What is Social Responsibility of Business?
Social responsibility can be said to be the obligation on the part of business enterprises to protect and promote society’s welfare. The activities of businesses should be organized in such a way that the society is benefited and not affected.
Business enterprises exist to satisfy needs of the society. It is the society that provides them the inputs and serves as the market for their produce. In other words, all business enterprises are dependent on the society. Therefore they should ensure that they keep the interest of the society as their most important consideration in all their decisions and actions. The basic requisites expected in this regard are trust, honesty, integrity, transparency and compliance with the laws of the land.
The concept of social responsibility has been in practice in India for over several decades. The concept of trusteeship propounded by Gandhiji and the pioneering welfare measures undertaken by Tata’s bear testimony.
The Need for Social Responsibility of Businesses
Businesses need to be socially responsible because of the following reasons:
1. Rationale for existence: The rationale for the existence of any business is satisfying consumer needs in a profitable manner. Consumers are part of the society and any business that needs to survive in the long run must respond and provide for society’s needs.
2. Symbiotic relationship: The society provides the inputs and serves as the market for the output of business. Business rewards the inputs provided by the society in the form of interest, rent, wages etc., and earns profits by selling the output to the society. Business and society enjoy a symbiotic relationship. Business has to protect and promote society’s welfare if it wishes to survive and prosper. A prosperous society is a necessary condition for profitable business.
3. Availability of resources: Modern businesses have huge amount of resources at their disposal. The profits earned by some of the multinational companies are more than the national income of certain countries. With such large resources, businesses are in a better position to further society’s interests.
4. Reputation: Businesses spend huge amount of resources in brand building and strengthening their image. A socially responsible company enjoys a good reputation in the society. It results in increased sales, profitability, attraction of talent and sustained growth.
5. Society’s expectations: Society’s expectations from business firms have undergone a sea change over the years. In the early days, businesses were viewed only as provider of goods and services. But today, society expects business to be a responsible citizen and contribute towards social welfare.
6. To ensure business growth: A healthy and prosperous society enjoys higher purchasing power. The higher purchasing power translates into higher demand for products and services. This increased demand translates to higher sales and profit growth for businesses.
7. To avoid government regulation: If businesses are exploitative and do not take society’s interests into account, the government has to step in. It would lay down restrictive rules and regulations. Such restrictive rules would hinder freedom and growth of businesses. In order to avoid government regulation, businesses have to be socially responsive.
8. To solve problems created: Problems such as environmental pollution, contamination of water resources, depletion of the ozone layer have been caused by businesses. These have resulted in poor health of the community and placed a question mark on the survival of human species. Therefore businesses should take measures to solve the problems which have been their creation. They need to ensure that their activities do not lead to such problems in the future.