Chapter 6: Social Responsibilities of Business and Business Ethics

Ans: Social responsibility is an ethical paradigm that implies that an entity, whether an organization or an individual, has a responsibility to behave in the best interests of society as a whole. Every individual has a responsibility to fulfill in order to maintain a balance between the economy and the ecosystems.

Difference between Social and Legal Responsibility is:

Ans: The whole of man's surroundings, both natural and manmade is characterised as the environment. These surroundings also include resources that are beneficial to human life.

Environmental Pollution is when there are undesirable changes in the surrounding that have harmful effects on plants and animals. Pollution alters the physical, chemical, and biological properties of the atmosphere, land, and water. Because the environment can only absorb a certain quantity of pollutants and wastes, pollution exists.

Ans:  Ethics is concerned with determining what is acceptable and wrong in human behaviour based on a standard form of individual conduct/behaviour as approved by society in a particular sector of activity. The relationship between company objectives, procedures, and processes and the good of society is the subject of business ethics.

Elements of business ethics are:

• Top management’s commitment, 

• Publication of code 

• Establishment of compliance mechanism, 

• Involving employees at all levels 

• Measuring results.
  
  

Ans: Air pollution is the pollution in the air which is primarily due to carbon monoxide emitted by automobiles, as well as smoke and other chemicals emitted by manufacturing industries. As a result of the pollution, a hole in the ozone layer has formed, causing severe global warming.

Ans: Chemicals, industrial waste, and trash dumping are the main sources of pollution in water. It has killed a number of animals and poses a severe threat to human life.

Ans: Land contamination occurs when toxic wastes are dumped on it. This degrades the land's quality, rendering it unsuited for agriculture or planting.

Ans: Social responsibility is an ethical paradigm that implies that an entity, whether an organization or an individual, has a responsibility to behave in the best interests of society as a whole. Every individual has a responsibility to fulfil in order to maintain a balance between the economy and the ecosystems.

The major areas of social responsibility of business include the following:

• Economic Responsibility

The primary social obligation of a business enterprise is the economic responsibility, i.e., to produce things and services that society desires and sell them for a profit.

• Legal Responsibility

Every business has a legal obligation to follow the rules of the land. A business who abides to the laws and regulations of the country, is also a socially responsponsible business.

• Ethical Responsibility

Described as socially acceptable behaviour that is not codified in legislation. This job requires some volunteer participation.

• Discretionary Responsibility

It is the responsibility of the company to protect the capital investment by avoiding speculative activity and engaging in only healthy business initiatives that provide good returns on investment, such as charities, donations etc.

Ans: CSR is a self-regulatory company model that strives to contribute to social goals, such as volunteering or ethically-oriented actions. It establishes a company's social responsibility and accountability. This accountability is towards itself, its stakeholders (i.e., the people who have an interest in the life of a corporation including shareholders, creditors, consumers, competitors, workers, government and society at large).

Ans: The arguments for social responsibilities are:

Arguments for Social Responsibility

• Protect the interest of stakeholders:

It has become critical for businesses to fulfil their obligations to their employees in order to win their support. The consumer does not purchase the product that is being offered to him. He buys exactly what he wants. Businesses have been compelled to adopt social responsiveness toward their customers as a result of greater customer awareness. As a result, keeping social obligations is beneficial to a company's long-term viability.

• Long-run survival:

When a company's primary purpose is to provide "service to society," it and its image stand to profit the most in the long run. If a company performs its social obligation, it benefits itself. Also the image of the firm in the eyes of the people also improves,when the firm fulfils social goals.

• Self-enlightenment:

Businesses are motivated to work for the greater good as their degree of knowledge and understanding of their role as society's creators increases. Managers adopt and follow voluntary moral and social responsibility norms, which help to shape public expectations. Hence, firms assume social responsibility on their own, rather than as a result of legislative intrusion.

• Avoids government regulation:

Regulations from the government are unwelcomed since they restrict one's freedom. Businessmen are thought to be able to escape the problem of government restrictions by voluntarily taking on social duties, hence reducing the need for new legislations.

The Central Pollution Control Board, for example, is in charge of environmental pollution issues. 

• Resources:

Business organizations have vast resources that can be leveraged to help solve societal problems in part. Therefore, given the vast financial and personnel resources at its disposal, a firm can assist society in better addressing its problems. Also, businesses are the result of society's creation, and they must act in its best interests, both economically and socially.

• Holding business responsible for social problems:

Businesses have either generated or perpetuated social problems. Therefore, instead of ignoring these issues, businesses have a moral obligation to be actively involved in their solution rather than only anticipating that they will be dealt with by other social agencies.

• Converting problems into opportunities:

By accepting the challenge, business, which has a history of turning difficult situations into profitable agreements, may not only alleviate societal problems, but also make them successfully helpful.

Arguments Against Social Responsibility:

• Violation of profit maximisation:
  Profit maximisation is the sole purpose of business. As a result, any discussion of social responsibility is incompatible with this goal. Profit maximisation through higher efficiency and lower costs is the best way for business to fulfil its social obligation.

• Burden on consumers:
  Pollution management and environmental preservation are expensive social duties that frequently necessitate large financial investments. Instead of carrying the burden of social duty, business people tend to simply pass it to their customers by demanding higher costs.

• Lack of social skills:
  Business people lack the essential knowledge and training to solve social issues. Instead, other specialized agencies need to deal with social issues.

• Lack of broad public support:
  Business engagement or meddling in social programmes is disliked by the general public. As a result, business cannot thrive due to a lack of public trust and collaboration in resolving social issues.
  
  

Ans: The forces responsible for increasing concern of business enterprises towards social responsibility are:

A. Threat of public regulation:

• To protect the public's interests, actions are taken to control business enterprises that operate in a socially irresponsible manner.

• One of the main reasons why businesses are concerned about social responsibility is the fear of government regulation.
  
  

B. Pressure of labour movement:

• The labour movement has grown in strength around the world in order to extract gains for the working class.

• This has compelled businesses to consider the welfare of their employees rather than employing a "hire and fire" policy.
  
  

C. Impact of consumer consciousness:

• With the advancement of education and mass media, as well as increased market competition, the customer has become more aware of his rights and powers in influencing market dynamics.

• Now that the consumer is king, businesses have begun to take a customer-centric approach.
  
  

D. Development of social standard for business:

• New social standards recognise corporate firms' economic activity as acceptable, but only if they also serve social requirements.

• There is no way to run a business without interacting with the rest of the world.
  
  

E. Development of business education:

• The expansion of business education, with its strong social responsibility content has increased public awareness of business's social mission.
  
  

F. Relationship between social interest and business interest:

• Social and business goals are no longer mutually exclusive, according to business enterprises. Infact, they are a good match for each other.

• The long-term benefit of business is in providing good service to society.
  
  

G. Development of professional, managerial class:

• Professional management education at universities and specialized management schools has resulted in the formation of a distinct class of professionals.

• Professional managers are more concerned with fulfilling a variety of societal interest groups than with simply meeting profit targets when it comes to running their businesses successfully.
  
  

Ans: Profit is the driving force behind any business. This is due to the fact that profit is both a metric of performance and the primary source of revenue for a business. In addition, earnings are frequently utilised to fund a company's expansion plans.

Business firms, on the other hand, are claimed to be more than profit-making organisations because:

• Social Institutions: They are considered as social institutions, because society contributes towards the success of a business.

• Societal Resources: As every business makes use of society's resources in terms of human and physical capital, so wastage of time, money ,and manpower should be minimized.

• Business needs consumers: Business cannot work without consumers, so the business needs consumers to buy its products or services. It needs to maintain a good relationship with its consumers so that it can smoothly conduct business.

Thus, it becomes important that business should do something for society in return. As a result, we refer to a corporate firm as a social institution rather than a profit-making corporation.

Ans: Business enterprises need to take suitable measures for pollution control not merely to protect the environment, but also to enjoy other benefits which are:

• Reduction of health hazards:
  Many ailments, including cancer, heart attacks, and lung difficulties, are increasingly being linked to environmental contaminants.

• Reduced risk of liability:
  It is conceivable for a company to be held accountable for compensating people who have been harmed by the toxicity of gaseous, liquid, or solid pollutants it has released into the environment. To avoid the possibility of responsibility, businesses must install pollution control systems on their premises.

• Cost savings:
  Cost reductions are especially obvious when faulty manufacturing technology produces more trash, resulting in higher waste disposal and facility cleaning costs.

• Improved public image:
  A company that promotes environmental causes will have a positive reputation and be seen as a socially responsible business.

• Other social benefits:
  Controlling pollution has a number of other advantages, including improved visibility, cleaner buildings, a higher quality of life, and the availability of natural resources in their purest form.