell them at a profit.
(ii) Legal Responsibility: A law abiding enterprise is a socially responsible enterprise. Therefore, every business has a responsibility to operate within the laws of the land and fulfil their legal responsibility by paying various statutory dues.
(iii) Ethical Responsibility: This includes the behaviour of the firm that is expected by society, but not codified in law. For example, respecting the religious sentiments of people and dignity of people while advertising its product.
(iv) Discretionary Responsibility: It signifies a voluntary obligation that an enterprise assumes. For example, providing charitable contribution to educational institutions. Fulfilling such responsibility promotes a good public image.
7.1.2 Need for Social Responsibility
Business is a creation of society and it exists to serve customers. Also, the employees of the business, the investors, its creditors, etc are all part of the society. Thus, a healthy relationship should always be there between the businessman and the society to avail fruitful results.
Following points will describe the need of social responsibility
(i) It is required to serve the interest of certain sections of society such as customers, employees, suppliers, community, etc.
(ii) It gives the moral understanding to an entrepreneur as to what is right and what is wrong.
(iii) It also helps in addressing legal, ethical and commercial issues.
7.1.3. Social Responsibility Towards Different Interest Groups
It is obvious for a business enterprise to decide in which areas it should carry out social goals. Some of the specific responsibilities of enterprises are outlined below
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.
An enterprise should try to give right kind of working conditions and must respect the democratic rights of the workers to form unions. The worker must also be ensured of a fair wage.
Supply of right quality and quantity of goods and services to consumers at reasonable prices constitutes the responsibility of an enterprise towards its customers.
A business should ensure timely and honest payment of taxes and should above by various-rules and regulation laid down by the government. It should also ensure that environment is not polluted.
Business should act according to the well accepted values of the society. It should develop a proper image in society through continuous interaction with various groups of people.
7.2 Environment Protection
A business is socially responsible towards the community to ensure that the environment is not adversely affected by its activities.
The quality of our environment is deteriorating rapidly particularly due to industrial activities. Thus, it is reasonable to link environment protection with business. The protection of the environment is directly related to the control of pollution.
7.2.1 Causes of Pollution
The introduction of harmful substances into the environment is referred to as pollution. It changes physical, chemical and biological characteristics of air, land and water.
Business activities such as production, distribution, storage and consumption of goods and services are known to be most critical sources of environmental pollution problems.
They are termed as hazardous pollutants.
7.2.2 Types of Pollution
Mainly there are four types of pollution:
(i) Air Pollution: It means contamination of air with harmful materious, gases and smoke which are harmful to the ether elements of environment such as plants, animals and human beings.
(ii) Water Pollution: Mostly it is caused by the dumping of chemical wastes into big rivers, streams, lakes, etc.
(iii) Land Pollution: Dumping of toxic wastes on land causes land pollution.
(iv) Noise Pollution: It is caused by running of factories and vehicles. Continuous exposure to noise is not only annoying, but also causes serious health problems.
7.2.3 Role of Business in Environment Protection
It is the social responsibility of every business to take steps to check pollution and to protect environmental resources.
They should take the following steps to protect the environment
(i) Top management of the enterprise should be committed to create, maintain and develop work culture for environmental protection and pollution prevention.
(ii) This commitment should be shared throughout the enterprise by all divisions and employees.
(iii) They should develop clear-cut policies to purchase good quality raw materials, employing superior technology, using scientific techniques of disposal and treatment of wastes, etc. to control pollution.
(iv) Respect the laws and regulations that are enacted by the government for prevention of pollution.
(v) Participate in government programmes that are relating to management of hazardous substances, cleaning of rivers, plantation of trees, etc.
(vi) Periodical assessment of pollution control programmes should be done.
(vii) Educational workshops should be arranged to impart technical information and share experience with suppliers, dealers and customers, to get them actively involved in pollution control programmes.
7.2.4 Environmental Protection in India
For environmental protection, Indian government has made laws and regulations. These are discussed
Laws of Environmental Protection
The Directive Principles of State Policy in the Constitution of India lay emphasis on protection of environment.
Some of the laws enacted are as under
(i) The Wildlife Protection Act, 1972
(ii) The Water (Prevention and Control of Pollution) Act, 1974 amended in 1974 and 1988
(iii) The Air (Prevention and Control of Pollution) Act, 1974 amended in 1974 and 1988
(iv) The Environment (Protection) Act, 1986
(v) The Forests Conservation Act, 1980 amended in 1988
(vi) The Hazardous Wastes Act, 1989
Regulations for Environmental Protection
Administrative orders/policy guidelines have been laid down by the government. A separate department of environment Government of India was created in 1980.
Steps taken by the Government include the following
(i) Certain regulatory bodies or quasi-judicial authorities have been established such as
(a) National Afforestation and Eco-development Board and
(b) National Wastelands Development Board
(ii) Closing of manufacturing units in cities.
For example, courts have ordered removal of foundaries from Agra city and shifting of manufacturing factories from Kanpur.
(iii) Various programmes on environment education and seminars on creating awareness and resource are being organised regularly.
(iv) Government has also laid down Environment Action Plan (EAP)
7.3 Business Ethics
Ethics is derived from the Greek word ethos, which means character, norms, ideals or morals. Ethics means those standards that impose reasonable obligations on an individual to refrain from social and moral evils, such as stealing, murder, assault and fraud.
Business Ethics suggest adhering to moral principles and values while conducting a business.
It gives the standard by which managerial executives follow fair practices and give equal and fair treatment to the employees, stakeholders, agents, customers, etc.
The concept of Business Ethics originated in USA in the 1970s.
According to Andrew Crane “Business ethics is the study of business situations, activities and decisions where issues of right and wrong are addressed”.
Observance of business ethics is not to indulge in
(i) Corrupt practices i.e., corrupting public servant for getting favours
(ii) Evasion of taxes
(iii) Defrauding with customers
(iv) Misbehaving with employees
(v) Exploiting workers
(vi) Selfishness
(vii) Pollution of the atmosphere.
Factors Influencing Business Ethics/Social Responsibility
Elements of Business Ethics
The business must observe the following basic elements of business ethics.
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