You know that business is an economic activity, which is carried out on a regular basis to earn profit. However, you must have seen businessmen spending money on different aspects, which is not going to give them any profit straightway. For example, you must have seen businessmen maintaining and developing gardens and parks on streets and squares in cities. Some businessmen engage themselves in research for improving the quality of products; some provide housing, transport, education and health care to their employees and their families. In some places businessmen provide free medical facility to poor patients. Sometimes they also sponsor games and sports at national as well as international level. Did you ever wonder why they do so? Let us learn more about why businessmen engage themselves in such activities.
After studying this lesson, you will be able to: explain the concept of social responsibility of business; appreciate the importance of social responsibility; recognize the responsibility of business towards different interest groups; explain the concept of social values and business ethics; identify the causes of environmental pollution; and describe the role of business in preventing and controlling environmental pollution.
4.2 What is Social Responsibility
In your daily life, you perform a number of activities. For example, brushing your teeth, listening to your parents, showing respect to elders obeying traffic rules on road etc. Now
why do you perform all these activities? It is because you live in a family as well as in a society and the members of your family as well as the society want you to do all of them. They do several things for you and expect something from you, which you must do. The expectations of the family or society become your obligations, which you need to fulfill. For example, taking care of your parents or children, keeping the road clean by not throwing garbage on it, etc. There are also obligations towards yourself, which you need to fulfill.
For example, taking food timely, going to sleep early at night, etc. that keep you fit and takes care of your health. Now you fulfill all these obligations by performing certain activities which are called your responsibilities. Any responsibility you have, particularly towards members of the society with whom you interact or towards the society in general, are called your social responsibility. The obligation of any business to protect and serve public interest is known as social responsibility of business
This is true in case of business also. As we know, every business operates within a society. It uses the resources of the society and depends on the society for its functioning. This creates an obligation on the part of business to look after the welfare of society. So all the activities of the business should be such that they will not harm, rather they will protect and contribute to the interests of the society. Social responsibility of business refers to all such duties and obligations of business directed towards the welfare of society.
These duties can be a part of the routine functions of carrying on business activity or they may be an additional function of carrying out welfare activity. Let us take an example. A drug-manufacturing firm undertakes extensive research and thus, produces drugs which are qualitatively superior. It also provides scholarships or fellowships to the family members of its employees for studying abroad. We find, in both the cases, the drug-manufacturing firm is carrying out its social responsibility. In case of the former, it is a part of its routine business function while in the latter case it is a welfare function.
4.3 Concept of Social Responsibility
We all know that people engage in business to earn profit. However, profit making is not the sole function of business. It performs a number of social functions, as it is a part of the society. It takes care of those who are instrumental in securing its existence and survival like- the owners, investors, employees, consumers and government in particular and the society and community in general. So, every business must contribute in some way or the other for their benefit. For example, every business must ensure a satisfactory rate of return to investors, provide good salary, security and proper working condition to its employees, make available quality products at reasonable price to its consumers, maintain the environment properly etc. However, while doing so two things need to be noted to view it as social responsibility of business.
First, any such activity is not charity. It means that if any business donates some amount of money to any hospital or temple or school and college etc., it is not to be considered as discharge of social responsibility because charity does not imply fulfilling responsibility. Secondly, any such activity should not be such that it is good for somebody and bad for others. Suppose a businessman makes a lot of money by smuggling or by cheating customers, and then runs a hospital to treat poor patients at low prices his actions cannot be socially justified. Social responsibility implies that a businessman should not do anything harmful to the society in course of his business activities.
Thus, the concept of social responsibility discourages businessmen from adopting unfair means like black-marketing, hoarding, adulteration, tax evasion and cheating customers etc. to earn profit. Instead, it encourages them to earn profit through judicious management of the business, by providing better working and living conditions to its employees, providing better products, after sales-service, etc. to its customers and simultaneously to control pollution and conserve natural resources.
4.4 Why should business be socially responsible
Social responsibility is a voluntary effort on the part of business to take various steps to satisfy the expectation of the different interest groups. As you have already learnt, the interest groups may be owners, investors, employees, consumers, government and society or community. But the question arises, why should the business come forward and be responsible towards these interest groups. Let us consider the following points: i. Public Image – The activities of business towards the welfare of the society earn goodwill and reputation for the business. The earnings of business also depend upon the public image of its activities. People prefer to buy products of a company that engages itself in various social welfare programmes. Again, good public image also attracts honest and competent employees to work with such employers.
Government Regulation – To avoid government regulations businessmen should discharge their duties voluntarily. For example, if any business firm pollutes the environment it will naturally come under strict government regulation, which may ultimately force the firm to close down its business. Instead, the business firm should engage itself in maintaining a pollution free environment. Survival and Growth -Every business is a part of the society. So for its survival and growth, support from the society is very much essential. Business utilizes the available resources like power, water, land, roads, etc. of the society. So it should be the responsibility of every business to spend a part of its profit for the welfare of the society. Employee satisfaction – Besides getting good salary and working in a healthy atmosphere, employees also expect other facilities like proper accommodation, transportation, education and training.
The employers should try to fulfill all the expectation of the employees because employee satisfaction is directly related to productivity and it is also required for the long-term prosperity of the organisation. For example, if business spends money on training of the employees, it will have more efficient people to work and thus, earn more profit. Consumer Awareness – Now-a-days consumers have become very conscious about their rights. They protest against the supply of inferior and harmful products by forming different groups. This has made it obligatory for the business to protect the interest of the consumers by providing quality products at the most competitive price.
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