Social Responsibilities of Social Responsibilities of Business (SRB)Business (SRB)

Social Responsibility of Business Social Responsibility of Business Social Responsibility of Business refers to all that Social Responsibility of Business refers to all that

business does for the benefit of the society, over business does for the benefit of the society, over and above the statutory requirement.and above the statutory requirement.

Operation of business affect a wide spectrum of Operation of business affect a wide spectrum of areas, and it even impacts people who are not areas, and it even impacts people who are not connected with the enterprise. The shareholders, connected with the enterprise. The shareholders, the suppliers, the consumers, the local community the suppliers, the consumers, the local community and the society at large are all affected by the way and the society at large are all affected by the way an enterprise functions. an enterprise functions.

Hence it is expected that a business enterprise Hence it is expected that a business enterprise would be socially responsible so that there is a would be socially responsible so that there is a balance of forces between those with opposing balance of forces between those with opposing interests. interests.

Nature of Social Responsibility of Nature of Social Responsibility of BusinessBusiness

Nature of SRB can be classified into two Nature of SRB can be classified into two categories:categories:

1. The manner in which a business carries out 1. The manner in which a business carries out its business. This in turn involves, accepting that its business. This in turn involves, accepting that business in not solely a profit- making business in not solely a profit- making occupation but it is a social function with some occupation but it is a social function with some duties towards society. These involve obeying duties towards society. These involve obeying the law of the land, producing good quality the law of the land, producing good quality products, paying fair wages, dividends to products, paying fair wages, dividends to shareholders, paying taxes, taking up shareholders, paying taxes, taking up investments and increase industrialisation in investments and increase industrialisation in backward areas etc.backward areas etc.

Promoting social welfare, even directly Promoting social welfare, even directly sometimes.sometimes.

Social Orientation of BusinessSocial Orientation of Business The extent of social orientation of business vary The extent of social orientation of business vary

across companies and over time. across companies and over time. Some models try to describe the evolution and Some models try to describe the evolution and

extent of social orientation of companies. extent of social orientation of companies. CARROLL’S MODELCARROLL’S MODEL Carroll’s model defines corporate social Carroll’s model defines corporate social

responsibility as the entire range of obligations that responsibility as the entire range of obligations that business has to society. And there are basic business has to society. And there are basic 44 obligationsobligations

EconomicEconomic: which involves efficient operation for : which involves efficient operation for satisfying economic needs of the society and satisfying economic needs of the society and generation of surplus for rewarding shareholders generation of surplus for rewarding shareholders and investing for development. and investing for development.

Carroll’s Model Carroll’s Model LegalLegal: Obeying the law of the country of : Obeying the law of the country of

operationoperation EthicalEthical: Company should not resort to unethical : Company should not resort to unethical

practices, like bribing, extortion, unfair practices, like bribing, extortion, unfair competitive practicescompetitive practices

DiscretionaryDiscretionary: Refers to voluntary contributions : Refers to voluntary contributions of business to various social clauses. of business to various social clauses.

Akerman’s ModelAkerman’s Model According to this model there are three phases According to this model there are three phases

in the development of social responsiveness of a in the development of social responsiveness of a company. company.

These three phases through which companies These three phases through which companies commonly tend to pass in developing a commonly tend to pass in developing a response to social issues are:response to social issues are:

Phase IPhase I: Company becomes aware of a : Company becomes aware of a particular social problem particular social problem

Phase IIPhase II: Company hires staff specialists or : Company hires staff specialists or engages external consultants to study the engages external consultants to study the problem and suggest ways of dealing with itproblem and suggest ways of dealing with it

Phase III:Phase III: Implementation – Company integrates Implementation – Company integrates the policy into its ongoing operations. This the policy into its ongoing operations. This comes slowly & not often until forced by the comes slowly & not often until forced by the government or public opinion.government or public opinion.

Late implementation or no responsiveness may Late implementation or no responsiveness may create problems that may become legal in create problems that may become legal in nature as well.nature as well.

According to Ackerman the best way is to According to Ackerman the best way is to response to a social issue at the earliest.response to a social issue at the earliest.

““Act early in the life cycle of any social issue in Act early in the life cycle of any social issue in order to enjoy the largest amount of managerial order to enjoy the largest amount of managerial discretion over the outcome.”discretion over the outcome.”

Factors Influencing Extent of Social Factors Influencing Extent of Social Orientation of BusinessOrientation of Business

Values and Visions of promoters and top Values and Visions of promoters and top management.management.

Attitude of the members of the Board, who Attitude of the members of the Board, who decide major policies and resource allocationdecide major policies and resource allocation

Attitude of various stakeholders like Attitude of various stakeholders like shareholders, creditors, employeesshareholders, creditors, employees

Societal FactorsSocietal Factors Government and Laws: Government and Laws: Competitors Competitors Resources Resources

Responsibilities to Different Responsibilities to Different SectionsSections

Responsibility to ShareholdersResponsibility to Shareholders: This is the : This is the primary responsibility to shareholders as they primary responsibility to shareholders as they are the owners. Growth, innovation and earning are the owners. Growth, innovation and earning profit, therefore remains necessary for fulfilling profit, therefore remains necessary for fulfilling this social responsibility.this social responsibility.

Responsibility to EmployeesResponsibility to Employees: Success of an : Success of an enterprise depends on the employees’ enterprise depends on the employees’ cooperation and involvement. Therefore cooperation and involvement. Therefore payment of fair wages, provision of best possible payment of fair wages, provision of best possible work environment, establishment of fair work work environment, establishment of fair work standards and norms, provision of labour welfare standards and norms, provision of labour welfare facilities, appreciation and recognition for special facilities, appreciation and recognition for special skills and abilities etc. skills and abilities etc.

Responsibilities to Different Responsibilities to Different SectionsSections

Responsibility to CommunityResponsibility to Community: Preventing : Preventing environmental pollution, and preserving ecological environmental pollution, and preserving ecological balance, rehabilitating people displaced by the balance, rehabilitating people displaced by the business, assisting in overall development of business, assisting in overall development of locality, development of backward areas, locality, development of backward areas, promotion of research and development, promoting promotion of research and development, promoting growth of ancillaries and small scale industries etc. growth of ancillaries and small scale industries etc.

Responsibility to ConsumersResponsibility to Consumers: To improve quality, : To improve quality, reduce prices by increasing efficiency, through reduce prices by increasing efficiency, through research and developmental activities, providing research and developmental activities, providing required after-sales service, to avoid misleading required after-sales service, to avoid misleading through improper adv, provide proper information through improper adv, provide proper information about the adverse effects, risks of the products. about the adverse effects, risks of the products.

Arguments for Social ResponsibilityArguments for Social Responsibility Business which survives using the resources of Business which survives using the resources of

society has a responsibility to society. society has a responsibility to society. Changed public Expectations of Business Changed public Expectations of Business Social Responsibility, like recycling of waste, Social Responsibility, like recycling of waste,

may have favourable financial impact. may have favourable financial impact. Better Environment of BusinessBetter Environment of Business Public imagePublic image To avoid Govt. RegulationTo avoid Govt. Regulation Balance of responsibility with powerBalance of responsibility with power Moral responsibility & Citizen ArgumentMoral responsibility & Citizen Argument GlobalizationGlobalization

Arguments against Social Arguments against Social ResponsibilityResponsibility

Profit maximization- the question of efficiencyProfit maximization- the question of efficiency Society has to pay the additional costSociety has to pay the additional cost Lack of social skillsLack of social skills Social overhead costsSocial overhead costs Lack of accountabilityLack of accountability Responsibility towards stakeholdersResponsibility towards stakeholders

Barriers to social Barriers to social responsibilityresponsibility

The Individual ManagerThe Individual Manager Focus on profitFocus on profit Lack of Industry supportLack of Industry support

ConsumerismConsumerism OrganisedOrganised endeavour of consumers to protect endeavour of consumers to protect

their rights is called their rights is called ConsumerismConsumerism. . Consumer RightsConsumer Rights Right against exploitation by unfair trade Right against exploitation by unfair trade

practices, practices, Right to protection of health and safety from Right to protection of health and safety from

goods consumedgoods consumed Right to be informed about the quality and Right to be informed about the quality and

standards, standards, Right to be heard in case of grievances Right to be heard in case of grievances Right to have genuine grievances addressedRight to have genuine grievances addressed

ConsumerismConsumerism Movement to inform consumers & protect them Movement to inform consumers & protect them

from business malpracticesfrom business malpractices Focus Areas – inferior & dangerous Focus Areas – inferior & dangerous

merchandise, unfair business practices, & false merchandise, unfair business practices, & false or misleading advertisementsor misleading advertisements

Malpractices - Artificial scarcity, price hikes, Malpractices - Artificial scarcity, price hikes, distorted advertisements, product qualitydistorted advertisements, product quality

Consumer Protection ActConsumer Protection Act Consumer Protection Act, 1986 – enacted by the Consumer Protection Act, 1986 – enacted by the

Central Govt. (modified by the Amendment Act Central Govt. (modified by the Amendment Act 1993)1993)

Protects against unfair trade practices, Protects against unfair trade practices, unsatisfactory services & defective goodsunsatisfactory services & defective goods

Special forums at district, state & central levels Special forums at district, state & central levels to deal exclusively with consumer complaints & to deal exclusively with consumer complaints & issues.issues.

Compensation to be awarded to the affected Compensation to be awarded to the affected consumersconsumers

Most progressive, comprehensive & unique Most progressive, comprehensive & unique legislationlegislation

A revolution in the field of consumers’ rightsA revolution in the field of consumers’ rights

Objectives of the Central CouncilObjectives of the Central Council Protects the following rightsProtects the following rights Right to be protected against marketing of goods Right to be protected against marketing of goods

& services which are hazardous to life & & services which are hazardous to life & propertyproperty

Right to be informed about quality, quantity, Right to be informed about quality, quantity, potency, purity, standard & price of goods & potency, purity, standard & price of goods & services so as to protect the consumer against services so as to protect the consumer against unfair trade practicesunfair trade practices

Right to be assured, wherever possible, access Right to be assured, wherever possible, access to a variety of goods at competitive pricesto a variety of goods at competitive prices

Right to be heard and assured that consumer’s Right to be heard and assured that consumer’s interests will receive due consideration at interests will receive due consideration at appropriate forumsappropriate forums

Right to seek redressal against unfair trade Right to seek redressal against unfair trade practices or unscrupulous exploitation of practices or unscrupulous exploitation of consumersconsumers

Right to consumer educationRight to consumer education

Consumer Disputes Redressal Consumer Disputes Redressal AgenciesAgencies

The Protection Act provides for a: The Protection Act provides for a: Three tier consumer redressal system – district, Three tier consumer redressal system – district,

state and national levelstate and national level District forumDistrict forum State CommissionState Commission National Commission: Established by the govt. National Commission: Established by the govt.

in 1988in 1988

Consumer ComplaintsConsumer Complaints A complaint, in relation to any goods sold or A complaint, in relation to any goods sold or

delivered or any service provided may be filed delivered or any service provided may be filed with the redressal agency by –with the redressal agency by –

a)a) The consumer to whom such goods are sold or The consumer to whom such goods are sold or delivered or such service provideddelivered or such service provided

b)b) Any recognized consumer association, Any recognized consumer association,

c)c) One or more consumers having a common One or more consumers having a common interestinterest

d)d) The Central or State Govt.The Central or State Govt.

Remedial ActionRemedial Action If the consumer disputes redressal agency is satisfied If the consumer disputes redressal agency is satisfied

that any of such allegations contained in the complaint is that any of such allegations contained in the complaint is true, it shall issue an order to the opposite party directing true, it shall issue an order to the opposite party directing him to take one or more of the following things, namely:him to take one or more of the following things, namely:

To remove the defect pointed To remove the defect pointed To replace goodsTo replace goods To compensate with high awardTo compensate with high award Price returnPrice return To remove defectsTo remove defects To discontinue unfair trade and not repeat themTo discontinue unfair trade and not repeat them Not to offer hazardous goods for saleNot to offer hazardous goods for sale To withdraw goods from sale offerTo withdraw goods from sale offer To provide for adequate costs to parties To provide for adequate costs to parties

Cost of Consumer ProtectionCost of Consumer Protection Economic costs – costs of manufacturing safety Economic costs – costs of manufacturing safety

devices incurred by the firm. E.g. – safety devices incurred by the firm. E.g. – safety belts, pollution control devices belts, pollution control devices

Social costs – incurred in three ways – loss of Social costs – incurred in three ways – loss of freedom of choice (increased protection implies freedom of choice (increased protection implies dependence on the system), fear of product dependence on the system), fear of product liability discourages innovationliability discourages innovation

Opportunity Costs – “Disproportionate Concern Opportunity Costs – “Disproportionate Concern with Consumer Protection may divert attention with Consumer Protection may divert attention and resources away from social problems which and resources away from social problems which should have equal or perhaps greater priority”should have equal or perhaps greater priority”