What is Social Responsibility?

Social responsibility is the idea that an organization or individual is obligated to act to benefit society at
large—i.e., to maintain equilibrium/balance between the economy and the ecosystem.

According to H.R. BOWEN, ”Social responsibility is to pursue those policies and decisions or to follow
those lines of actions which are desirable in terms of its objectives and values of our society

Social responsibility means that individuals and companies have a duty to act in the best interests of
their environment and society as a whole. Social responsibility, as it applies to business, is known
as corporate social responsibility (CSR).

Corporate Social Responsibility

Traditional View of CSR
 The prime purpose of the business was profit maximization- Milton Friedman “ the business of
business is business.”

• It is argued that the profit earned by business belongs exclusively to the shareholders of the business
and these profits cannot be diverted to any other social purpose.

Definition of CSR
 The World Business Council for Sustainable Development
“Corporate Social Responsibility is the continuing commitment by business to behave ethically and
contribute to economic development while improving the quality of life of the workforce and their
families as well as of the local community and society at large”

 European Commission
A concept whereby companies decide voluntarily to contribute to a better society and a cleaner
environment. A concept whereby companies integrate social and environmental concerns in their
business operations and in their interaction with their stakeholders on a voluntary basis

 Philippines
“CSR is about capacity building for sustainable livelihoods. It respects cultural differences and finds the
business opportunities in building the skills of employees, the community and the government from
Ghana, through to CSR is about business giving back to society ”

 ISO 26000
“Social responsibility is the responsibility of an organization for the impact of its decisions and activities
on society and the environment, through transparent and ethical behavior that:
 Contributes to sustainable development, including the health and the welfare of society
 Takes into account the expectations of stakeholders
 Is in compliance with applicable law and consistent with international norms of behavior, and
 Is integrated throughout the organization and practiced in its relationships.”

corporate social responsibility means that businesses, in addition to maximizing shareholder value,
must act in a manner that benefits society. It refers to the obligations and duties of the business towards
the society.
corporate social responsibility has become increasingly important to investors and consumers who seek
investments that are not just profitable but also contribute to the welfare of society and the
environment. However, critics argue that the basic nature of business does not consider society as
a stakeholder.

• Striving for social responsibility helps individuals, organizations and governments have a positive
impact on development, business and society with a positive contribution to bottom-line results. It
pertains not only to business organizations but also to everyone whose action impacts the environment.

Classification of Social Responsibility

1. Responsibility towards Shareholders

• ensure a reasonable rate of return over time.
• work for the survival & the growth of the concern.
• build reputation & goodwill of the company.
• remain transparent & accountable.

2. Responsibility towards Employee

• provide a healthy working environment.
• grant regular & fair wages.
• provide welfare services.
• provide training & promotion facilities.
• provide reasonable working standard & norms.
• provide efficient mechanism to redress worker’s grievances.
• Proper recognition of efficiency & hard work.

3. Responsibility towards consumers

• Supply socially harmless products.
• Supply the quality, standards, as promised.
• Adopt fair pricing.
• Provide after sales services.
• Maintaining consumer’s grievances cell

3. Responsibility towards Society

 Carry on business with moral& ethical standards.
 Prevention of environmental pollution.
 Minimize ecological imbalance.
 Contribute towards the development of social health, education
 Make use of appropriate technology.
 Overall development of locality.

4. Responsibility towards Government

 Obey rules & regulations.
 Regular payment of taxes.
 Cooperating with the Govt to promote social values.
 Not to take advantage of loopholes in business laws.
 Cooperating with the Govt for economic growth & development.
Four Areas of Social Responsibility

Figure 1 The Four Areas of Social Responsibility

1. Economic aspects/ Financial. Companies need to maintain strong economic interests so they
can stay in business. Being profitable and providing value to shareholders is part of a company
being socially responsible.
2. Legal aspects. A company must follow the law and have a legal obligation to do so. For example,
car companies are required to meet a certain level of emissions standards in car production.
3. Ethical aspects. Acting ethically means going above and beyond the legal requirements and
meeting the expectations of society. In other words, the ethical expectations (and outrage) of
society can encourage companies to act ethically.
4. Philanthropic aspects/ Discretionary. This is the expectation that companies should give back to
society in the form of charitable donations of time, money, and goods.

Based on these areas, many believe business should go above and beyond the law to act ethically, meet
expectations of society, and even go beyond by donating profit back to the communities in which the
businesses operate. As we mentioned at the start of this section, businesses are not the only ones who
engage in social responsibility. Since people run businesses, often we see business social responsibility
initiatives that are directly related to individuals in the organization.

Benefits of Social Responsibility

 Greater trust with stakeholders
 Greater customer satisfaction
 Stronger employee commitment
 Stronger investor loyalty
 Greater profitability
 Countries with greater trust-based institutions foster a productivity-enhancing environment
Samples of Social Responsibility Benefits

Environmental concerns may

enable the firm to charge
premium prices and gain brand
loyalty
Trustworthiness may help
generate enduring relationships
with suppliers and distributors
without spending time and
money policing contracts
Can attract outstanding
employees who prefer working
for a responsible firm
More likely to be welcomed into
a foreign country

Models of corporate social responsibility

1. The Classical Economic Model (Adam Smith)
 An “invisible hand” (i.e., the efforts of competing entrepreneurs) promoted the public
welfare when individuals tried to maximize short-run profits in pursuit of their own
economic self-interests.
 Equates short-run profitability to social responsibility

2. The Socioeconomic Model

 Business has an obligation to meet the needs of the many groups in society besides
stockholders in its pursuit of profit.
 Stakeholder audit: Systematically identifying all the parties that could possibly be
affected by the company’s performance

3. Friedman Model(1962-73)
 A business men should perform his duty well, he is performing a social as well as a moral
duty.
 A businessmen has no other social responsibility to perform except to serve his
shareholders & stockholders
4. Ackerman Model (1976)
• The model has emphasized on the internal policy goals & their relation to the CSR.
• Four stages involved in CSR.
» Managers of the company get to know the most common social problem & then express a
willingness to take a particular project which will solve some social problems.
» Intensive study of the problem by hiring experts & getting their suggestions to make it
operational
» Managers take up the project actively & work hard.
» Evaluating of the project by addressing the issues.
• Strategies in the adoption of CSR.
• Reactive strategy
• Defensive strategy
• Accommodation strategy
• Proactive strategy

5. Carroll Model
 simple model that helps argue how and why organizations should meet their social
responsibilities.
 The key features of Carroll's CSR Pyramid are that:
• CSR is built on the foundation of profit – profit must come first
• Then comes the need for a business to ensure it complies with all laws &
regulations
• Before a business considers its philanthropic options, it also needs to meet
its ethical duties
  Philanthropic requirements: Donation, gifts, helping the poor. It ensure goodwill & social
welfare.
 Ethical responsibility: Follow moral & ethical values to deal with all the stakeholders.
 Economic responsibility: Maximize the shareholders value by paying good return.
 Legal responsibility: Abiding the laws of the land.

6. Environmental Integrity & Community Health Model.

 This model developed by Redman.
 Many corporate in US adopted this model.
 Corporate contribution towards environmental integrity & human health, there will be
greater expansion opportunities.
 Healthy people can work more & earn more.
 CSR is beneficial for the corporate sector.
 CSR in a particular form is welcome.

7. . Corporate Citizenship Model

 To be a corporate citizen, a corporate firm has to satisfy four conditions:
» Consistently satisfactory
» Sustainable economic performance
» Ethical actions
» Behaviour.
 A particular firm’s commitment to corporate citizenship requires the fulfillment of
certain social responsibility

8. Stockholders & Stakeholders Model

 Productivism
Productvists believe that the only mission of a firm is to maximize the profit
 Progressivism
Progressivists believe the corporate behavior basically motivated by self interest &
should have ability to transform the society for good.
  Philanthropy
Philanthropists who entertain the stockholders. CSR is dominated by moral obligations
& not self-interest
 Ethical Idealism
Ethical Idealism concern with sharing of corporate profits for humanitarian activities

9. New Model of CSR

Best Practices of CSR

 To set a feasible, Viable & measureable goal.
 Build a long lasting relationship with the community.
 Retain the community core values.
 The impact of the CSR needs to be assessed.
  Reporting the impact.
 Create community awareness.

Need for Corporate Social Responsibility

 To reduce the social cost.
 To enhance the performance of employees.
 It is a type of investment.
 It leads to industrial peace.
 It improves the public image.
 Can generate more profit.
 To provide moral justification.
 It satisfies the stakeholders.
 Helps to avoid government regulations & control.
 Enhance the health by non polluting measures.

Arguments for CSR

• Corporate should have some moral & social obligations to undertake for the welfare of the society.
• Proper use of resources, capability & competence.
• The expenditure on CSR is a sort of investment.
• Company can avoid many legal complications.
• It create a better impression.
• Corporate should return a part of wealth.

Arguments Against CSR

• Fundamental principles of business gets violated.
• It vey expensive for business houses.
• CSR projects will not be successful.
• These are not the special areas of any business.
• CSR is to induce them to steal away the shareholders money.