Social responsibility of business: concept and arguments in its favour

Concept of social responsibility

Social responsibility of business is its obligation to take decisions and actions that are desirable in the light of the objectives and values of society. A business that accepts it respects what society hopes for and tries to contribute to those hopes while pursuing its profit. This stands against the narrow view that a business exists only to maximise its owners' profit.

Two points describe the idea more fully.

• It goes beyond legal duty. Legal responsibility can be met by simply complying with the law; social responsibility also covers obligations that no law imposes, so it includes an element of voluntary action for the benefit of society.
• It is an ethical question, because it asks what is morally right or wrong in what a firm owes to customers, employees, suppliers, government and the community.

In India, corporate social responsibility is governed by section 135 of the Companies Act, 2013, which applies to companies with an annual turnover of ₹1,000 crore or more, a net worth of ₹500 crore or more, or a net profit of ₹5 crore or more. Supplying goods of good quality, creating healthy working conditions, paying taxes honestly, installing pollution-control devices and attending sincerely to customer complaints are everyday examples of socially responsible conduct.

Arguments for social responsibility

1. Business has helped create social problems. Pollution, unsafe workplaces, corruption in public institutions and discrimination in employment have in part been created or kept alive by business, so it has a moral duty to help solve them instead of leaving them to other agencies.
2. Laws cannot cover every situation. People who feel that business denies them their due may turn to anti-social activity that no law governs, which in the end harms business itself.
3. Voluntary action keeps regulation away. Government regulation limits a firm's freedom; by taking on social responsibilities of its own accord, business reduces the need for new laws.
4. It serves the firm's own long-term interest. When workers, consumers, shareholders and officials feel that a firm is not serving their interest, they withdraw their cooperation; a firm that supports social goals improves its public image and gains the most profit over time.
5. A healthier society is a better place to do business. A firm surrounded by serious social ills has little chance of success, so it pays to act on social needs before its own survival is threatened.
6. Business has the resources. It commands managerial talent and capital, built on years of organising experience, and these can help society tackle its problems better.
7. Problems can become opportunities. With its record of turning risky situations into profitable deals, business can solve social problems and also make them useful by taking up the challenge.
8. It justifies the existence and growth of business. Business exists to provide goods and services that satisfy human needs; profit should be seen as the outcome of that service, and lasting prosperity comes only through continuous service to society.

A cement company in Rajasthan that builds check dams and runs a school in the villages around its quarry illustrates several of these arguments at once: it repairs some of the strain its own operations place on local water, it earns the goodwill of the community whose cooperation it needs, and it uses engineering skills it already has.

Conclusion

Social responsibility asks business to act on its obligations to society, whether or not a law demands it. The arguments in its favour rest both on ethics and on the firm's own interest; in practice, durable success comes to enterprises through socially responsible and ethically upright behaviour.