Unit 5

The relationship between business & society: The basic objective of business is
to develop, produce and supply goods and services to customers. This has to be
done in such a way as to allow companies to make a profit, which in turn demands
far more than just skills in companies’ own fields and processes. Astute
entrepreneurs often demonstrate an almost intuitive understanding of the synergies
that create success. The social skills of company owners, together with
relationships maintained with customers, suppliers and other business people, are
always vital if companies are to be run well and developed with a view to the
future. Companies improve their resources by developing materials and ideas. The
goods and services produced must meet demands made by customers, other
companies or public institutions if companies are to survive. Profitability results
when customers are prepared to pay more for goods and services than it costs to
produce them. The ability to produce this kind of added value – profit – is the basic
prerequisite for business, but it is also a foundation for prosperity in society. Only
profitable companies are sustainable in the long term and capable of creating
goods, services, processes, return on capital, work opportunities and a tax base.
This is what business does better than any other sector. Hence, companies’ basic
commercial operations are the primary benefit they bring to society.
Companies benefit society by:
 Supplying goods and services that customer cannot, or do not want to,
produce themselves
 Creating jobs for customers, suppliers, distributors and coworkers. These
people make money to support themselves and their families, pay taxes and
use their wages to buy goods and services
 Continually developing new goods, services and processes
 Investing in new technologies and in the skills of employees
 Building up and spreading international standards, e.g. for environmental
practices
 Spreading “good practice” in different areas, such as the environment and
workplace safety
The role of business in the development of society can be described in many ways.
For a company to progress and develop, it must nurture relations with its
stakeholders, of which there may be many. Some have a strong influence and are
of fundamental importance to the survival of the company: these include
employees, customers and suppliers. The media, authorities, trade unions and local
residents are other stakeholders with a wide-ranging influence. The role of
business in society and the accompanying responsibilities that transpire from that
role is a highly contentious and debated topic. The economist Milton Friedman
famously contended that the “business of business is business” and thus it has only
one responsibility and that is to generate profit for shareholders (while adhering to
the law). Contrary to that argument is thinking that recognizes business as a system
in society that is affected by and affects other systems in society (such as the
surrounding community, government bodies, other types of organizations, the
natural environment, etc.). Thus business needs to work with these systems to
attain its economic goals in a way that will also benefit the system (society) as a
whole.
Good relations lead to profitability: The long-term survival of companies is
partly dependent on maintaining relationships of trust. Deterioration of such
relationships will jeopardize the ongoing development of the company. Experience
shows that companies with an international outlook, which are open and adopt the
long-term approach, are often best at maintaining relationships and hence at
developing their operations. The ability to constantly go on improving products
and processes is a basic prerequisite. Companies that want to keep developing have
to be receptive to signals from and opinions expressed by the market, staff and the
general public. Now that more and more customers – and stakeholders as well –
are making demands of companies’ ethical, social and environmental awareness, it
is also natural for companies to be receptive to these issues and actively use them
in their operations. Society’s values and current levels of knowledge are reflected
in companies’ activities, and companies are judged according to current standards.
Companies have always had to interpret society’s moods or else go out of business.
Companies have always had to adapt to fit in with values and norms. Businesses
have made huge profits and by one estimate, 60 per cent of India’s 200 leading
companies are looking to spend their new found wealth on foreign acquisitions and
investments.
Understanding Business: A business is an organization or enterprising entity
engaged in commercial, industrial or professional activities. A company transacts
business activities through the production of a good, offering of a service or
retailing of already manufactured products. A business can be a for-profit entity or
a nonprofit organization that operates to fulfill a charitable mission. A business
most often forms after the development of a business plan. This plan outlines the
strategic intentions and logistics in making those intentions occur. A business
name must be registered with the state, and this name is often referred to as the
"doing business as" or DBA name.
Key Business Skills: Running a small business often requires that you become a
jack-of-all-trades. It is therefore important to know early on the skills that you have
and those that you will either have to learn or delegate to others. The key business
skills to consider include:
 Strategic Management: Creating a business and strategic plan for your business
and making sure you keep to it.
 Basic Accounting: Which records to keep, how to keep them and how to file
them.
 Financial Management: Where to find financing and how to manage it once
you’ve sourced it.
 People Management: Hiring your first employee and how to manage them.
 Marketing. How to market your business through traditional channels, web and
social media.
 Sales: How to complete a sale and look after your customers.
 Operations Management: Choosing and managing your suppliers.
Every business conforms to the three basic parts of moneymaking – cash
generation, return on assets (combination of margin and velocity), and growth.
Whether running an online or traditional business, a business owner must
understand these parts individually and the relationship between them. These three
basic parts, plus customers, form the nucleus of any business.
1. Cash: Cash generation is the difference between all the cash that flows in the
business and the cash that flows out. Cash is the lifeblood of any business, or the
company’s oxygen supply. Without cash, a business can be in trouble even if other
aspects of moneymaking – profit margin and asset velocity – look good. If the
business generates sufficient cash, the entrepreneur is in a better position to grow
the business. An entrepreneur can make better investing decisions, not to mention
be more in control, if it has its own cash rather than borrowing money from
investors.
2. Return on assets (combination of margin and velocity): An entrepreneur uses
either his own money or someone else’s money to invest in the business. The
things invested – be it products, store or web site – are the business assets. An
entrepreneur must follow the rule: the return on assets has to be greater than the
cost of using their own money and other people’s. Earning a good return on assets
has two components – profit margin and velocity. Return on assets is simply
nothing more than profit margin multiplied by velocity. Even if profit margin is
small, a business can thrive if it has a fast turnover of its inventory. A faster
velocity leads to a higher return. The faster the inventory reaches the customer, the
better it is for the business. Generally, the best companies have a return on assets
greater than 10 percent after tax.
3. Growth: Growth is vital to every business. It energizes the business and creates
new opportunities. However, growth for growth’s sake does not do any good. The
growth of a business must be accompanied by improved margin and velocity, and
the cash generation must be able to keep pace. A smart entrepreneur does not only
push for sales. Instead, he or she must know how and why the business is growing;
and whether the growth can be sustained. Sales may be growing, but if the cash
situation is getting worse the entrepreneur must take the prudent approach and step
back.
4. Customers: A universal law of business is that no business can thrive without
customers. Hence, a smart entrepreneur instinctively understands his or her
customers. Entrepreneurs with business acumen have a close connection with their
customers and possess strong conviction that the business cannot thrive without
satisfying them. Entrepreneurs must always know the pulse of their customers. A
savvy entrepreneur knows that the best way to get to know the customer is to make
the special effort to observe and talk directly to people who use their products and
services.
Understanding Society: A society is a group of people involved in persistent
social interaction, or a large social grouping sharing the same geographical or
social territory, typically subject to the same political authority and dominant
cultural expectations. Societies are characterized by patterns of relationships
(social relations) between individuals who share a distinctive culture and
institutions; a given society may be described as the sum total of such relationships
among its constituent members. A society can also consist of like-minded people
governed by their own norms and values within a dominant, larger society. This is
sometimes referred to as a subculture, a term used extensively within criminology.
Societies may also be structured politically. In order of increasing size and
complexity, there are bands, tribes, chiefdoms, and state societies. These structures
may have varying degrees of political power, depending on the cultural,
geographical, and historical environments that these societies must contend with.
Thus, a more isolated society with the same level of technology and culture as
other societies is more likely to survive than one in closer proximity to others that
may encroach on their resources. A society that is unable to offer an effective
response to other societies it competes with will usually be subsumed into the
culture of the competing society.
Characteristics of society: Some of the important characteristics of society are as
follows: A comprehensive understanding of society requires a thorough analysis of
its characteristics. But the term society could be understood both from a narrower
and broader sense. In a narrower sense society refers to a group of people but in a
broader sense it refers to the whole human society. However, society has the
following characteristics A society must have population. Without a group of
people no society could be formed. Of course society refers not to a group of
people but to a system of social relationships. But for the establishment of social
relationships a group of people is necessary. This population is a self-perpetuating
individual who reproduces itself through some sort of mating relationship. Hence it
is the first requirement of society.
(1) Likeness: Likeness is the most important characteristic of society. Famous
sociologist Maclver opines that society means likeness. Without a sense of
likeness, there could be no mutual recognition of' belonging together' and therefore
no society. This sense of likeness was found in early society on kinship and in
modern societies the conditions of social likeness have broadened out into the
principles of nationality. Society consists of like bodied and likeminded
individuals. Friendship intimacy and association of any kind would be impossible
without likeness. It also helps in the understanding of one by the other.
(2) Differences: Along with likeness, differences are another important
characteristic of society. Because society involves differences and it depends on it
as much as on likeness. That is why Maclver opines that "primary likeness and
secondary differences create the greatest of all institutions-the division of labour".
Because differences is complementary to social relationship. If people will be alike
in all respect society could not be formed and there would be little reciprocity and
relationship became limited. Family as the first society based on biological
differences and differences in aptitude, interest and capacity. Though differences is
necessary for society but differences by itself does not create society. Hence
differences are sub-ordinate to likeness.
(3) Inter-dependence: Interdependence is another important characteristic of
society. This fact of interdependence is visible in every aspect of present day
society. Famous Greek Philosopher, Aristotle remarked that 'Man is a social
animal'. As a social animal he is dependent on others. The survival and well-being
of each member is very much depended on this interdependence. No individual is
self-sufficient. He has to depend on others for food, shelter and security and for the
fulfillment of many of his needs and necessities. With the advancement of society
this degree of interdependence increases manifold. Family being the first society is
based on the biological interdependence of the sexes. Not only individuals are
interdependent but also the groups, communities and societies.
(4) Co-operation and Conflict: Both co-operation and conflict are two another
important characteristics of society. Because famous sociologist Maclver once
remarked that "Society is Cooperation crossed by conflict". Co-operation is
essentially essential for the formation of society. Without co-operation there can be
no society. People can't maintain a happy life without co-operation. Family being
the first society rests on co-operation. Co-operation avoids mutual destructiveness
and results in economy in expenditure. Like co-operation conflict is also necessary
for society. Conflict acts as a cementing factor for strengthening social relations. In
a healthy and well developed society both co-operation and conflict co-exist. With
the help of these two universal processes society is formed. Conflict makes co-
operation meaningful. Conflict may be direct and indirect. However both are
necessary for society.
(5) Society is a network or web of social relationship: Social relationships are
the foundation of society. That is why famous sociologist Maclver remarked that
society is a network of social relationship. Hence it is difficult to classify social
relationships. But this social relationship is based on mutual awareness or
recognition to which Cooley call we-feeling, Giddings call consciousness of kind
and Thomas as common propensity. Without these social relationships no society
could be formed. As social relationships are abstract in nature so also the society is
abstract in nature. Different kinds of social processes like co-operation, conflict
constantly takes place in society. And the relationships established around these
create society. Hence a network of social relationships which created among
individuals constitutes society.
(6) Permanent Nature: Permanency is another important characteristic of society.
It is not a temporary organization of individuals. Society continues to exist even
after the death of individual members. Society is a coherent organization.
(7) Society is Abstract: Society is an abstract concept. As Maclver opines society
is a web of social relationships. We can't see this relationship but we can feel it.
Hence it is an abstract concept. Wright has rightly remarked that "society in
essence means a state or condition, a relationship and is, therefore, necessarily an
abstraction" Besides society consists of customs, traditions, folkways, mores and
culture which are also abstract. Hence society is abstract in nature.
(8) Society is Dynamic: The very nature of society is dynamic and changeable. No
society is static. Every society changes and changes continuously. Old customs,
traditions, folkways, mores, values and institutions got changed and new customs
and values takes place. Society changes from its traditional nature to modern
nature. Hence it is one of the most important characteristic of society.
(10) Comprehensive Culture: Culture is another important characteristic of
society. Each and every society has its own culture which distinguishes it from
others. Culture is the way of life of the members of a society and includes their
values, beliefs, art, morals etc. Hence culture is comprehensive because it fulfills
the necessities of social life and is culturally self-sufficient. Besides, each and
every society transmits its cultural pattern to the succeeding generations.
(11) Something more than mere collection of individuals: No doubt society
consists of individuals. But mere collection of individuals is not society. It is
something more than that and something beyond the individual. Durkheim is right
when he remarked that society is more than the sum of its parts i.e. individuals.
(12) Accommodation and Assimilation: This two associative social process is
also important for the smooth functioning and continuity of society. Hence it is
also another characteristic of society.
Business Ethics and Corporate Social Responsibility
Many notions such as Business Ethics, Corporate Philanthropy and Corporate
Social Responsibility, are sometimes used interchangeably to describe the relation
between business and society, although each has a different aim. Business ethics
are the principles and standards that guide acceptable behavior in business
organizations, whereas the extent of acceptability of business behaviour is
determined by a variety of entities including customers, competitors, government
regulators, interest groups, and the public, thus it relates to society's evaluation of
an action as right or wrong. Common business problems such as defective
products, bribery, and accounting fraud exist due to the lack of or decline in
business ethics. Although the judgment on business actions is based on each
individual’s moral principles and values this ethical perception of business stresses
on the fact that there has been a radical change in society's view of businesses.
Although the terms corporate social responsibility and business ethics are used
interchangeably, they have different meanings; whereas corporate social
responsibility (CSR) tries to analyze the extended socio-economic role of business
in society. CSR is a broader concept in a sense that it is concerned-from a
stakeholder perspective–with the impact of business’s activities on society. Thus,
CSR is a stakeholder oriented notion that focuses primarily on voluntary
commitments of an organization regarding both its internal and external issues,
which are determined by the business’s understanding and acknowledgement of its
moral responsibilities concerning the impact of its activities on society.
The Dynamic Environment of Business: The external environment of business is
dynamic and ever changing. Businesses and their stakeholders do not interact in a
vacuum. On the contrary, most companies operate in a swirl of social, ethical,
global, political, ecological, and technological change that produces both
opportunities and threats. These six dynamic forces powerfully shape the business
and society relationship.
1. Changing societal expectations: Everywhere around the world, society’s
expectations of business are changing. People increasingly expect business
to be more responsible, believing companies should pay close attention to
social issues and act as good citizens in society. New public issues
constantly arise that require action. Increasingly, business is faced with the
daunting task of balancing its social, legal, and economic obligations,
seeking to meet its commitments to multiple stakeholders. Modern
businesses are increasingly exploring opportunities to act as social
entrepreneurs often by focusing on those at the bottom of the pyramid.
2. Growing emphasis on ethical reasoning and actions: The public also
expects business to be ethical and wants corporate managers to apply ethical
principles or values—in other words, guidelines about what is right and
 wrong, fair and unfair, and morally correct—when they make business
decisions. Fair employment practices, concern for consumer safety,
contribution to the welfare of the community, and human rights protection
around the world have become more prominent and important. Business has
created ethics programs to help ensure that employees are aware of these
issues and act in accordance with ethical standards.
3. Globalization: We live in an increasingly integrated world economy,
characterized by the unceasing movement of goods, services, and capital
across national borders. Large transnational corporations do business in
scores of countries. Products and services people buy every day in the
United States or Germany may have come from Indonesia, Haiti, or Mexico.
Today, economic forces truly play out on a global stage. A financial crisis on
Wall Street can quickly impact economies around the world. Societal issues
—such as the race to find a cure for HIV/AIDS, the movement for women’s
equality, or the demands of citizens everywhere for full access to the Internet
—also cut across national boundaries. Environmental issues, such as ozone
depletion and species extinction, affect all communities. Globalization
challenges business to integrate their financial, social, and environmental
performance.
4. Evolving government regulations and business response: The role of
government has changed dramatically in many nations in recent decades.
Governments around the world have enacted a myriad of new policies that
have profoundly constrained how business is allowed to operate.
Government regulation of business periodically becomes tighter, then looser,
much as a pendulum swings back and forth. Because of the dynamic nature
of this force, business has developed various strategies to influence elected
officials and government regulators at federal, state, and local levels.
Business managers understand the opportunities that may arise from active
participation in the political process.
5. Dynamic natural environment: All interactions between business and
society occur within a finite natural ecosystem. Humans share a single
planet, and many of our resources—oil, coal, and gas, for example—are
nonrenewable. Once used, they are gone forever. Other resources, like clean
water, timber, and fish, are renewable, but only if humans use them
sustainably, not taking more than can be naturally replenished. Climate
 change now threatens all nations. The relentless demands of human society,
in many arenas, have already exceeded the carrying capacity of the Earth’s
ecosystem. The state of the Earth’s resources and changing attitudes about
the natural environment powerfully impact the business–society relationship.
6. Explosion of new technology and innovation: Technology is one of the
most dramatic and powerful forces affecting business and society. New
technological innovations harness the human imagination to create new
machines, processes, and software that address the needs, problems, and
concerns of modern society. In recent years, the pace of technological
change has increased enormously. From genetically modified foods to social
networking via the Internet, from nanotechnology to wireless
communications, change keeps coming. The extent and pace of
technological innovation pose massive challenges for business, and
sometimes government, as they seek to manage various privacy, security,
and intellectual property issues embedded in this dynamic force.
Changing concept of business: The changing concept of business reveals
that although profit is the sole motive of most businesses; focus must also be kept
on customer satisfaction, social welfare and safety of the environment. All of these
are equally important for sustainability and growth of a business in a long-run.
1. Producer orientation: Producer orientation is the most traditional concept of
business. In this approach, the producer’s interest, i.e. a profit motive is given
very high importance. Business is done only for the sole purpose of earning
optimum profit and nothing else. It is therefore, also called as a profit-oriented
concept of business. Producer oriented concept was in use in most parts of the
world before 1950.
Assumptions of producer oriented concept of business: Customers tend to buy
only those products which are easily available in the market and are low priced. A
business does production and/or distribution activities only for the sole purpose of
earning profit. The manufactures following such a concept focus greatly on
increasing their production efficiency and distribution coverage of produced goods.
They don’t give much importance to all functions of marketing. Reasons for
following a producer-oriented concept of business:
 Absence of competition in the market.
 Lack of professionalism in the business.
 Lower expectations of the consumers.
2. Customer orientation: Customer orientation highlights its main focus on
customers. In concept of business, along with earning profit, importance is also
given to the satisfaction of customers who utilize the produced goods. While
buying goods, consumers pay the quoted price. As a result, they do expect and
must get optimum satisfaction in return to their purchases, which are already
made. According to the customer-oriented concept, a business must first
identify the wants or expectations of the customers. It must then try its level
best to satisfy or fulfill these wants more efficiently and effectively than its
competitors. Customer oriented concept of business started around 1950s, and it
gained more significance during 1960s and 1970s. It introduced the viewpoint
of a customer’s satisfaction to the previous only profit-oriented approach. It
made the customer a center of all business activities. Reasons for following a
customer-oriented concept of business:
 Growing expectations of the consumers.
 Increase of competition in the market.
 Growth of professionalism in the business.
3. Societal orientation: Societal orientation brought the aspect of social welfare
in the concept of business. Under a social approach, along with earning profit
and giving customer satisfaction, social welfare or benefit is also given
importance. According to the social-oriented concept, every business
functioning in any specific area must willingly fulfill its social responsibilities
in the best interest of the people in that area. Generally, social responsibilities of
business cover following activities:
 Generation of employment,
 Providing good quality of goods and/or services,
 Charging a reasonable price on goods and services,
 Giving prompt responses to various consumer grievances,
 Contributing in the development of basic infrastructure facilities,
 Adhering to legal rules and regulations, and so on.
Social-oriented concept of business started around 1970s, and it gained more
prominence during 1980s and 1990s. Reasons for following a social-oriented
concept of business:
 Sustain and create goodwill in a cut-throat competitive market.
 Adopt a higher degree of professionalism in business.
  Fulfill growing expectations of society from the business.
4. Environmental orientation: Environmental orientation bounded the safety of
environment in the concept of business. Under an environmental approach, the
important areas in the business concept were re-determined. It was later decided
that, along with profit earning, giving customer satisfaction, doing social
welfare; even environment’s safety must be given a prime importance and high
priority in the conduct of business. According to environment-oriented concept,
entrepreneurs shall do further research and development (R&D) to produce
finished goods, which are eco-friendly in nature. If an entrepreneur implements
such an environment-friendly approach in his or her’s business activities, then
he/she can enjoy some monetary benefits from government on a case to case
basis. Environment oriented concept of business started in early 1990s, and it
has gained more significance since then. For example, establishment of
’Intergovernmental Panel on Climate Change’ (IPCC) took place during this
time for environmental monitoring and impact assessment of human-induced
climate change. Reasons for following an environment-oriented concept of
business:
 Minimize the environmental harm arising due to human-related economic
activities and keep a sustainable development.
 Encourage research and development of environment-friendly technologies
and goods.
 Inculcate worthiness of environment in minds of entrepreneurs.
Factors responsible for changing concept of business:
 Growing expectations of consumers.
 beginning of consumerism.
 Increase in the market competition.
 Information revolution.
 Rise of professionalism in business.
 Growing concern for safety of environment.
 Rapid development in various technologies.
Professionalization: Professionalization is a social process by which any trade or
occupation transforms itself into a true "profession of the highest integrity and
competence.“
Professionalization tends to result in establishing acceptable qualifications, one or
more professional associations to recommend best practice and to oversee the
conduct of members of the profession, and some degree of demarcation of the
qualified from unqualified amateurs (that is, professional certification).
It is also likely to create "occupational closure", closing the profession to entry
from outsiders, amateurs and the unqualified.
Business ethics: Business ethics is the study of appropriate business policies and
practices regarding potentially controversial subjects including corporate
governance, insider trading, bribery, discrimination, corporate social responsibility,
and fiduciary responsibilities. The law often guides business ethics, but at other
times business ethics provide a basic guideline that businesses can choose to
follow to gain public approval.
The three C’s of business ethics:
1. Compliance: The need for compliance with the rules including laws of the land,
principles of morality, customs and expectations of community
2. Contribution The contribution business can make to society through the value
and quality of ones products or services
3. Consequences The consequences of business activity - internal and external,
intended and unintended
The Gandhian philosophy: Gandhism is a body of ideas that describes the
inspiration, vision, and the life work of Mahatma Gandhi. It is particularly
associated with his contributions to the idea of nonviolent resistance, sometimes
also called civil resistance. The two pillars of Gandhism are truth and nonviolence.
The term "Gandhism" also encompasses what Gandhi's ideas, words, and actions
mean to people around the world and how they used them for guidance in building
their own future.
Three Cardinals/Pillars/ Elements: The three cardinals of Gardhian philosophy
are:
 Truth,
 Love,
 Nonviolence
Gandhiji’s views on labour management relations: My ideal is that capital and
labour should supplement and help each other. Gandhiji assigned a paternalist role
to management in their dealings with labour and principle of Trusteeship as
Trusteeship is foundation of philosophy of wealth management.
 Principles of Trusteeship
 No recognition to right to individual property
 Resources must be held and utilised for the benefit of society.
Management is the trustees of the stakeholders and must work towards optimising
stakeholder value, not merely maximising shareholder value. In case of
industrialist what they produce should be determine by social necessity with
optimal utilization of scarce resources and not by personal whims
Though wealth legally belongs of owners of business, morally belongs to society
and community.
Gandhian philosophy of wealth Management
The Gandhian philosophy of wealth management is based on the principle that a
wealthy man does not truly have the right to hoard wealth solely for the self; the
only right he has is that to an honorable livelihood. The concept is oriented
towards the common good. This is distinct from capitalistic economies, with its
assistant social ecological and psychological affliction. Gandhian Philosophy of
Wealth Management Trusteeship, as applicable to the corporate world, refers to the
act of holding and managing resources on behalf of the stakeholders of the firm.
Gandhian Philosophy of wealth management is based on the ‘Servodaya’
principles of Truth, Non-Violence and Trusteeship; wherein harmony between
labour and management reigns supreme. According to Gandhiji, managers and
proprietors of business firms are only the trustees of wealth of society. The idea of
trusteeship advocated by Gandhiji, is based on and has its origin in the Bhagaved
Gita-in the principles of ‘aparigraha’ (non-possession) and ‘Sambhawa’ (equalism)
which were followed by Mahatma Gandhi.  Gandhiji’s motto was ‘greatest good
of all’.
Seven deadly sins proposed by Gandhiji: Mahatma Gandhi said that seven things
will destroy us, which are enlisted below:
 Wealth without work.
 Pleasure without conscience.
 Knowledge without character.
 Commerce (business) without morality (ethics).
 Science without humanity.
  Religion without sacrifice.
 Politics without principle
Ethical responsibilities: To be ethical, an organization should seek a higher
standard than merely obeying the law:
 Act with equity, fairness, and impartiality.
 Respect the rights of individuals.
 Act for the common good.
Technology and Societal changes: Technology has strongly affected the way
societies are designed and how they keep changing.
 People receive their information more quickly.
 People can communicate in different ways.
 Negative and positive consequences to the introduction of new technology.
 Social Change Theory looks at the factors contributing to change within the
structure of society.
 Change has to start with society and a belief that change is good and
warranted.
A new concept suggests that social change can be initiated by another force:
technology.

Technology and Industrialization: Technology has contributed to the growth of

industries or to the process of industrialization.
 Industrialization is a term covering in general terms the growth in a society
mainly of modern industry.
 It describes in general term the growth of a society in which a major role is
played by manufacturing industry.
 The Industrial Revolution of 18th century led to the unprecedented growth of
industries.
 Industrialization is associated with the factory system of production.
 The factories have brought down the prices of commodities, improved their
quality and maximized their output.
 The whole process of production is mechanized.
 Consequently the traditional skills have declined and good number of artisans
has lost their work.
 Huge factories could provide employment opportunities to thousands of people.
Hence men have become workers in a very large number. The process of
industrialization has affected the nature, character and the growth of economy. It
has contributed to the growth of cities or to the process of urbanization.
Technology and Urbanization: In many countries the growth of industries has
contributed to the growth of cities.
 Urbanization denotes a diffusion of the influence of urban centers to a rural
hinterland.
 Urbanization can be described as a process of becoming urban moving to cities
changing from agriculture to other pursuits common to cities and corresponding
change of behavior patterns.
 Hence only when a large proportion of inhabitants in an area come to cities
urbanization is said to occur.
 Urbanization has become a world phenomenon today. An unprecedented
growth has taken place not only in the number of great cities but also in their
size.
As a result of industrialization people have started moving towards the industrial
areas in search of employment. Due to this the industrial areas developed into
towns and cities.
Technology and Modernization: Modernization is a process that indicates the
adoption of the modern ways of life and values.
 It refers to an attempt on the part of the people particularly those who are
custom-bound to adapt themselves to the present-time, conditions, needs, styles
and ways in general.
 It indicates a change in people's food habits, dress habits, speaking styles,
tastes, choices, preferences, ideas, values, recreational activities and so on.
 People in the process of getting modernized give more importance to science
and technology.
 The scientific and technological inventions have modernized societies in
various countries.
They have brought about remarkable changes in the whole system of social
relationship and installed new ideologies in the place of traditional ones.
Development of the means of transport and communication: Development of
transport and communication has led to the national and international trade on a
large scale.
 The road transport, the train service, the ships and the airplanes have eased the
movement of men and material goods.
 Post and telegraph, radio and television, newspapers and magazines, telephone
and wireless and the like have developed a great deal.
 The space research and the launching of the satellites for communication
purposes have further added to these developments.
 They have helped the people belonging to different corners of the nation or the
world to have regular contacts.
Transformation in the economy and the evolution of the new social classes:
The introduction of the factory system of production has turned the agricultural
economy into industrial economy. The industrial or the capitalist economy has
divided the social organization into two predominant classes-the capitalist class
and the working class. These two classes are always at conflict due to mutually
opposite interest. In the course of time an intermediary class called the middle
class has evolved.
Technology and Unemployment: The problem of unemployment is a
concomitant feature of the rapid technological advancement. Machines not only
provide employment opportunities for men but they also take away the jobs of men
through labor saving devices. This results in technological unemployment.
Technology and war: The dangerous effect of technology is evident through the
modern mode of warfare. The weaponry has brought fears and anxieties to the
mankind. They can easily destroy the entire human race reveal how technology
could be misused. Thus, greater the technological advancement the more risk for
the mankind.
Changes in Social institutions: Technology has profoundly altered our modes of
life.
 Technology has not spared the social institutions of its effects.
 The institutions of family, religion, morality, marriage, state, property have
been altered.
 Modern technology in taking away industry from the household has radically
changed the family organization.
 Many functions of the family have been taken away by other agencies.
 Marriage is losing its sanctity. It is treated as a civil contract than a sacred
bond.
 Marriages are becoming more and more unstable.
 Instances of divorce, desertion and separation are increasing.
 Technology has elevated the status of women but it has also contributed to the
stresses and strains in the relations between men and women at home.
 Religion is losing hold over the members.
 People are becoming more secular, rational and scientific but less religious in
their outlook.
 Inventions and discoveries in science have shaken the foundations of religion.
 The function of the state or the field of state activity has been widened.
 Modern technology has made the states to perform such functions as -the
protection of the aged, the weaker section and the minorities making provision
for education, health care etc.
 Transportation and communication inventions are leading to a shift of functions
from local government to the central government of the whole state.
 The modern inventions have also strengthened nationalism. The modern
governments that rule through the bureaucracy have further impersonalized the
human relations.
 The most striking change in modern times is the change in economic
organization.
 Industry has been taken away from the household and new type of economic
organizations has been set up such as factories, stores, banks, corporations etc.
Organizational Culture: Organizational culture includes an organization’s
expectations, experiences, philosophy, as well as the values that guide member
behavior, and is expressed in member self-image, inner workings, interactions with
the outside world, and future expectations. Culture is based on shared attitudes,
beliefs, customs, and written and unwritten rules that have been developed over
time and are considered valid (The Business Dictionary).
Culture also includes the organization’s vision, values, norms, systems, symbols,
language, assumptions, beliefs, and habits (Needle, 2004).
Simply stated, organizational culture is “the way things are done around here”
(Deal & Kennedy, 2000).
Qualities of organizational Culture:
1. Alignment: Alignment comes when the company’s objectives and its
employees’ motivations are all pulling in the same direction.
2. Appreciation: Appreciation can take many forms: a public kudos, a note of
thanks, or a promotion
3. Trust: Trust  is vital to an organization. With a culture of trust, team members
can express themselves
4. Performance: Performance is key, as great companies create a culture that
means business.
5. Flexibility: Flexibility is a key quality in highly dynamic environments where
change is continuous
6. Teamwork: Teamwork encompasses collaboration, communication, and
respect between team members.
7. Innovation: Innovation leads organizations to get the most out of available
technologies, resources, and markets.
8. Psychological safety: Psychological safety provides the support employees
need to take risks and provide honest feedback.
Building Organizational culture:
 Excel in recognition
 Enable employee voice
 Make your leaders culture advocates
 Live by your company values
 Removing Falsify connections between team member
 Focus on learning and development
  Keep culture in mind from day one
 Personalize the employee experience
Social Responsibility of Business: Social responsibility is the idea that businesses
should balance profit-making activities with activities that benefit society; it
involves developing businesses with a positive relationship to the society in which
they operate. The International Organization for Standardization (ISO) emphasizes
that the relationship to the society and environment in which businesses operate is
"a critical factor in their ability to continue to operate effectively. It is also
increasingly being used as a measure of their overall performance."
The social responsibility of business means various obligations or responsibilities
or duties that a business-organization has towards the society within which it exists
and operates from. Generally, the social responsibility of business comprises of
certain duties towards entities, which are depicted and listed below.
1. Shareholders or investors who contribute funds for business.
2. Employees and others that make up its personnel.
3. Consumers or customers who consume and/or use its outputs (products
and/or
4. services).
5. Government and local administrative bodies that regulate its commercial
activities
6. in their jurisdictions.
7. Members of a local community who are either directly or indirectly
influenced by its activities in their area.
8. Surrounding environment of a location from it operates.
9. The general public that makes up a big part of society.
The social responsibility of business comprises of the following obligations:
 A business must give a proper dividend to its shareholders or investors.
 It must provide fair wages and salaries with good working conditions.
 It must provide a regular supply of good quality goods and/or services to its
 consumers/customers at reasonable prices.
 It must abide by all government rules and regulations, supports its
businessrelated policies and should pay fair taxes without keeping any
delays or dues.
  It must also contribute in betterment of a local community by doing
generous
 activities like building schools, colleges, hospitals, etc.
 It must take immense care to see that its activities neither directly nor
indirectly create chaos on the vitality of its surrounding environment.
 It should maintain a stringent policy to curb or control pollution in regard to
contamination of air, water, land, sound and radiation leakages. Here, to do
so, it must hire experienced professional individuals who are experts in their
respective fields.
 It should also offer social-welfare services to the general public.
The core objectives of social responsibility of business are as follows:
 It is a concept that implies a business must operate (function) with a firm
mindset
 to protect and promote the interest and welfare of society.
 Profit (earned through any means) must not be its only highest objective else
contributions made for betterment and progress of a society must also be
given a prime importance.
 It must honestly fulfill its social responsibilities in regard to the welfare of
society in which it operates and whose resources & infrastructures it makes
use of to earn huge profits.
 It should never neglect (avoid) its responsibilities towards society in which it
flourishes.
The survival, growth and success of business are linked and dependent on sincere
execution of its social responsibilities.
1. Shareholders or investors: Social responsibility of business towards its
shareholders or investors is most important of all other obligations. If a business
satisfies its funders, they are likely to invest more money in a project. As a result,
more funds will flow in and the same can be utilized to modernize, expand and
diversify the existing activities on a larger scale. Happy financiers can fulfill the
rising demand of funds needed for its growth and expansion.
2. Personnel: Social responsibility of business towards its personnel is important
because they are the wheels of an organization. Without their support, the
commercial institution simply can't function or operate. If a business takes care of
the needs of its human resource (for e.g. of office staff, employees, workers, etc.)
wisely, it will boost the motivation and working spirit within an organization. A
happy employee usually gives his best to the organization in terms of quality labor
and timely output than an unsatisfied one. A pleasant working environment helps
in improving the efficiency and productivity of working people. A good
remuneration policy attracts new talented professionals who can further contribute
in its growth and expansion. Thus, if personnel are satisfied, then they will work
together very hard and aid in increasing the production, sales and profit.
3. Consumers or customers: Social responsibility of business towards its
consumers or customers matters a lot from sales and profit point of view. Its
success is directly dependents on their level of satisfaction. Higher their rate of
satisfaction greater is the chances to succeed. If a business rolls out good-quality
products and/or delivers better quality services that too at reasonable prices, then it
is natural to attract lots of customers. If the quality-price ratio is maintained well
and consumers get worth for their money spend, this will surely satisfy them. In a
long run, customer loyalty and retention will grow, and this will ultimately lead to
profitability.
4. Government: Social responsibility of business towards government's regulatory
bodies or agencies is quite sensitive from the license's point of view. If permission
is not granted or revoked abruptly, it can result in huge losses to an organization.
Therefore, compliance in this regard is necessary. Furthermore, a business must
also function within the demarcation of rules and policies as formulated from time
to time by the government of state or nation. It should respect laws and abide by all
established regulations while performing within the jurisdiction of state.
Some examples of activities a business can do in this regard:
 Licensing an organization,
 Seeking permissions wherever necessary,
 Paying fair taxes on time,
 Following labor, environmental and other laws, etc.
If laws are respected and followed, it creates goodwill of business in eyes of
authorities. Overall, if a government is satisfied it will make favorable commercial
policies, which will ultimately open new opportunities and finally benefit the
organization sooner or later. Therefore, satisfaction of government and local
administrative bodies is equally important for legal continuation of business.
5. Local community: Social responsibility of business towards the local
community of its established area is significant. This is essential for smooth
functioning of its activities without any agitations or hindrances. A business has a
responsibility towards the local community besides which it is established and
operates from. Industrial activities carried out in a local-area affect the lives of
many people who reside in and around it. So, as a compensation for their hardship,
an organization must do something or other to alleviate the intensity of suffering.
As a service to the local community, a business can build:
 A trust-run hospital or health center for local patients,
 A primary and secondary school for local children,
 A diploma and degree college for local students,
 An employment center for recruiting skilled local people, etc.
Such activities to some-extend may satisfy the people that make local community
and hence their changes of agitations against an establishment are greatly reduced.
This will ensure the longevity of a business in a long run.
6. Environment: Social responsibility of business with respect to its surrounding
environment can't be sidelined at any cost. It must show a keen interest to
safeguard and not harm the vitality of the nature. A business must take enough care
to check that its activities don't create a negative impact on the environment. For
example, dumping of industrial wastes without proper treatment must be strictly
avoided. Guidelines as stipulated in the environmental laws must be sincerely
followed. Lives of all living beings are impacted either positively or negatively
depending on how well their surrounding environment is maintained (naturally or
artificially). Humans also are no exception to this. In other words, health of an
environment influences the health of our society. Hence, environmental safety
must not be an option else a top priority of every business.
7. Public: Finally, social responsibility of business in general can also contribute
to make the lives of people a little better.
Some examples of services towards public include:
 Building and maintaining devotional or spiritual places and gardens for
people,
 Sponsoring the education of poor meritorious students,
 Organizing events for a social cause, etc.
Such philanthropic actions create a goodwill or fame for the business-organization
in the psyche of general public, which though slowly but ultimately pay off in a
due course of time. The world is recognizing the importance of social
responsibility of business.
Social responsibility in business or corporate social responsibility (CSR) pertains
to people and organizations behaving and conducting business ethically and with
sensitivity towards social, cultural, economic, and environmental issues. Striving
for social responsibility helps individuals, organizations, and governments have a
positive impact on development, business, and society.
Social responsibility means that individuals and companies have a duty to act in
the best interests of their environments and society as a whole. Social
responsibility as it applies to business is known as corporate social responsibility
(CSR). Many companies, such as those with "green" policies, have made social
responsibility an integral part of their business models. Additionally, some
investors use a company's social responsibility, or lack thereof, as an investment
criterion. As such, a dedication to social responsibility can actually turn into
profits, as the idea inspires investors to invest and consumers to purchase goods
and services from the company. Put simply, social responsibility helps companies
develop a good reputation.
Benefits of corporate social responsibility: Corporate social responsibility (CSR)
offers a number of direct business benefits. Responsible business reputation:
Building a reputation as a responsible business will give you a competitive
advantage. Companies often favour suppliers who have responsible policies. This
is because it can have a positive impact on how they are seen by their customers.
Some customers don't just prefer to deal with responsible companies, but insist on
it. Reducing costs Reducing resource use, waste and emissions doesn't just help the
environment - it saves you money too. It's not difficult to cut utility bills and waste
disposal costs and you can bring immediate cash benefits. Advantages of corporate
social responsibility Other business benefits of CSR include:
 A good reputation makes it easier to recruit employees.
 CSR will help you retain staff. Employees may be motivated stay longer,
reducing the costs and disruption of recruitment and retraining. Employees
are better motivated and staff productivity will increase
 CSR helps ensure you comply with regulatory requirements.
  Activities such as involvement with the local community are ideal
opportunities to generate positive press coverage.
 Good relationships with local authorities make doing business easier.
 Understanding the wider impact of your business can present opportunities
to develop new products and services.
 CSR can make you more competitive and reduces the risk of sudden damage
to your reputation (and sales). You may find it easier to access finance as
investors are more willing to back a reputable business.
Social Audit: A social audit is a formal review of a company's endeavors in social
responsibility. It serves as a way for a business to see if the actions being taken are
being positively or negatively received and relates that information to the
company's overall public image.
 IT is a formal review of a company's procedures, and code of conduct regarding
social responsibility and the company's impact on society. A social audit is an
assessment of how well the company is achieving its goals or benchmarks for
social responsibility.
A social audit helps to narrow gaps between vision/goal and reality, between
efficiency and effectiveness. It is a technique to understand, measure, verify, report
on and to improve the social performance of the organization. Social auditing
creates an impact upon governance
Process:
1. Initiating: In this phase, the users shall need to define a clear objective and
evaluate what do they want to audit, establish an individual who will be
responsible for the overall process of audit, and accordingly secure funding.
2. Planning: In this phase, the users shall need to select a strategy and identify
the stakeholders of the company and understand the decision process of the
government and then, after, collaborate various approaches as well as
practices, and accordingly engage the counterparts of the government.
3. Implementing: In this phase, the users will need to perform the audit
function, source as well as analyze all the information, disseminate the
results and the information, and then after, consider factors like
sustainability and institutionalization.
4. Closing: In this phase, the users will simply need to follow up to ensure that
the social audit is successful.
Objectives of Social Audit:
1. Principal Objectives: These are concerned with the payment of fair and
timely dividends to the stockholders fair salaries, and wages to the
employers and laborers. Also, fair, reasonable, and best possible prices
offered to clients and customers, and the extension, development as well as
enhancement of an entity’s business and allowing it to become financially
independent.
2. Secondary Objectives: These are concerned with factors like creating a
provision of incentives and bonuses for the employees and also assisting in
promoting and encouraging the amenities of the local community. Boosting
the development of the industry in which the company operates. And
promoting research and development framework in the techniques used by
the company as well as the industry.
3. General Objectives: The other and general objectives are to put an end on
irregular activities, to reduce or diminish the economic as well as social
gaps. Also, to evaluate conditions in which the employees work, to evaluate
the impact of a company’s business operation on the environment and the
local community. To formulate the initiatives that are taken to develop the
local communities, and so on.
Need: It has a vast need in today’s world, where every business player is facing
tough and neck to neck competition.
 Each business unit is not just connected with the internal stakeholders but is
also primarily connected to the external public too.
 Established companies are supposedly more persuasive and make use of
enormous resources.
 This power can sometimes be misused, and the result of these activities can
create a significant impact on the local community or society and
environment at large.
 To monitor and regulate the activities of the companies from time to time.
Motivate the company to act in the best interest of society and the
environment.
Importance: It is highly essential as it helps the local communities with planning
function, supports democracy, encourages the involvement of the communities,
and benefits not just individuals. Still, their families too assist the human resource
development and growth, enhances the image of the company in the eyes of the
investors, promotes decision making, and so on.
Advantages
 It helps the local community in planning
 It supports the democracy function in the community
 It promotes the active involvement of the local community;
 It helps in enhancing the image of an organization in the eyes of the internal
as well as the external public;
 It assists in the growth and development of human resources.
Disadvantage
 It can be highly complicated, and time taking for the users.
 It does not offer any sort of transparent methodology.
 It defines scope might get difficult for the users.
 It tends to be subjective is another reason why the same is highly
discouraged.
 It lacks qualified trainers.
 The practical utility in social audit is minimal.
Social Audit Example
ABC Limited is a company that purchases and sells household items, and it claims
to make donations in the form of offering groceries to needy families.
In this case, it can be performed by thoroughly evaluating charity records, and such
other documents to check and confirm the validity of the claims that are made by
ABC Limited.
After the research, it was found that ABC is doing a clean and green business and
not causing any harm to the environment and implements the use of only eco-
friendly procedures.
This assessment report will be updated on behalf of the company on its website.
This report will be of great significance for investors who are planning to invest in
the shares of ABC Limited.