Social Responsibility & Ethics
Long Answer Type
Question 1: Build up arguments for and against social responsibilities.
Answer: Arguments for Social Responsibility
Justification for existence and growth: It is a fact that a business prospers and sustains in the long run only when it serves some purpose to the society. Hence, it can be said that social responsibility is necessary for existence and growth of a business organization.
Long term interest of the firm: If the public image of a business firm gets tarnished, it becomes difficult for the firm to continue in the long run. All the stakeholders should view the business organization with positive perspective in order to ensure long term survival of the organization.
Avoidance of government regulation: Sometimes, the government may enact new laws if the business firms are seen not providing some social service. Thus, a commitment towards social responsibility is a good tool to avoid new rules and regulations being enacted.
Maintenance of society: Sometimes, people may resort to unlawful activities if a business organization is not seen to fulfill social obligations. This can create the problem of lack of harmony in the society. So, by committing to social responsibility; the business organization ensures maintenance of peace in the society.
Availability of resources with business: A business firm has valuable and financial resources. Hence, a business firm should utilize its resources for some social causes.
Converting problems into opportunity: Established business firms have a long history of turning various problems into opportunities. This is the reason; new products and new markets are created and profitably utilized. Business firm should take social problems as opportunities and should tackle those problems.
Arguments against Social Responsibility
Violation of profit maximization objective: The main purpose of existence of a business firm is profit maximization and any activity related to social responsibility interferes and violates the objective of profit maximization.
Burden on consumers: Many activities related to social responsibility involve very high cost and the cost is finally transferred to the consumers. Thus, social responsibility creates a burden on the consumers. Many products and services become costlier because of the costs involved in social responsibility.
Lack of social skills: A business organization’s competency lies in creating value from the business. The business organization does not have the necessary skills to handle social responsibility. Hence, business firm should be left to focus on value creation.
Lack of broad public support: In general; public does not appreciate a business organization’s involvement in social causes. Due to this, corporate social responsibility does not have broad public support.
Question 2: Discuss the forces which are responsible for increasing concern of business enterprises toward social responsibility.
Answer: The forces which are responsible for increasing concern of business enterprises toward social responsibility:
- Threat of Public Regulation: While focusing on profit maximization, a business organization may tend to forget social responsibility. Democratically elected government has to protect public interest. If a business practice is found to be violating public interest, then a democratically elected government is likely to come with some regulation to make the business firm fall in line. Thus, the threat of public regulation often forces a business firm to work towards social responsibility.
- Pressure of Labor Movement: Over the last century, the workforce has become more educated and aware. So, the business firms cannot afford to ignore the interests of the workforce. Moreover, workforce is more organized than earlier. This has helped in creating pressure on business organization to keep in mind the humanitarian interests of the workforce.
- Impact of Consumer Consciousness: Because of growth in media and better education, the consumer has become more aware. The consumer is now really the king and business organizations have to keep consumer’s interest in mind.
- Development of Social Standard for Business: Business firms cannot be allowed to make money at the cost of the society. While ensuring profit maximization, a business firm needs to keep the interests of society protected. This factor has also forced business organizations towards social responsibility.
- Development of Business Education: Business education has evolved over a period of time. This has made the various stakeholders realize the importance of corporate social responsibility.
- Relationship between Social Interest and Business Interest: Business organizations have realized that social interest and business interest are complementary and cannot be antagonistic to each other. This realization has also promoted the culture of social responsibility.
- Development of Professional Managerial Class: Now, more and more businesses are being managed by managers who are professionally educated in business management. These are the people who always try to satisfy all the stakeholders rather than just the business owners. This new trend has also helped in business firms paying attention towards social responsibility.
Question 3: ‘Business is essentially a social institution and not merely a profit making activity’. Explain.
Answer: A business can be defined as an activity which is involved in trade of goods or services. A business activity is done with the sole purpose of profit maximization. However, some not-for-profit organizations also exist and conduct business. Let us analyze whether a business is just a profit making activity or more than that.
Profit making is an essential aspect of business because a loss-making business firm cannot survive in the long run. It has to earn profit in order to survive and grow. Profit is necessary for continuing various functions of a business organization. For example; a business needs to invest in people and other resources from time to time. This investment would not be possible if the business is incurring losses. A business also needs to come with new products or services in order to cater to the changed preferences. New product development is also a resource intensive task and profit is necessary for resource mobilization. Thus, it can be said that profit maximization is a prime goal of any business organization.
But we need to remember the fact that a business does not function in vacuum. A business needs consumers to buy its products or services. It needs some suppliers to source raw materials and equipments. It needs to maintain a good relationship with its suppliers and consumers so that it can smoothly conduct business.
If a business organization sours its relationship with either the supplier or the consumer, it cannot sustain for more than a couple of seasons. So, it needs to obey the laws of the land to maintain respect in the eyes of suppliers and consumers.
In my neighbourhood, a simple rustic fellow from Himachal Pradesh sells momos. His mobile shop is made up of a gas stove, some steamers and a wooden board; all of them fitted on the rear carrier of his bicycle. Looking at the big crowd he attracts, I can easily tell the great taste of momos he sells. No other momos seller in that area can match the crowd at his stall. To top it all, the guy behaves nicely with every customer. This guy is able to do brisk business because he is serving tasty food at affordable price and his very good customer relationship skills. Had this guy been arrogant or ill-behaved, he would not be able to do as brisk business as he is doing right now. This example shows that a business needs to be an integral part of the society in which it functions.
Hence, it can be said that a business is essentially a social institution and not merely a profit making activity.
Question 4: Why do the enterprises need to adopt pollution control measures?
Answer: A business organization takes and utilizes various natural and man-made resources from the environment. We know that pollution destroys the environment and hence it is necessary to protect the environment. Like every other member of the society, a business organization too needs to take adequate pollution control measures because pollution control is a collective responsibility. Some of the important reasons for adopting pollution control measures are as follows:
- Reduction of Health Hazards: Many scientific researchers have shown that cases of many diseases are on the rise because of increased level of pollution. Hence, it becomes imperative to control pollution to reduce health hazards. By adopting pollution control measures, a business firm can ensure a better and cleaner environment which has less health hazards.
- Reduced Risk of Liability: If some industrial accident results in severe damage to the environment, the responsible firm shall be held liable for that. There can be numerous examples of firms which had to pay a heavy penalty for damaging the environment. So, pollution control is a way to minimize the risk of liability.
- Cost Saving: A suitable pollution control programme can help in improving productivity of a business firm. A cleaner environment means better supply of healthy workforce, high quality raw materials and less wastage. All of this results in cost saving for the business organization.
- Improved Public Image: Off late, the society has become more aware about environmental issues. Hence, if a firm adopts pollution control measures; it can improve its public image. Nobody would like to live in the vicinity of a factory like Union Carbide.
- Other Social Benefits: Pollution control helps in many other benefits which improve the quality of life of all the stakeholders.
Question 5: What steps can an enterprise take to protect the environment from the dangers of pollution?
Answer: To protect the environment from the dangers of pollution, a business enterprise can take following steps:
- The top management should make a definite commitment to create, maintain and develop a work culture which is tuned towards protection of environment and prevention of pollution.
- It should ensure that the commitment to environmental protection is shared throughout the enterprise by all divisions and employees.
- The enterprise should develop clear cut policies and programmes for purchasing good quality raw materials. It should employ superior technology and scientific techniques for disposal and treatment of wastes. It should develop employee skills for pollution control.
- The enterprise should comply with the laws and regulations enacted by the government for prevention of pollution.
- It should participate in government programmes related to management of hazardous substances. It should participate in programmes for clearing up of polluted rivers, plantation of trees and checking deforestation.
- The enterprise should conduct periodic assessment of pollution control programmes in terms of costs and benefits so as to increase the progress with respect to environmental protection.
- The enterprise should arrange educational workshops and training materials so that technical information can be shared with suppliers, dealers and customers to actively involve them in pollution control programmes.
Question 6: Explain the various elements of business ethics.
Answer: The various elements of business ethics are as follows:
- Top Management Commitment: The top management has to always lead by setting examples in every sphere. The top management needs to be openly and strongly committed to very high level of business ethics. It is the top management which needs to provide leadership on a continuous basis so that business ethics can be followed down the line.
- Publication of a ‘Code’: The enterprise should chalk out and publish a code of conduct related to business ethics. The code usually covers fundamental honesty, adherence to laws, product safety and quality, health and safety at the workplace, conflicts of interest, fairness in selling/marketing practices, etc.
- Establishment of Compliance Mechanism: The enterprise should establish a compliance mechanism so that employees and other stakeholders should observe business ethics. This can be done by periodic reports, following quality control during hiring the employees, establishing a communication system to ensure compliance at all levels, adequate punishment if someone fails to comply with business ethics, etc.
- Involving Employees at All Levels: Employees at all levels should be deeply involved because mere lip service is not going to serve the purpose. Employee involvement can be achieved by suitable system of rewards and encouragement. This can also be achieved by ensuring group behavior among the employees.
- Measuring Results: It is difficult to exactly quantify the results of business ethics. However, some audit system can be made to measure the results.