“If you are the luckiest of 1% of humanity, you owe it to the rest of humanity to think about the other 99%,” said Warren Buffett. Mr Buffett understood that the purpose of any business is not only to make a profit but also to be responsible for its actions and decisions. Social responsibility is the duty of businesses towards society. Businessmen must review the impact of decisions and actions on the different sections of society.
The Need for Social Responsibility
Self-interest: It is in the self-interest of the business to have a social responsibility as it opens opportunities for understanding the problems and issues of society.
A better environment for Business: In today’s cynical age, social responsibility keeps businesses honest and the markets stable.
Public image: When a business takes initiative to solve the problems of society, it puts the business in the goodwill of the people.
Social power: A leader is a helper. Helping society is a form of social responsibility. Executing social work helps the business attain social power within society.
Arguments Supporting Social Responsibility
The justification for existence and growth: The primary goal of business is to make profits as only profits can help the business sustain and expand. Profits should only be made as a return of service to society by producing goods and services.
The long-term-term interest in the firm: A firm is to gain maximum profits in the long run if it has its highest goal as service to society. As humans are social beings, when they notice that a particular corporation is not serving its best interest socially, they do not support the organization further.
Avoidance of government regulations: Government is the highest authority in the nation. When a government feels that the business is not socially responsible or is creating problems like pollution, the government limits its freedom.
Maintenance of Society: Business is one of the important pillars on which society survives. It is the responsibility of businesses to take care of society’s needs. Law alone can't help people with the issues they face. Therefore businesses contribute to the well-being, peace and harmony of society.
Availability of resources with Business: Business enterprises have huge financial resources, and very efficient managers & contacts and thereby they can ensure that a social problem can be solved easily.
Converting problems into opportunities: Business means risk. And turning risky situations into profits can also be related to solving social problems.
Holding Business responsible for Social problems: Business enterprises are responsible for many problems such as pollution, discriminated employment, corruption, etc. The business must solve the problems created by them.
Arguments Against Social Responsibility
Violation of maximization of the profit motive: This statement argues that business exists only for maximizing profits and businesses fulfil their social responsibility best by maximizing profits by increasing efficiency and reducing costs. They need not take up any additional obligations.
Side effects on Consumers: Customers suffer because solving social problems and taking social care requires huge financial investment. As the money within the business is used for social help, the business increases the cost of its products and services.
Lack of Social skills: It is often stated that businessmen don’t fully understand social problems and thus can’t solve them efficiently.
Personal resistance: People tend to dislike interference from businesses in their problems.
The Reality of Social Responsibility
The threat of Public Regulation: Government agencies keep a watchful eye on all business operations. So to avoid government action, businesses should behave responsibly.
The pressure of the Labour movement: Labour plays an important role not only in production but also in the managerial factors of the organization. Labour nowadays are more educated and their movements are more powerful. The ‘Hire and fire policy no longer works. Managers now have to be more responsible while dealing with labourers.
Impact of Consumer Consciousness: In this era, consumers are well aware of the quality and price of the product. Consumers are understanding their rights over the product and even for small issues, they file a suit in consumer court.
Development of a Social standard for Business: New social standards consider business enterprises as legitimate but with a condition, they must also serve social needs.
Development of Business Education: Business education has created an awareness among investors, consumers, employees, etc and the world is more sensitive towards social issues.
The relationship between Social interest and Business Interest: People know that social interest and business interest are complementary. This means long-term benefits for the business.
Development of Professional and Managerial Class: Earlier business houses only aimed at profit maximization but now professional management and educational institutions have made a new kind of managers that give similar importance to social responsibility.
Comments