Why business accepts it, and to whom

Several forces have made business accept social responsibility: the threat of public regulation; the pressure of the labour movement; the impact of consumer consciousness; the development of social standards; the development of business education; the understanding that social and business interests go together (complement each other); and the rise of professional managers, who try to satisfy many groups, not only the owners.

Social responsibility is of four kinds: economic (producing goods people want and selling them at a profit); legal (obeying the law); ethical (behaving rightly even where no law says so); and discretionary (purely voluntary, such as giving to charity).

Responsibility towards different groups:

• Shareholders (owners): a fair return on their money, the safety of their investment, and regular, accurate information.
• Workers: meaningful work, fair wages, good working conditions, and respect for their right to form unions.
• Consumers: goods of the right quality and quantity at fair prices, honest information, and attention to complaints. If a new AC does not work, a technician who comes quickly shows that a firm takes this seriously.
• Government and community: obeying the laws, paying taxes honestly, protecting the environment, and helping the neighbourhood.

Attitudes to consumers have changed. The old rule was caveat emptor; today the rule is 'the customer is king'.

For bigger companies, social responsibility is also a legal duty. Under section 135 of the Companies Act, 2013, a company with a turnover of ₹1,000 crore or more, or a net worth of ₹500 crore or more, or a net profit of ₹5 crore or more in a year must:

• set up a CSR committee of its board;
• spend at least 2 per cent of its average net profit of the last three years on CSR activities;
• choose these activities from the list in Schedule VII of the Act (such as removing hunger and poverty, education, health and the environment), carried out in India.