1PUC BST Chapter 6

SOCIAL
RESPONSIBILITIES
OF BUSINESS
6.53
AND BUSINESS
ETHICS
Sharon Elizabeth Jacob
CONCEPT
Social responsibility of
business refers to its
obligation to take those
decisions and perform
those actions which are
desirable in terms of the
objectives and values of
our society.
2
NEED FOR SOCIAL
RESPONSIBILITY
• There has been a debate, for
some time now whether business
should assume social
responsibilities or not.
• Some people strongly believe that
a firm’s only social
responsibility is towards its
owners.
• Some others, however, hold an
opposite view and argue that the
firm has a social responsibility
7/1/20XX
to serve all sections of society
3
ARGUMENTS FOR SOCIAL RESPONSIBILITY
(i) Justification for (iv) Maintenance of
existence and growth: society:
People who feel that they are
The prosperity and not getting their due from the
growth of business is business may resort to
possible only through anti-social activities, not
continuous service to necessarily governed by law.
society.
(ii) Long-term interest of (v) Availability of
the firm: resources with business:
A firm and its image Business institutions have
stands to gain maximum valuable financial and
profits in the long run human resources which
when it has its highest can be effectively used for
goal as ‘service to society’. solving problems.
(iii) Avoidance of government
From the point of view of a business, government
regulation:
regulations are undesirable because they limit freedom. 4
ARGUMENTS FOR SOCIAL RESPONSIBILITY
vi) Converting viii) Holding business

problems into responsible for social
Businesses can not only
opportunities:
solve social problems, but problems:
it can also make them Some of the social
effectively useful by problems have either
accepting the challenge. been created or
perpetuated by
(vii) Better business enterprises
environment for doing themselves.
business:
If business is to operate in
a society which is full of
diverse and complicated
problems, it may have little 5
chance of success.
ARGUMENTS AGAINST
SOCIAL RESPONSIBILITY
(i) Violation of profit maximisation
objective:
Business can best fulfil its social responsibility if it
maximises profits through increased efficiency and
reduced costs.
(ii) Burden on consumers:
Businessmen are likely to simply shift this
burden of social responsibility by charging
higher prices from the consumers instead of
bearing it themselves.
(iii) Lack of social skills:
Businessmen do not have the necessary
understanding and training to solve social
problems.
(iv) Lack of broad public support:
Public in general does not like business
7/1/20XX involvement or interference in social 6
programmes.
REALITY OF SOCIAL RESPONSBILITY
i) Threat of Public (ii) Pressure of labour

Regulation:
Where business institutions operate in movement:
Labour movement for extracting gains
a socially irresponsible manner, action for the working class throughout the
is taken to regulate them for world has become very powerful.
safeguarding people’s interest.
(iii) Impact of consumer iv) Development of social standard for
Development of education and mass
consciousness: business:
New social standards consider
media and increasing competition in the economic activity of business
market have made the consumer enterprises as legitimate but with the
conscious of his right and power in condition that they must also serve
determining market forces. social needs.
7
REALITY OF SOCIAL RESPONSBILITY
(v) Development of business (vi) Relationship between social
education interest and business interest :
Educated persons as The feeling that business can grow only
consumers, investors, through exploitation of society has
employees, or owners have given way to the belief that long-term
become more sensitive benefit of business lies in serving the
towards social issues than society well.
(vii) Development of professional, managerial
earlier.
class :
Professional managers are more interested in satisfying a multiplicity
of interest groups in society for running their enterprises successfully
than merely following profit goals.
KINDS OF SOCIAL RESPONSIBILITY
Economic responsibility Legal responsibility

• A business enterprise is • Every business has a
basically an economic responsibility to
entity and, therefore, its operate within the
primary social
responsibility is laws of the land.
economic i.e., produce
goods and services that
society wants and sell
them at a profit.
9
KINDS OF SOCIAL RESPONSIBILITY
Ethical responsibility Discretionary responsibility

• This includes the • This refers to purely
behaviour of the firm that voluntary obligation that
is expected by society an enterprise assumes,
but not codified in law. for instance, providing
charitable contributions
to educational
institutions or helping the
affected people during
floods or earthquakes.
10
SR TOWARDS DIFFERENT INTEREST GROUPS
(i) Shareholders or (iii) Consumers:

A business enterprise has
owners: Supply of right quality and
the responsibility to provide quantity of goods and
a fair return to the services to consumers at
shareholders or owners on reasonable prices
their capital investment and constitutes the responsibility
to ensure the safety of such of an enterprise toward its
investment. customers.
(ii) Workers: (iv) Government and

Management of an community:
An enterprise must
enterprise is also respect the laws of the
responsible for providing country and pay taxes
opportunities to the regularly and honestly.
workers for meaningful
work. 11
BUSINESS AND ENVIRONMENTAL
PROTECTION
12
TYPES OF POLLUTION
Air Pollution Water Pollution
Air pollution is the Water becomes
result of a combination polluted primarily from
of factors which chemical and waste
lowers the air quality. dumping.
Land Pollution Noise Pollution

Dumping of toxic Noise caused by the
wastes on land running of factories
and vehicles is not
causes land pollution. merely a source of
annoyance but is also
a serious health 13
NEED FOR POLLUTION CONTROL
Reduction of health Reduced risk of liability:
hazards:
• There is increasing • It is possible that an
evidence that many enterprise is held liable
diseases like cancer, heart to pay compensation to
attacks and lung people affected by the
complications are caused toxicity of gaseous,
by pollutants in the liquid and solid wastes it
environment. has released into the
environment.
14
Cost Savings: Improved Public Image:

• Cost savings are particularly • A firm that promotes the
noticeable when improper cause for environment will
production technology results be able to enjoy a good
in greater wastes which leads
reputation and will be
to higher cost of waste
disposal and cost of cleaning perceived as a socially
the plants. responsible enterprise.
15
Other Social
Benefits:
•Pollution control results in many
other benefits like clearer visibility,
cleaner buildings, better quality of
life, and the availability of natural
products in a purer form.
16
ROLE OF BUSINESS IN ENVIRONMENTAL
PROTECTION
(i) A definite commitment by top management of the
enterprise to create, maintain and develop work culture for
environmental protection and pollution prevention.
(ii) Ensuring that commitment to environmental protection is
shared throughout the enterprise by all divisions and
employees.
(iii) Developing clear-cut policies and programmes for
purchasing good quality raw materials, employing superior
technology, using scientific techniques of disposal and
treatment of wastes and developing employee skills for the
purpose of pollution control.
17
PROTECTION
(iv) Complying with the laws and regulations enacted by
the Government for prevention of pollution.
(v) Participation in government programmes relating to
management of hazardous substances, clearing up of
polluted rivers, plantation of trees, and checking
deforestation.
(vi) Periodical assessment of pollution control
programmes in terms of costs and benefits so as to
increase the progress with respect to environmental
protection.
18
PROTECTION
(vii) Arranging educational workshops

and training materials to share technical
information and experience with suppliers,
dealers and customers to get them
actively involved in pollution control
programmes.
19
BUSINESS ETHICS
20
CONCEPT
Business ethics concerns
itself with the
relationship between
business objectives,
practices, and
techniques and the
good of society.
Business ethics refer to
the socially determined
moral principles which
should govern business
activities. 21
ELEMENTS OF BUSINESS ETHICS
(i) Top management commitment: To achieve results,

the Chief Executive Officer (CEO) and other higher-level
managers need to be openly and strongly committed to
ethical conduct.
(ii) Publication of a ‘Code’ : Enterprises with effective
ethics programmes do define the principles of conduct for
the whole organisation in the form of written documents
which is referred to as the “code”.
22
(iii) Establishment of compliance mechanisms:

In order to ensure that actual decisions and
actions comply with the firm’s ethical standards,
suitable mechanisms should be established.
(iv) Involving employees at all levels: It is the
employees at different levels who implement
ethics policies to make ethical business a reality.
23
(v) Measuring results: Although it is

difficult to accurately measure the end
results of ethics programmes, the firms
can certainly audit to monitor compliance
with ethical standards.
24
THANK YOU
25

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SOCIAL

vi) Converting viii) Holding business

i) Threat of Public (ii) Pressure of labour

Economic responsibility Legal responsibility

Ethical responsibility Discretionary responsibility

(i) Shareholders or (iii) Consumers:

(ii) Workers: (iv) Government and

Land Pollution Noise Pollution

Cost Savings: Improved Public Image:

(vii) Arranging educational workshops

(i) Top management commitment: To achieve results,

(iii) Establishment of compliance mechanisms:

(v) Measuring results: Although it is

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