Meaning and Concept of Social Responsibility of Business

1. Meaning and Concept of Social Responsibility of Business

Social responsibility of business means the obligation of a business enterprise to take

decisions and actions that protect and improve the welfare of society, alongside pursuing its

own legitimate interest of earning a profit. It rests on a simple but powerful idea: a business

is not a closed, self-sufficient unit — it draws capital from investors, labour from workers,

raw material and land from the community, and infrastructure and law-and-order from the state.

Because it draws so much FROM society, the classical view that a firm's only job is to maximise

profit for its owners has, over time, given way to a broader view that a firm must also give

something back.

How the idea has evolved:

• Classical/traditional view — a business's sole objective is to maximise profit for its owners within the four corners of the law; social welfare is the government's job, not a private firm's.
• Modern/stakeholder view — a business is answerable not only to its owners but to every group whose interest is affected by its decisions (its stakeholders): employees, consumers, suppliers, the government, and the community/society at large. On this view, ignoring the welfare of these groups is not just morally questionable, it is also poor long-run business strategy, since a firm depends on the continued goodwill and cooperation of exactly these groups to survive.
• Statutory view — for a defined class of large companies, India has since gone one step further and made a specific form of this responsibility a binding legal obligation rather than a purely voluntary choice, under Section 135 of the Companies Act, 2013 (Section 5 of this chapter).

Why social responsibility matters, stated plainly: a business that only ever asks "is this

profitable?" and never asks "is this fair to the people and the environment this decision

affects?" eventually damages the very foundations — a skilled workforce, loyal customers, a

functioning environment, a cooperative government — that its own profitability depends on. Social

responsibility is, in this sense, an investment in the business's own long-term survival, not

merely a cost imposed from outside. …