SOCIAL RESPONSIBILITY OF BUSINESS AND BUSINESS ETHICS

CONCEPT OF SOCIAL RESPONSIBILITY

Social responsibility of business implies that businessmen must
consider wider public interest while taking decisions and actions
relating to business. They should work not merely for profits, but
should attempt to fulfil the legitimate demands of all those interest
groups that have a stake in the business.

Definition of Social Responsibility of Business

Social responsibility requires managers to consider whether their
action is likely to promote the public good, to advance the basic
beliefs of our society, to contribute to its stability, strength and
harmony." - Peter F. Drucker

NEED FOR SOCIAL RESPONSIBILITY

Business is expected to be responsible to society due to the
following reasons:
1. Self-interest
In the long-term, it is in the interest of business to assume social
obligations. Enlightened businessmen recognise that they can
succeed better by fulfilling the demands and aspirations of society.
For example, provision of higher wages and good working
conditions motivates workers to work hard and produce more.
Labour turnover and absenteeism are reduced.
2. Creation of Society
Business is a creation of society and uses the resources of society.
Businessmen should respond to the demands of society and
should utilise the social resources at their command for the benefit
of the people.
3. Social Power
Businessmen have considerable social power. Their decisions and
actions affect the lives and fortunes of all of us. They collectively
determine for the nation such important matters as amount of
employment, rate of economic progress, and distribution of income
among various groups.
4. Public Image
A business can improve its image in public by assuming social
obligations. Good relations with workers, consumers, and suppliers
help in the success of business. Social obligations improve the
confidence and faith of people in a business enterprise.
5. Social Awareness
Nowadays consumers and workers are well informed about their
rights. Consumers expect better quality products at reasonable
prices. Similarly, workers desire fair wages and other benefits.

RESPONSIBILITIES TOWARDS DIFFERENT INTEREST GROUPS

As a socio-economic institution, business comes into contact with
several groups such as shareholders, employees, customers, the
government, community, suppliers, competitors, etc. Business is
responsible to all these interest groups.

1. Responsibilities towards Owners and Investors

Shareholders provide capital and bear risks. Therefore, they have a
direct stake in business. The responsibilities of a business concern
towards its shareholders are as follows:
(a) To ensure safety of investment;
(b) To provide a fair and regular dividend or interest;
(c) To offer reasonable appreciation of capital through optimum
utilisation of resources;
(d) To provide regular, accurate, and adequate information on the
financial position and future schemes of the company;
(e) To offer reasonable opportunities for participation of
shareholders in policy decisions.

2. Responsibilities towards Employees

The employees are the greatest asset of a business and their well-
being is a matter of material advantage as well as moral obligation.
Their lives must be given meaning and dignity. A sense of
partnership and belonging should be inculcated. They should be
provided both economic and psychological satisfaction.
Business has the following responsibilities towards its employees:
(a) To pay a fair and regular wage or salary;
(b) To provide good working conditions and whole time
employment;
(c) To ensure welfare facilities such as housing, medical care,
social security, recreation, etc.;
(d) To provide opportunities for education and self-development;
(e) To develop a sense of belonging and dignity of labour;
(f) To guarantee freedom of religion and political views; and
(g) To protect trade union rights including the right of participation
in management.
3. Responsibilities towards Consumers
The responsibilities of business towards its customers are given
below:
(a) To supply socially useful products that meet the needs of
customers;
(b) To ensure regular and adequate supply of products;
(c) To provide goods of standard quality;
(d) To charge fair prices;
(e) To provide prompt and courteous service;

4. Responsibilities towards Government

Business has the following responsibilities towards the
government:
(a) To abide by the laws of the land;
(b) To pay taxes promptly and regularly;
(c) To cooperate with the state in solving national problems such as
poverty, over population, illiteracy, concentration of economic
power, backward regions, etc.;
(d) To adopt fair dealings in foreign trade in order to maintain the
country's image:
(e) To refrain from corrupting public servants and the democratic
process; and

5. Responsibilities towards the Community

In general, business should work for the economic and social well-
being of the community.
The main responsibilities of business towards the public are as
follows:
(a) To protect the environment from all types of pollution;
(b) To make optimum utilisation of natural resources, e.g., energy
conservation.
(c) To assist local bodies in providing amenities such as drinking
water, sanitation, public transport, etc.;
(d) To provide more and more employment opportunities;
(e) To provide assistance to hospitals, religious institutions,
educational institutions, sports bodies, etc.;
(f) To preserve social and cultural values;
(g) To promote national integration;

BUSINESS AND ENVIRONMENTAL PROTECTION

The health and well-being of people and other living creatures
depends to a great extent on the quality of environment in which
they live and work. Rapid industrialisation and growing traffic have
caused a great damage to the environment. Forests, wild life, and
other desirable elements in the environment are declining very fast
to accommodate growing population and industry and commerce.
This damage to the environment has contributed to increasing
disease and disaster. All types of pollution-air, water, noise are
rapidly growing. Governments in various countries (including India)
have enacted laws to prevent pollution of air and water.

Causes of Environmental Pollution

Since independence, there has been a rapid growth of population in
India and urbanisation has increased tremendously.
Simultaneously, the number of vehicles on roads has increased
substantially. As a result, environmental pollution has become a
major problem. Pollution refers to the injection of harmful
substances into the environment. Environmental pollution arises
due to the following causes:
1. Air Pollution
Air pollution occurs when several factors converge to spoil the
quality of air. Carbon monoxide emitted by vehicles, smoke, and
chemicals created by factories are the main causes of air pollution.
2. Water Pollution
Factories and people dump chemicals and waste into rivers,
streams, and lakes thereby causing pollution of water.
3. Land Pollution
Land is damaged by toxic waste and pesticides used in agriculture.
Modem methods of disposal of solid waste help to prevent
contamination of soil.
4. Noise Pollution
Automobiles and factories are the main sources of noise pollution.
Noise pollution can cause loss of hearing, mental disorder, and
malfunctioning of the heart.

Need for Control of Pollution

Pollution spoils the quality of environment and makes it unfit for
normal life. Air becomes harmful to breathe, water becomes unfit to
drink, and land becomes unfit to live on. The main reasons for
pollution control are as follows:
1. To Protect Public Health
Environmental pollution is the main cause of cancer, heart, and
lung diseases. These diseases are now the leading causes of death
in modern society. Air pollution is known to aggravate heart
disease. Similarly, water pollution may cause liver and kidney
diseases.
2. To Ensure Safety
Air pollution reduces visibility and can create hazards for aircrafts
trying to land or take off from airports. Poor visibility also poses a
threat to automobiles on the highways. Refineries and other
industries cause pollution and create hazards.
3. To Reduce Nuisance
Air pollution creates personal discomfort such as irritation in eyes
and difficulty in breathing. Similarly, water pollution makes
swimming and fishing difficult. Pollution control is required to
reduce such inconvenience.
4. To Reduce Economic Loss
Pollution causes economic loss such as damage to vegetation and
livestock, spoiling of buildings and works of art, soiling of clothes
which result in increase in washing expenses. Control over
environmental pollution will reduce such economic loss.
5. To Ensure Aesthetic Pleasure
Pollution control is necessary to reduce noise so that normal
conversation becomes possible, to reduce foul smell and to protect
monuments such as Taj Mahal.
6. To Reduce Risk of Liability
A business enterprise can be held liable to pay compensation to
people who suffer from toxic gases and wastes from business.

Approaches to Pollution Control

Several approaches can be adopted to check pollution. Some of
these approaches are given below:
1. Environmental Evaluation
Any industrial activity should be allowed after a comprehensive
evaluation of its impact on the environment. For example, all
government agencies in India are required to submit The
Environmental Impact Statement for their projects. This would
ensure that all effects of an industrial undertaking are examined
before it is approved.
2. Establishing Pollution Control Standards
Standards can be laid down to prescribe maximum allowable level
of specific pollutants. For example, Euro 11 emission norms have
been established for small cars manufactured in India to check air
pollution.
3. Regulations
Water pollution is controlled through regulations. Licensing
procedures have been laid down to regulate industrial and
municipal discharge into rivers and canals. Certain types of waste
and pollutants can be discharged only after treating them through
prescribed technology. Government of India has enacted.
4. Ban
Under this approach unsafe or hazardous substances are either
banned or their use is restricted. For example, smoking in public
places and use of polythene bags are banned in some states.
Legislative control over toxic substances is necessary to check
environmental pollution.

Role of Business in Environmental Protection

Some of the specific steps which business can take for
environmental protection are as follows:
• Top management's commitment to create and maintain work
culture for environmental protection.
• Ensure that all divisions and employees of the firm share the
commitment to environmental protection.
• Comply with the country's laws and regulations for preventing
pollution.
• Arrange workshops and training materials for suppliers, dealers,
and customers in pollution control.
• Periodically assess pollution control programmes in terms of
costs and benefits.
• Recycle waste and affluent before discharging them from
factories.

MEANING AND IMPORTANCE OF BUSINESS ETHICS

The word 'ethics' is derived from the Greek word 'ethos' which
means character, ideals, and standards of behaviour. Ethics may be
defined as the study of moral behaviour. Business ethics may be
defined as a set of standards or principles governing the moral
conduct of businessmen. It requires the businessmen to be honest
with themselves and with others.

Importance: Now businessmen realise that ethical considerations

are important in business for the following reasons:
1. Businessmen are responsible for the welfare of society. They can
discharge their social responsibilities only when they adopt ethical
practices.
2. Modern society is an industrial society and business values, to a
large extent, are adopted by most members of the society.
3. If a business adopts unethical practices, it can lose the power
and prestige it enjoys in society.
4.A job has a fairly important place in a person's life. A healthy
personality can be developed only when business values are in
harmony with social values.

ELEMENTS OF BUSINESS ETHICS

Ethical behaviour is good for both business and society. Therefore,
business firms should foster ethics in their day-to-day working. The
main elements of business ethics in running a business enterprise
are as follows:
1. Top Management Commitment
Top management can play a vital role in guiding the enterprise
towards ethical behaviour. The Board of Directors and the chief
executive must show a strong commitment to ethical conduct.
2. Code of Ethics
A written code of conduct defines the principles of conduct to be
followed. The code may cover issues such as product safety and
quality, employment practices, fair marketing practices, health and
safety in the work place, conflict of interest, financial reporting, etc.
3. Compliance Mechanisms
Suitable mechanisms need to be established to ensure that actual
decisions and actions comply with the firm's ethical standards. The
degree of compliance should be monitored regularly.
Communication systems are needed to help employees report
incidents of unethical behaviour.
4. Employee Involvement
Employees at all levels must be involved in the implementation of
ethical policies and programmes. For example, small groups of
employees may be formed to analyse the firm's ethical policies and
to judge attitudes towards these policies.
5. Regular Monitoring
The end results of ethical programmes should be measured and
reported on a regular basis. Top management and other executives
can review and revise the company's ethical policies and
programmes on the basis of such feedback.