Social Responsibilities of a Business – Meaning, Need and Types
An organization performs different activities to fulfill its profit-earning motive and satisfy the needs of society. While fulfilling the expectations of society, a business has some obligations towards society and has to respect its norms and values. It means as society is permitting an organization to run its business, set up factories, and perform other activities to earn a profit, it also wants the business to not enter into anything undesirable from their point of view or which is harmful to them. Some of the socially desirable practices which are expected from the companies are: supply of quality goods and services, providing goods at a fair price, creating healthy and better working conditions, preventing activities that can create pollution, or installing devices to control pollution, ensuring that the customers’ complaints are taken care of, etc. However, the socially undesirable practices which should be avoided by the companies are the production and sale of bad quality goods and services, polluting the environment, unfair trade practices, fraudulent activities, etc.
Meaning of Social Responsibility
An organization’s obligation to make decisions and perform them for the benefit of society and its values is known as social responsibility. It is assumed under social responsibilities that the businesses will respect the values and aspirations of society and try their best to fulfill these aspirations and accomplish their business goals.
In simple terms, it is the responsibility of an organization to be a responsible member of society and work towards its betterment. However, according to critics, social responsibility practices are exact opposites of the major motive of a business’s existence. Social responsibility in business is also known as Corporate Social Responsibility (CSR). For example, a factory not disposing of its chemicals and waste in the water bodies, improving working hours and conditions of the employees, donating part of the firm’s profits to educational services for poor children, etc. Social responsibilities performed by the companies not only help society, but also help the business gain a positive image and build its brand in the market. It motivates the employees of the firm to work hard, as they feel good to be a part of an organization that works well for society and respects its values.
Corporate Social Responsibility is a business model used by companies to enhance society and the environment through concerted efforts. It is a great way for business organizations’ to build morale in the workplace and build a good image in the market. Some of the companies strongly committed to CSR are IKEA, Bosch, Apple, Ben and Jerry’s, Starbucks, Marc Jacobs, and Adidas.
Need for Social Responsibility
Although an organization exists with the aim of maximizing profits; however, it should not be its sole motive and should commit to society. An organization needs social responsibility because of the following reasons:
- Changing expectations of society: Today’s world has changed a lot compared to the past years. Now, society expects different things from a business besides the supply of goods and services. As society provides companies with different resources like labour, natural resources, etc., it expects something good in return for their welfare.
- Reputation: Companies spend a lot of money on brand building and a good image in society. To do so, an organization can also perform socially responsible practices that will it result in profitability, increased sales, sustainable growth, a good image and attraction of talent.
- Avoidance of government interference: Government has enacted various laws, putting moral and legal pressure on the companies to perform socially responsible activities. If the company fails or avoids these practices, the government will interfere in the business. Therefore, to avoid such interference by the government, companies need to perform their social responsibilities.
- Long-term self-interest: Practicing socially responsible practices not only helps society, but also proves to be beneficial for the companies in the long run. It means that if a company has an image in the market as a brand or firm that serves society besides earning a profit, it will build the company’s image and will be good for its self-interest.
- Contribution to social problems: Businesses create some of the social problems, like pollution, inequality, discrimination, unsafe workplace, etc. Therefore, it is those firms’ duty and obligation to perform socially responsible activities to solve these social problems and make society better and safe.
- Better environment for business: Businesses use natural resources for their daily activities of the business and usually degrade the environment in the process. Therefore, business organizations need to avoid environmental degradation caused by them. It not only benefits society, but also gives firms a chance to grow their business in a healthy and safe environment.
- Growth of Consumer: The consumer of the present world is more educated and aware of their rights and powers as compared to the past. They know when a business is engaged in unfair trade practices, giving them bad quality goods and services, charging more price, etc., and what measures they can take for the same. Therefore, organizations need to work with social responsibility to retain existing customers and attract more.
- Optimum utilization of resources: One of the aims of businesses while producing and selling goods and services to customers is optimum utilization of resources. As we know that with the increase in population, resources have become scarce, and we need to save them for future generations. Therefore, business organizations need to make optimum utilization of resources and work with social responsibility.
Types of Social Responsibilities
1. Economic Responsibility
As we know, a business organization is an economic entity; therefore, economic responsibility is its primary social responsibility. In simple terms, economic responsibility means producing goods and services according to the needs and wants of the customers and selling them the same at a profit. It means that the organizations should understand whether the customers are demanding quality or price and then provide them with the same. Earning profit is a responsibility of the business as it ultimately increases the incentives of the employees. Therefore, the economic growth of an organization affects society as a whole.
2. Legal Responsibility
It is the duty and responsibility of an organization to legally abide by the rules, laws, and regulations while performing business activities. As the authorities enact these laws for the good of society, an organization following these rules is a socially responsible firm. Besides, an organization performing activities as per the laws gets no interference from the government. Legal responsibilities include paying taxes on time to the government, keeping its books of accounts and financial statements clean and accurate, etc.
3. Ethical Responsibility
It is the behaviour expected from the business organizations’ by society; however, it is not codified in the law. Therefore, there is no legal obligation on the companies to perform ethically responsible activities. Ethical responsibility is beyond the laws and includes fair trade practices, respecting the religious sentiments of people, maintaining and protecting the environment, etc. It also means that a business should not get involved in black marketing, adulteration, fraud, etc.
4. Discretionary Responsibility
It is a philanthropic responsibility and is completely voluntary. It includes charitable services, providing education facilities to poor people, helping the people affected by floods or other natural calamities, donating to healthcare facilities for those who cannot afford them, etc. The management of an organization is responsible for avoiding speculative activities and safeguarding its capital investment by undertaking healthy business ventures only that can provide them with good ROI(Returns on Investment).