What is Social Responsibility?
An organization is committed to making decisions or performing them for the benefit of society and its value is referred to as the social responsibility of a business. It has become important for the investors and consumers who ask for investments that are profitable as well they contribute to the welfare of society and the environment. A business has some duty towards society and has to respect its norms and values while fulfilling the expectations of society. There are some socially desirable practices or things that are from the companies for example.
- Providing goods at a fair price
- Quality goods and services
- Preventing activities that can create pollution
- Good working conditions
- Ensure customers’ complaints are taken care of
Need for Social Responsibility
Every organization exists with the aim of maximizing profits. But this should not be the only sole motive or desire of it, they should also commit to society. These are some following reasons an organization needs social responsibility.
1. Avoidance of Government Interference
The government has approved laws for applying moral and legal pressure on companies in order to perform socially responsible activities. If in case the company fails or avoids these practices the government will interfere in the business. So to avoid such interference by the government, companies need to perform their social responsibilities.
2. Changing Expectations of Society
Over the years society expects different things from a business. In the early days, businesses were viewed only as providers of goods and services. Today society expects businesses to contribute towards social welfare and be responsible citizens. Society provides companies with different resources such as natural resources and labor. It expects something good in return for its welfare.
3. Long-term Self-interest
Practicing socially responsible things in a company not only helps society but also provides benefits for the companies in the long run. Meaning that if a company has a good image in the market as a brand that actually serves society besides earning a profit. This is good for self-interest.
4. Reputation
All most every organization spends a huge amount on brand building and strengthening their image in society. An organization that is socially responsible has a good reputation in the society. It results in increasing the following things.
- Profitability
- Sales
- The attraction of talent
- Sustainable growth
5. To Ensure Business Growth
A healthy and flourishing financial society enjoys higher purchasing power. The higher purchasing power means higher demand for products and services in the market. This result increased demand for higher sales and profit growth for businesses.
6. Optimum Utilization of Resources
One of the most important goals of a business while producing and selling goods and services to customers is the optimum utilization of resources. Now resources have become scarce so we have to save them for future generations. For this reason, organizations need to make optimum utilization of resources.
7. To Solve Problems Created
There are many problems involved such as contamination of water resources, environmental pollution, and depletion of the ozone layer have been caused by businesses. These have actually placed a question mark on the survival of the human species due to the poor health of the community. All businesses should take measures to solve this problem which is directly or indirectly created by them. They also need to ensure that their activities do not create more problems in the future.
Types of Social Responsibilities
1. Ethical Responsibility
Ethical responsibility is the behavior expected from business organizations by society. This responsibility does not come under the law. Due to this, there is no legal obligation on the companies to perform ethically responsible activities. Under this responsibility, it is to make sure that the business should not get involved in fraud, black marketing, or adulteration.
2. Economic Responsibility
Economic responsibility means producing goods and services as per the needs and wants of the customers, and selling them at the same profit. This means that the organization has to analyze and understand whether the customers are demanding quality or price. Then provide them with their demand. A business earning profit will indirectly increase the incentives of the employees. As a whole the economic growth of an organization affects society.
3. Legal Responsibility
While performing or carrying on business activities it is the duty and responsibility of an organization to legally follow the rules, laws, and regulations. If an organization performs activities as per the laws then they don’t get any interference from the government. Some legal responsibility involves,
- Keeping its books of accounts
- Financial statements are clean and accurate
- Paying taxes on time to the government
4. Discretionary Responsibility
Discretionary Responsibility is completely voluntary. The organization’s management is responsible for avoiding speculative activities. They undertake healthy business ventures that can provide them with Returns on Investment. Discretionary Responsibility includes
- Donating to healthcare facilities for those who cannot afford
- Charitable services
- Providing education facilities to poor people