Social Responsibilities of Business and Business Ethics

Social responsibility of business means the obligation of a business enterprise to take those decisions and perform those actions which are desirable in terms of the objectives and values of society. It means business should not only earn profit, but also act in a way that helps society.

It is different from legal responsibility in this way:
- Legal responsibility is only obeying the law. A business fulfills it by mere compliance with laws.
- Social responsibility is broader than legal responsibility. It includes legal duties and also those social obligations which are not covered by law.
- Social responsibility involves a voluntary action by business for the benefit of society, while legal responsibility is compulsory.

Environment means the totality of man's surroundings—both natural and man-made. These surroundings include resources useful for human life, such as land, water, air, flora and fauna, and also man-made resources like cultural heritage and socio-economic institutions.

Environmental pollution is the injection of harmful substances into the environment. It happens when waste and pollutants are released beyond the environment's capacity to absorb them, causing harm to human life, other species, and natural and man-made resources.

Business ethics refers to the socially determined moral principles which should govern business activities. It concerns what is right and wrong in business behaviour, based on accepted standards of conduct in society.

The basic elements of business ethics are:
1. Top management commitment — the CEO and senior managers must strongly support ethical conduct.
2. Publication of a code — written rules or a code of conduct for the organisation.
3. Establishment of compliance mechanisms — systems to ensure decisions and actions follow ethical standards.
4. Involving employees at all levels — employees should participate in ethics programmes.
5. Measuring results — audit and review the ethics programme and its compliance.

These elements help make ethical behaviour a part of day-to-day business working.

(a) Air pollution: It is the lowering of air quality due to harmful substances. It is mainly caused by carbon monoxide from automobiles, smoke, and chemicals from factories. It can also contribute to ozone layer depletion and warming of the earth.

(b) Water pollution: It is caused mainly by chemical and waste dumping into rivers, streams, and lakes. Business enterprises dumping waste into water bodies make water unsafe and can harm animals and human beings.

(c) Land pollution: It is caused by dumping toxic wastes on land. It damages soil quality and makes the land unfit for agriculture or plantation. Restoring damaged land is very difficult.

The major areas of social responsibility of business are:
1. Towards shareholders or owners — provide fair return and safety of investment, and regular, accurate information.
2. Towards workers — provide meaningful work, fair wages, good working conditions, and respect their rights.
3. Towards consumers — supply right quality and quantity of goods and services at reasonable prices, and avoid adulteration and misleading advertising.
4. Towards government and community — obey laws, pay taxes honestly, protect the natural environment, and behave as a good citizen.

As per the Companies Act, 2013, Corporate Social Responsibility (CSR) means the responsibility of enterprises for their impacts on society and their continuing commitment to contribute to economic development while improving the quality of life of the workforce, their families, and the community and society at large.

The Act applies to companies with an annual turnover of ₹1,000 crore or more, or net worth of ₹500 crore or more, or net profit of ₹5 crore or more.

### Arguments for social responsibility
1. Justification for existence and growth: Business exists to satisfy human needs, so serving society justifies its existence and growth.
2. Long-term interest of the firm: A firm gains better public image and long-run profits when it serves society well.
3. Avoidance of government regulation: If business acts responsibly, there is less need for government interference and new laws.
4. Maintenance of society: Business should help prevent social unrest and anti-social activities caused by neglect.
5. Availability of resources with business: Business has finance, managerial talent, and experience that can help solve social problems.
6. Converting problems into opportunities: Business can turn social problems into useful opportunities.
7. Better environment for doing business: A society with fewer problems gives a better business climate.
8. Holding business responsible for social problems: Since business itself often creates or worsens pollution, unsafe workplaces, corruption, and discrimination, it must help solve them.

### Arguments against social responsibility
1. Violation of profit maximisation objective: Business exists for profit, so social responsibility may reduce profit.
2. Burden on consumers: Costs of social activities may be passed on to consumers through higher prices.
3. Lack of social skills: Businessmen may not have the training needed to solve social problems.
4. Lack of broad public support: People may not want business interference in social programmes.

Thus, the chapter shows that there are strong arguments on both sides, but in practice business is increasingly accepting social responsibility.

The increasing concern of business enterprises toward social responsibility is due to several forces:
1. Threat of public regulation — governments regulate irresponsible business activities.
2. Pressure of labour movement — organised labour forces firms to care for workers' welfare.
3. Impact of consumer consciousness — educated and aware consumers demand better and fairer business behaviour.
4. Development of social standards for business — society expects business to serve social needs, not just make money.
5. Development of business education — education has increased awareness of social responsibility.
6. Relationship between social interest and business interest — firms realise that social and business interests are complementary.
7. Development of professional managerial class — professional managers are more concerned with satisfying different interest groups than only profit-making.

These forces have made business a socio-economic activity and increased its responsibility towards society.