Chapter 6 Social Responsibilities of Business and Business Ethics

Introduction-

Business is an indispensable part of the society and gets its manpower and other resources from the society. It is permitted by the society to carry on industrial or commercial or commercial activities and thereby earn profits. When the very existence of a business organization depends on society, it should not ignore its responsibility towards the society. It should conduct the activities in a manner that fulfill its obligations towards the society. It should not indulge in any socially undesirable practices (like black marketing, adulteration, etc.)

CONCEPT OF SOCIAL RESPONSIBILITY

                             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.

The assumption of social responsibilities by business enterprises implies that they respect the aspirations of society and would try their best to contribute to the achievement of these aspirations along with their profit interests.

This idea is in contrast to the common notion that business exists only for maximizing profits for its owners and it is relevant to talk of public good. It follows that a responsible business, and indeed any responsible member of society, must act with due concern for the effects on the lives of other people.

CASE OF SOCIAL RESPONSIBILITY:-

1. JUSTIFICATION FOR EXISTENCE AND GROWTH:- Business exists for providing goods and services to satisfy human needs. Through, profit motive is an important justification for undertaking business activity; it should be looked upon as an outcome of service to the people. In fact, the prosperity and growth of business is possible only through continuous service to society.
2. LONG-TERM INTEREST OF THE FIRM:- It is in the long-term self-interest of the business to fulfill its social responsibility towards various groups of society, like workers, consumers, shareholders, government officials, feel that business enterprise is not serving its best interest, they will tend to withdraw their cooperation to the enterprise concerned.
3. AVOIDANCE OF GOVERNMENT REGULATION:- From the point of view of a business, government regulations are undesirable because they limit freedom. Therefore, it is believed that businessmen can avoid the problem of government regulations by voluntarily assuming social responsibilities, which helps to reduce the need for new laws.
4. MAINTENANCE OF SOCIETY:- If the people related to a business feel that they are not getting their dues, then they may resort to anti-social activities. This may be harmful for the business. So, business enterprises must fulfill social responsibilities.
5. AVAILABILITY OF RESOURCES WITH BUSINESS:- The arguments holds that business institutions have valuable financial and human resources which can be effectively used for solving problem. For example:- business has a pool of managerial talent and capital resources , supports by years of experience in organizing business activities.
6. Converting problems into opportunities:-  It is a common saying that ‘Profit is the reward of risk bearing’. Business is capable of converting risky situations into profitable deals. It no only helps is solving social problems but can also be used effectively as an opportunity for growth. For example, by setting up industries in backward regions, the problem of regional disparity can be solved and a businessman can benefit from various tax incentives offered by the government.
7. Better Environment for Doing Business:- when the society is confronted with diverse and complicated problems, then there are little chances for the success of the business. So, in order to have better environment for doing business, the business should assume social responsibilities to solve problems of the society.
8. Holding Business Responsible for Social problems:- Every business uses capital, physical and human resources of the society for business purposes. Moreover, a number of social problems like environmental pollution, unsafe workplaces, corruption, etc. arise due to activities of business enterprise.

KINDS OF SOCIAL RESPONSIBILITY:-

1. ECONOMIC RESPONSIBILITY:- A business enterprise is basically an economic entity and, therefore, its primary social responsibility is economic produce goods and services that society wants and sell them at a profit. There is little discretion in performing this responsibility.
2. ETHICAL RESPONSIBILITY:- This includes the behavior of the firm that is expected by society but not codified in law. For example, respecting the religious sentiments and dignity of people while advertising for a product. There is an element of voluntary action in performing this responsibility.
3. DISCRETIONARY RESPONSIBILITY:- This refers to purely voluntary obligation that an enterprise assumes, for instance, providing charitable contributions to educational institutions or helping the affected people during floods or earthquakes. It is the responsibility of the company management to safeguard the capital investment by avoiding speculative activity and undertaking only healthy business ventures which give good returns on investment.
4. LEGAL RESPONSIBILITY:- Every business has a responsibility to operate within the laws of the land. Since these laws are meant for the good of the society, a law abiding enterprise is a socially responsible enterprise as well.

SOCIAL RESPONSIBILITY TOWARDS DIFFERENT INTEREST GROUPS:-

1. RESPONSIBILITY TOWARDS THE SHAREHOLDERS OR OWNERS:- A business enterprise has the responsibility to provide a fair return to the shareholders or owners on their capital investment and to ensure the safety of such investment. The corporate enterprise on a company form of organisation must also provide the shareholders with regular, accurate and full information about its working as well as schemes of future growth.
2. RESPONSIBILITY TOWARDS THE WORKERS:- Management of an enterprise is also responsible for providing opportunities to the workers for meaningful work. It should try to create the right kind of working conditions so that it can win the corporation of workers.
3. RESPONSIBILITY TOWARDS THE CONSUMERS:- Supply of right quality and quantity of goods and services to consumers at reasonable prices constitutes the responsibility of an enterprise toward its customers. The enterprise must take proper precaution against adulteration, poor quality, lack of desired service and courtesy to customers, misleading and dishonest advertising, and so on.
4. RESPONSIBILITY TOWARDS THE GOVERNMENT AND COMMUNITY:- An enterprise must respect the laws of the country and pay taxes regularly and honestly. It must behave as a good citizen and act according to the well accepted values of the society. It must protect the natural environment and should avoid bad, effluent, smoky chimneys, ugly buildings dirty working conditions. It must also develop a proper image in society through continuous interaction with various groups of people.

ROLE OF BUSINESS IN ENVIRONMENT PROTECTION

Businesses need to play a key role in environmental protection because every human being including businessmen is part of the environment. Businesses cannot engage in practices that harm the environment because profitability cannot replace the well-being of other humans.

Businesses need to play a key role in environmental protection because every human being including businessmen is part of the environment. Businesses cannot engage in practices that harm the environment because profitability cannot replace the well-being of other humans.

It has been observed that many businesses ignore sustainable practices for making the environment safe and secure for coming generations. Businesses also have the responsibility to conserve the environment because they have the money and power to run big environment-friendly projects.

Role of Business in Environmental Protection:

1.Commitment by top management to create a work culture for environmental protection.

2. Ensuring that commitment of environmental protection is shared throughout the enterprise by all divisions and employees.

3. Developing clear policies and programmer for purchasing good quality raw materials, introducing superior technology, using scientific techniques of disposal of waste and developing employee skills for pollution control.

4. Consider with the laws and regulations enacted by the Government for prevention of pollution.

5. Participation in government programs relating to management of hazardous substances, cleaning up of polluted rivers, plantation of trees, and checking deforestation.

6. Periodical assessment of pollution control programmed in terms of costs and benefits with a view to improve them.

7. Arranging educational workshops and training materials to share technical information with everyone involved in pollution control.

CAUSES OF POLLUTION

Pollution may be defined as introduction of contaminants into an environment, which causes instability, disorder, harm or discomfort to the ecosystem. All the sectors of the society release waste (known as pollution) in the environment during the process of production or consumption. Among the various sources of pollution, industry generates the maximum amount of toxic waste.

TYPES OF POLLUTION-

1.  Air pollution:- Air pollution is the contamination of air by the discharge of harmful substances. It is mainly due to carbon monoxide emitted by automobiles and smoke and other chemicals from manufacturing plants. It has resulted in ozone depletion, which is leading to climate change and dangerous warming of the earth.
2. Water pollution:- When toxic substances enter rivers, streams and other water bodies and get dissolved or lie suspended in water, it leads to water pollution.
3. Land pollution:- Land pollution is caused due to dumping of toxic wastes on land. For example, use of synthetic fertilizers, pesticides or polluted water in agriculture leads to land pollution.
4. Noise pollution:- Noise made by machines, vehicles, firecrackers, etc. leads to noise pollution. It not only causes irritation or annoyance, but is also a serious health hazard.

Need for pollution control

Pollution adversely affects the quality of environment and makes it unfit for normal life. There is a strong need to control and prevent pollution in order to preserve precious environmental resources and to improve its quality.

1. Reduction of Health Hazards:- Increasing level of pollution is the major reason for many diseases like cancer, heart attacks and lung complications. So, pollution control is needed to reduce such health hazards and  to improve the quality of life.
2. Reduced Risk of Liability:- Business enterprise is often held liable to pay compensation to the individuals affected by toxic gases, chemicals and other wastes releases into the environments.
3. Cost Savings:- Pollution control also helps to save costs of operating business. For example, if the production process releases wastes in heavy quantity, then an effective pollution control programmer will prevent high cost of waste disposal and cost of cleaning the plants.
4. Improved Public Image:- The society is becoming more and more conscious about the quality of environment. As a result it has become necessary for the business enterprise to implement pollution control measures in order to improve its public image.
5. Other Social Benefits:- Pollution control results in many other benefits like better visibility, cleaner buildings, better quality of life and availability of natural products in a purer form.

BUSINESS ETHICS

                                 From the social point of view, business exists to supply goods and services to the people. The word ‘ethics’ has its origin in the Greek word ‘ethics’ meaning character; norms, ideals or morals prevailing in a group or society.

Ethics is concerned with what is right and what is wrong in human behavior judged on the basis of a standard form of conduct/behavior of individuals, as approved by society in a particular field of activity.

Business ethics concerns itself with the relationship between business objective, practices, and techniques and the good of society. Business ethics refer to the socially determined moral principles which should govern business activities.

A few examples of business ethics are: charging fair prices from customers, using fair weights for measurement of commodities, giving fair treatment to workers and earning reasonable profits.

ELEMENTS OF BUSINESS ETHICS:-

1. TOP MANAGEMENT COMMITMENT:- Top management has a crucial role in guiding the entire organisation towards ethically upright behavior. To achieve results, the Chef Executive Officer (CEO) and other higher level managers need to be openly and strongly committed to ethical conduct.
2. 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. Some examples of such mechanisms are: paying attention to values and ethics in recruiting and hiring.
3. PUBLICATION OF A CODE:- Enterprises with effective ethics programmers do define the principles of conduct for the whole organisation in the form written documents which is referred to as the “code”. This generally covers areas such as fundamental honesty and adherence to laws’ product safety and quality.
4. MEASURING RESULTS:- Although it is difficult to accurately measure the end result of ethics programmers, the firms can certainly audit to monitor compliance with ethical standards. The top management team and other employees should then discuss the results for further course of action.
5. INVOLVING EMPLOYEES AT ALL LEVELS:- It is the employees at different levels who implement ethics policies to make ethical business a reality. Therefore, their involvement in ethics programmers becomes a must. For example, small groups of employees can be formed to discuss the important ethics policies of firms and examine attitudes of employees towards these polices.