What social responsibility means

Social responsibility of business means its obligation to take decisions and actions that are desirable in terms of the objectives and values of society. A business lives within society, uses its resources and serves its people, so it owes something back.

It is broader than legal responsibility. Legal responsibility means only obeying the law. Social responsibility also includes voluntary action: doing good that no law requires, such as a firm that, on its own, keeps water out for animals and birds near its office in summer.

Some practices are clearly socially undesirable: adulteration (mixing cheap or harmful things into a product), deceptive advertising, tax evasion, pollution, and exploiting workers.

Arguments for social responsibility:

• Justification for existence and growth: business exists to serve society, and that service justifies its profit.
• Long-term interest of the firm: a good public image helps it in the long run.
• Avoidance of government regulation: if business behaves well on its own, there is less need for new laws.
• Maintenance of society: unhappy people may turn against business.
• Availability of resources with business.
• Converting problems into opportunities.
• A better environment for doing business.
• Holding business responsible for social problems: business has helped create problems such as pollution, so it should help solve them.

Arguments against:

• Violation of profit maximisation: business exists to make profit.
• Burden on consumers: the cost of social work is often passed on through higher prices.
• Lack of social skills: business people are not trained to solve social problems.
• Lack of broad public support: the public may not want business to get involved.

The balance of opinion is that business should serve society, and that profit should follow from service.