Arguments for Social Responsibility

The case in favour of business assuming social responsibility rests on eight arguments:

• (i) Justification for existence and growth: Business exists to provide goods and services that satisfy human needs. Although the profit motive is an important reason for undertaking business, profit should be seen as the outcome of service to people. The prosperity and growth of a business is possible only through continuous service to society — so assuming social responsibility justifies the very existence and growth of business.
• (ii) Long-term interest of the firm: A firm and its image gain the most profit in the long run when their highest goal is 'service to society'. If growing numbers of people — workers, consumers, shareholders, government officials — feel the enterprise is not serving their best interest, they withdraw their cooperation. Fulfilling social responsibility is therefore in the firm's own interest, and it improves the firm's public image.
• (iii) Avoidance of government regulation: Government regulations limit a business's freedom and are seen as undesirable. By voluntarily assuming social responsibilities, businesses reduce the need for new laws and thereby avoid the burden of further regulation.
• (iv) Maintenance of society: Laws cannot be framed for every possible circumstance. People who feel they are not getting their due may resort to anti-social activities not governed by law, which can ultimately harm business itself. It is therefore desirable for enterprises to assume social responsibilities.
• (v) Availability of resources with business: Businesses possess valuable financial and human resources — a pool of managerial talent, capital, and years of organising experience — which can be used effectively to help society tackle its problems.
• (vi) Converting problems into opportunities: Business has a history of turning risky situations into profitable deals. With the same ability, it can not only solve social problems but also make them productively useful by accepting the challenge.
• (vii) Better environment for doing business: A society full of complex problems offers a poor setting for success. If business helps meet social needs before problems threaten its own survival, it creates a healthier environment in which to operate — a society with fewer problems is a better place to do business.
• (viii) Holding business responsible for social problems: Some social problems — environmental pollution, unsafe workplaces, corruption in public institutions, discriminatory employment practices — have been created or worsened by business itself. It is therefore the moral obligation of business to help solve them, rather than expecting other agencies to deal with them alone.

CSR under Indian law (informational box): In India, CSR is governed by Clause 135 of the Companies Act, 2013 (passed by both Houses of Parliament, and assented to by the President on 23 August 2013). The provisions apply to companies with an annual 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. Key points: …