Concept and Meaning of Social Responsibility of Business

A business does not operate in isolation — it draws resources (capital, labour, raw material, land) from society and, in turn, affects society through the goods and services it produces, the jobs it creates, and the wider environmental and social consequences of its activities. Social responsibility of business is the obligation of a business enterprise to take decisions and actions that protect and promote the welfare of society as a whole, and not merely the narrow financial interest of its owners.

This obligation is usually understood as going beyond what the law strictly compels a business to do (its legal responsibility) and beyond what is merely profitable for the business (its economic responsibility). A widely used way of organising a business's responsibilities places them in four broad, overlapping categories: economic responsibility (to be efficient and profitable, since an unprofitable business cannot serve anyone for long); legal responsibility (to comply with the laws of the land — labour law, tax law, environmental law, and so on); ethical responsibility (to do what is right, fair and just even where the law is silent or does not go far enough); and discretionary (or philanthropic) responsibility (voluntary activities that improve the quality of life in the community, such as supporting education or health causes, that go beyond what is expected as a duty).

Social responsibility, understood this way, is not opposed to running a business profitably — it is the recognition that a business's "licence to operate" ultimately depends on the goodwill and trust of the society it operates within, and that ignoring this can carry real long-term costs even where short-term profit is unaffected.