Social Responsibilities of Business (SRB)

1. Social Responsibilities of Business (SRB)

2. Social Responsibility of Business • Social Responsibility of Business refers to all that business does for the benefit of the society, over and above the statutory requirement. • Operation of business affect a wide spectrum of areas, and it even impacts people who are not connected with the enterprise. The shareholders, the suppliers, the consumers, the local community and the society at large are all affected by the way an enterprise functions. • Hence it is expected that a business enterprise would be socially responsible so that there is a balance of forces between those with opposing interests.

3. Nature of Social Responsibility of Business • Nature of SRB can be classified into two categories: • 1. The manner in which a business carries out its business. This in turn involves, accepting that business in not solely a profit- making occupation but it is a social function with some duties towards society. These involve obeying the law of the land, producing good quality products, paying fair wages, dividends to shareholders, paying taxes, taking up investments and increase industrialisation in backward areas etc. • Promoting social welfare, even directly sometimes.

4. Social Orientation of Business • The extent of social orientation of business vary across companies and over time. • Some models try to describe the evolution and extent of social orientation of companies. • CARROLL’S MODEL • Carroll’s model defines corporate social responsibility as the entire range of obligations that business has to society. And there are basic 4 obligations • Economic: which involves efficient operation for satisfying economic needs of the society and generation of surplus for rewarding shareholders and investing for development.

5. Carroll’s Model • Legal: Obeying the law of the country of operation • Ethical: Company should not resort to unethical practices, like bribing, extortion, unfair competitive practices • Discretionary: Refers to voluntary contributions of business to various social clauses.

6. Akerman’s Model • According to this model there are three phases in the development of social responsiveness of a company. • These three phases through which companies commonly tend to pass in developing a response to social issues are: • Phase I: Company becomes aware of a particular social problem • Phase II: Company hires staff specialists or engages external consultants to study the problem and suggest ways of dealing with it

7. Phase III: Implementation – Company integrates the policy into its ongoing operations. This comes slowly & not often until forced by the government or public opinion. • Late implementation or no responsiveness may create problems that may become legal in nature as well. • According to Ackerman the best way is to response to a social issue at the earliest. • “Act early in the life cycle of any social issue in order to enjoy the largest amount of managerial discretion over the outcome.”

8. Factors Influencing Extent of Social Orientation of Business • Values and Visions of promoters and top management. • Attitude of the members of the Board, who decide major policies and resource allocation • Attitude of various stakeholders like shareholders, creditors, employees • Societal Factors • Government and Laws: • Competitors • Resources

9. Responsibilities to Different Sections • Responsibility to Shareholders: This is the primary responsibility to shareholders as they are the owners. Growth, innovation and earning profit, therefore remains necessary for fulfilling this social responsibility. • Responsibility to Employees: Success of an enterprise depends on the employees’ cooperation and involvement. Therefore payment of fair wages, provision of best possible work environment, establishment of fair work standards and norms, provision of labour welfare facilities, appreciation and recognition for special skills and abilities etc.

10. Responsibilities to Different Sections • Responsibility to Community: Preventing environmental pollution, and preserving ecological balance, rehabilitating people displaced by the business, assisting in overall development of locality, development of backward areas, promotion of research and development, promoting growth of ancillaries and small scale industries etc. • Responsibility to Consumers: To improve quality, reduce prices by increasing efficiency, through research and developmental activities, providing required after-sales service, to avoid misleading through improper adv, provide proper information about the adverse effects, risks of the products.

11. Arguments for Social Responsibility • Business which survives using the resources of society has a responsibility to society. • Changed public Expectations of Business • Social Responsibility, like recycling of waste, may have favourable financial impact. • Better Environment of Business • Public image • To avoid Govt. Regulation • Balance of responsibility with power • Moral responsibility & Citizen Argument • Globalization

12. Arguments against Social Responsibility • Profit maximization- the question of efficiency • Society has to pay the additional cost • Lack of social skills • Social overhead costs • Lack of accountability • Responsibility towards stakeholders

13. Barriers to social responsibility • The Individual Manager • Focus on profit • Lack of Industry support

14. Consumerism • Organised endeavour of consumers to protect their rights is called Consumerism. • Consumer Rights • Right against exploitation by unfair trade practices, • Right to protection of health and safety from goods consumed • Right to be informed about the quality and standards, • Right to be heard in case of grievances • Right to have genuine grievances addressed

15. Consumerism • Movement to inform consumers & protect them from business malpractices • Focus Areas – inferior & dangerous merchandise, unfair business practices, & false or misleading advertisements • Malpractices - Artificial scarcity, price hikes, distorted advertisements, product quality

16. Consumer Protection Act • Consumer Protection Act, 1986 – enacted by the Central Govt. (modified by the Amendment Act 1993) • Protects against unfair trade practices, unsatisfactory services & defective goods • Special forums at district, state & central levels to deal exclusively with consumer complaints & issues. • Compensation to be awarded to the affected consumers • Most progressive, comprehensive & unique legislation • A revolution in the field of consumers’ rights

17. Objectives of the Central Council • Protects the following rights • Right to be protected against marketing of goods & services which are hazardous to life & property • Right to be informed about quality, quantity, potency, purity, standard & price of goods & services so as to protect the consumer against unfair trade practices • Right to be assured, wherever possible, access to a variety of goods at competitive prices

18. Right to be heard and assured that consumer’s interests will receive due consideration at appropriate forums • Right to seek redressal against unfair trade practices or unscrupulous exploitation of consumers • Right to consumer education

19. Consumer Disputes Redressal Agencies • The Protection Act provides for a: • Three tier consumer redressal system – district, state and national level • District forum • State Commission • National Commission: Established by the govt. in 1988

20. Consumer Complaints • A complaint, in relation to any goods sold or delivered or any service provided may be filed with the redressal agency by – • The consumer to whom such goods are sold or delivered or such service provided • Any recognized consumer association, • One or more consumers having a common interest • The Central or State Govt.

21. Remedial Action • If the consumer disputes redressal agency is satisfied that any of such allegations contained in the complaint is true, it shall issue an order to the opposite party directing him to take one or more of the following things, namely: • To remove the defect pointed • To replace goods • To compensate with high award • Price return • To remove defects • To discontinue unfair trade and not repeat them • Not to offer hazardous goods for sale • To withdraw goods from sale offer • To provide for adequate costs to parties

22. Cost of Consumer Protection • Economic costs – costs of manufacturing safety devices incurred by the firm. E.g. – safety belts, pollution control devices • Social costs – incurred in three ways – loss of freedom of choice (increased protection implies dependence on the system), fear of product liability discourages innovation • Opportunity Costs – “Disproportionate Concern with Consumer Protection may divert attention and resources away from social problems which should have equal or perhaps greater priority”