Concept of Social Responsibility

We all know that people engage in business to earn profit. However, profit making is not the sole function of business. It performs a number of social functions, as it is a part of the society. It takes care of those who are instrumental in securing its existence and survival like- the owners, investors, employees, consumers and government in particular and the society and community in general. So, every business must contribute in some way or the other for their benefit. For example, every business must ensure a satisfactory rate of return to investors, provide good salary, security and proper working condition to its employees, make available quality products at reasonable price to its consumers, maintain the environment properly etc. However, while doing so two things need to be noted to view it as social responsibility of business. First, any such activity is not charity. It means that if any business donates some amount of money to any hospital or temple or school and college etc., it is not to be considered as discharge of social responsibility because charity does not imply fulfilling responsibility. Secondly, any such activity should not be such that it is good for somebody and bad for others. Suppose a businessman makes a lot of money by smuggling or by cheating customers, and then runs a hospital to treat poor patients at low prices his actions cannot be socially justified. Social responsibility implies that a businessman should not do anything harmful to the society in course of his business activities. Thus, the concept of social responsibility discourages businessmen from adopting unfair means like black-marketing, hoarding, adulteration, tax evasion and cheating customers etc. to earn profit. Instead, it encourages them to earn profit through judicious management of the business, by providing better working and living conditions to its employees, providing better products, after sales-service, etc. to its customers and simultaneously to control pollution and conserve natural resources.

It proposes that a private corporation has responsibilities to society that extend beyond making a profit.

Definition of Social Responsibility

Social Responsibility is obligation for a business as they primarily exist to benefit society, corporations exists because we allow them to exist. Prof. Robert Dahl

Only function of organization is to perform its economic activity and produce goods/services to society and earn for itself max. profit and it is better to leave social function to other institutions ADAM SMITHSR can be defined as “Continuing commitment by business to behave ethically and contribute to economic development while improving quality of life of workforce and their family as well as local community and society as a whole.”

The term means that a private sector firm has responsibility to society that goes beyond the production of goods and services and its profit.

Why should business be socially responsible?

Social responsibility is a voluntary effort on the part of business to take various steps to satisfy the expectation of the different interest groups. As you have already learnt, the interest groups may be owners, investors, employees, consumers, government and society or community. But the question arises, why the business should come forward and be responsible towards these interest groups. Let us consider the following points:

i. Public Image - The activities of business towards the welfare of the society earn goodwill and reputation for the business. The earnings of business also depend upon the public image of its activities. People prefer to buy products of a company that engages itself in various social welfare programmes. Again, good public image also attracts honest and competent employees to work with such employers.

ii. Government Regulation - To avoid government regulations businessmen should discharge their duties voluntarily. For example, if any business firm pollutes the environment it will naturally come under strict government regulation, which may ultimately force the firm to close down its business. Instead, the business firm should engage itself in maintaining a pollution free environment.

iii. Survival and Growth -Every business is a part of the society. So for its survival and growth, support from the society is very much essential. Business utilizes the available resources like power, water, land, roads, etc. of the society. So it should be the responsibility of every business to spend a part of its profit for the welfare of the society.

iv. Employee satisfaction - Besides getting good salary and working in a healthy atmosphere, employees also expect other facilities like proper accommodation, transportation, education and training. The employers should try to fulfill all the expectation of the employees because employee satisfaction is directly related to productivity and it is also required for the long-term prosperity of the organisation. For example, if business spends money on training of the employees, it will have more efficient people to work and thus, earn more profit.

v. Consumer Awareness - Now-a-days consumers have become very conscious about their rights. They protest against the supply of inferior and harmful products by forming different groups. This has made it obligatory for the business to protect the interest of the consumers by providing quality products at the most competitive price.

Responsibility towards Different Interest Groups

After getting some idea about the concept and importance of social responsibility of business let us look into the various responsibilities that a business has towards different groups with whom it interacts. The business generally interacts with owners, investors, employees, suppliers,

customers, competitors, government and society. They are called as interest groups because by each and every activity of business, the interest of these groups is affected directly or indirectly.

i. Responsibility towards owners

Owners are the persons who own the business. They contribute capital and bear the business risks. The primary responsibilities of business towards its owners are to:

a. Run the business efficiently.b. Proper utilisation of capital and other resources.c. Growth and appreciation of capital.d. Regular and fair return on capital invested.

ii. Responsibility towards investors

Investors are those who provide finance by way of investment in debentures, bonds, deposits etc. Banks, financial institutions, and investing public are all included in this category. The responsibilities of business towards its investors are :

a. Ensuring safety of their investment,b. Regular payment of interest,c. Timely repayment of principal amount.

iii. Responsibility towards employees

Business needs employees or workers to work for it. These employees put their best effort for the benefit of the business. So it is the prime responsibility of every business to take care of the

interest of their employees. If the employees are satisfied and efficient, then the only business can be successful. The responsibilities of business towards its employees include:

a. Timely and regular payment of wages and salaries.b. Proper working conditions and welfare amenities.d. Opportunity for better career prospects.e. Job security as well as social security like facilities of provident fund, group insurance, pension, retirement benefits, etc.f. Better living conditions like housing, transport, canteen, crèches etc.g. Timely training and development.

iv. Responsibility towards suppliers

Suppliers are businessmen who supply raw materials and other items required by manufacturers and traders. Certain suppliers, called distributors, supply finished products to the consumers. The responsibilities of business towards these suppliers are:

a. Giving regular orders for purchase of goods.b. Dealing on fair terms and conditions.c. Availing reasonable credit period.d. Timely payment of dues.

v. Responsibility towards customers

No business can survive without the support of customers. As a part of the responsibility of business towards them the business should provide the following facilities:

a. Products and services must be able to take care of the needs of the customers.b. Products and services must be qualitativec. There must be regularity in supply of goods and servicesd. Price of the goods and services should be reasonable and affordable.e. All the advantages and disadvantages of the product as well as procedure to use the products must be informed do the customers.f. There must be proper after-sales service.g. Grievances of the consumers, if any, must be settled quickly.h. Unfair means like under weighing the product, adulteration, etc. must be avoided.

vi. Responsibility towards competitors

Competitors are the other businessmen or organizations involved in a similar type of business. Existence of competition helps the business in becoming more dynamic and innovative so as to make itself better than its competitors. It also sometimes encourages the business to indulge in negative activities like resorting to unfair trade practices. The responsibilities of business towards its competitors are:

a) not to offer exceptionally high sales commission to distributers, agents etc.

b) not to offer to customers heavy discounts and /or free products in every sale.c) not to defame competitors through false or ambiguous advertisements.

vii. Responsibility towards government

Business activities are governed by the rules and regulations framed by the government. The various responsibilities of business towards government are:

a. Setting up units as per guidelines of governmentb. Payment of fees, duties and taxes regularly as well as honestly.c. Not to indulge in monopolistic and restrictive trade practices.d. Conforming to pollution control norms set up by government.h. Not to indulge in corruption through bribing and other unlawful activities.

viii. Responsibility towards society

A society consists of individuals, groups, organizations, families etc. They all are the members of the society. They interact with each other and are also dependent on each other in almost all activities. There exists a relationship among them, which may be direct or indirect. Business, being a part of the society, also maintains its relationship with all other members of the society. Thus, it has certain responsibilities towards society, which may be as follows:

a. to help the weaker and backward sections of the societyb. to preserve and promote social and cultural valuesc. to generate employmentd. to protect the environmente. to conserve natural resources and wildlifef. to promote sports and cultureg. to provide assistance in the field of developmental research on education, medical science, technology etc.

According to Friedman’s Traditional view of Business Responsibility

“There is one and only one social responsibility of business that is to use its profit”.

In an enterprise, a corporate executive is an employee of the owner of the business. So, it is responsibility of the employees to conduct the business accordance to the desire of the employers.

It meant, the Social Responsibility of the employees towards its corporation is to cut down the price of the firm’s product to prevent inflation or and making more profit by proper utilization of resources.

According to Carroll’s 4 responsibility (modern way)

1) Economic -: responsibility of a businesses are to produce goods and services of value to society so that firm can repay its creditors and shareholders. (must do)

2) Legal -: responsibilities are defined by governments in laws that mgt is expected to obey. (Have to do)

3) Ethical -: responsibilities of an organization’s mgt are to follow the generally held belief about behavior in a society. It is defined as an accepted standard of behavior for an occupation, trade and a profession. (should do)

4) Discretionary -: responsibilities are the purely voluntary obligation a corporation assumes. (must do)

Example -: training the hard core unemployed and providing day care centres.

Carroll lists these 4 responsibilities in order of priority. A business firm must first make profit to satisfy its economic responsibility. To continue in existence, the firm must follow the laws, thus fulfilling its legal responsibilities. Afterward, the firm should look to fulfilling its social responsibilities and it includes ethical and discretionary, not economic and legal responsibilities.

Social Accounting

It meant the disclosure of all information or activities in respect of social performance of the organization which includes employee welfare, donation, education aid in natural disasters, health, pollution control, employment growth etc.

Example – Social accounting of ITC

Various Projects run by ITC as its CSR Activities

(A)Mission “Sunehra Kal”

A rural capacity building program

Active in 11 States

Empowers rural communities to adopt sustainable changes that make them economically competitive and socially secure.

ITC targets four problems, which it believes are the fundamental obstacles to productivity and growth in the farm sector :

• Loss of productivity through soil erosion caused by intensification of land use and decline of water tables and forest resources.

• Dependence on out-moded farm practices and inferior inputs.

• Loss and disruption of farm incomes and non-availability of alternative livelihoods.

• Inadequate access to primary education and healthcare.

ITC’s mission is to build community based capacity to remove these adverse conditionsand create the basis for renewed agrarian prosperity:

help farmers to achieve higher farm productivity,

enable communities to develop and manage water, soil and forest resources for long term ecological security,

Empower rural men and women by creating new non-farm livelihoods,

Facilitate development of infrastructure for primary education, health and sanitation.

In Andhra Pradesh, 3,596 hectares of wasteland have been developed so far through collaboration with the State Government’s rural poverty reduction project, Indira Kranthi Padham, and its Comprehensive Land Development programme.

ITC has also signed a landmark agreement with the Government of Rajasthan to bring 5,000 hectares under soil and moisture conservation in the drought-prone Bhilwara district.

Thus, by augmenting water resources and forest cover and fostering organic soil management, ITC has enhanced farm productivity. It has simultaneously opened up new avenues of non-farm income and employment to reduce pressure on land.

(B) Reviving the Resource Base- A Farmers' Movement

ITC works to bring farm productivity back to a path of sustainable and remunerative growth by enabling farmers to:

• develop water and forest resources to enhance soil fertility,• adopt soil and water management practices• apply superior farming methods to improve quality and quantity of farm yields.

ITC’s contribution to augmenting forest cover and water harvesting works in tandem with its internal practices of energy efficiency and conservation.

ITC has been water positive for the past 7 years, creating more than twice water harvesting capacity than its consumption,

It has been carbon positive for the last 4 years, sequestering twice the amount of carbon dioxide emitted by its operations.

(C) ITC Aforestation Programs “Social And Farm Forestry”

(D)INTEGRATED WATERSHED DEVELOPMENT

(E) INTEGRATED AGRICULTURAL DEVELOPMENT PROGRAM

(F) RURAL ECONOMY DEVELOMENT PROGRAMS

(G)WOMAN EMPOWERMENT PROGRAMS

(H)LIVESTOCK DEVELOPMENT PROGRAMS

(I) ITC’s PRIMARY EDUCATION INITIATIVE

(J) SAFEGUARDING MOTHER & HER CHILD

(K)ITC- Renewable Energy

Social Reporting- social performance

The annual financial statements of companies report on the financial result. Similarly social report give a detail of all the activities which are going to conduct or sponsored by corporation for external as well as internal environment of organization, in their annual director’s report, which are present in annual report of the corporation.

Social report is a business statement published every year to present a set of information about the social projects, benefits and actions addressed to employees, investors, market analysts, shareholders and the community at large.

Though social report the company shows what it does on behalf of its professional staff, their families, collaborators and the community at large. Transparency is given to the activities developed to improve quality of life.

Why need?

To show that we run our business ethicallyFor evaluate market analysts, investors and financersFor the knowledge of employees about fairness, transparency etc.

Various Projects run by ITC as its CSR Activities Mission “Sunehra Kal” Reviving the Resource Base- A Farmers' Movement ITC Afforestation Programs “Social And Farm Forestry” Integrated Watershed Development Programs Integrated Agricultural Development Programs Footprints Of hope- A Woman Empowerment Cum Rural

Economy Development Program Projects on Livestock Development ITC’s initiatives of Providing Primary Education to children Programs regarding safeguarding Mother And The Child ITC E-Choupal

Awards

United Nations Industrial Development Organisation (UNIDO) Award at the

international conference on Sharing Innovative Agribusiness Solutions 2008at

Cairo for ITC's exemplary initiatives in agri business through the e-Choupal.

The Ashoka - Changemakers 'Health For All' Award 2006 for the Rural Health

Services model for delivery of health services through the e-Choupals.

The Stockholm Challenge 2006. This award is for using information technology for

the economic development of rural communities.

Innovation for India Award 2006 for ITC e-Choupal in the Social Innovations

category for business organizations. The first of its kind in India, based on

parameters of number of lives impacted, degree of impact on organization and

environment, uniqueness, leverage of resources and whether it was scalable and

sustainable, e-Choupal was declared as one of 'India's Best Innovations'.

The Development Gateway Award 2005 (previously known as the Petersberg Prize)

for the trailblazing e-Choupal initiative. ITC is the first Indian company and the

second in the world to win this prestigious award.

The 'Golden Peacock Global Award for Corporate Social Responsibility (CSR) in

Emerging Economies for 2005'. The Company received this award for its e-Choupal

and social and farm forestry initiatives that are impactfully transforming lives and

landscapes in rural India.

The Corporate Social Responsibility Award 2004 from The Energy and

Resources Institute(TERI) for its e-Choupal initiative. The Award provides impetus to

sustainable development and encourages ongoing social responsibility processes within

the corporate sector.

The inaugural 'World Business Award', instituted jointly by the International

Chamber of Commerce (ICC), the HRH Prince of Wales International Business

Leaders Forum (IBLF) and the United Nations Development Programme

(UNDP). This award recognises companies who have made significant efforts to create

sustainable livelihood opportunities and enduring wealth in developing countries.

The 'Enterprise Business Transformation Award' for Asia Pacific (Apac),

instituted by Infosys Technologies and Wharton School of the University of

Pennsylvania.

PC Quest's IT Implementation Award in the 'Best Project' category.

The Golden Peacock Innovation Award 2004.

The NASSCOM award for 'Best IT User in FMCG' in 2003. The Award is a recognition

of ITC's successful integration of its IT usage with its business processes.

The Seagate Intelligent Enterprise of the Year 2003 Award, for the most

innovative usage of Information Technology.

Social Audit

It’s a tool to measure the social performance of the organization.

FormatI. Social Benefits & Costs to Staff

A. Social Benefits to Staff1. Medical and hospital facilities2. Education facilities3. Canteen facilities4. Recreation, entertainment & cultural activities5. Housing & township facilities6. Water supply, concessional electricity & transport7. Training & career development8. Providing fund, gratuity, bonus, insurance benefits9. Holiday, leave encashment and leave travel benefits10. Other benefits

Total benefits to staffB. Social Costs to staff

1. Lay off and involuntary termination2. Extra hours put in officers voluntarily

Total cost to staffNet social Income to staff (A-B)

II. Social Benefits and Costs to CommunityA. Social Benefits to Community

1. Local taxes paid to Panchayat/ Municipality2. Environmental improvements3. Generation of job potential4. Generation of business

Total Social benefits to CommunityB. Social Costs to Community

1. Increase in cost of living Net social Income to Community (A-B)

III. Social Benefits & Costs to General publicA. Social Benefits to general public

1. Taxes, duties, etc, paid to State Govt2. Taxes, duties, etc, paid to Central Govt

Total Benefits to General publicB. Social Costs to General public

1. State Service consumed-electricity2. Central Services consumed

- Telephone, telegrams, postal services and banking

Total social costs to General Public

Net Social Benefits to General Public III (A-B)

Net social income to staff, community & general public (I+II+III)