Social Responsibility

Social responsibility defines the concept of individuals and businesses taking the responsibility to act in the best interest of their society and environment while working for their betterment or profit. 

An entity can work towards its growth but parallelly should work to uplift the whole society by carefully evaluating the impact of its actions on society and the environment. It helps entities to have social goals, follow sustainability concepts, and focus on long-term growth.

• Social responsibility reflects the individuals' and organizations' responsibility to act in the best interest of their society and engage in activities contributing to social development.
• It has four types: economic, environmental, philanthropic, and ethical. Applying the concept in business creates corporate social responsibility (CSR).
• Simple examples include banning plastics, using green products, green manufacturing, etc.
• CSR opponents criticize CSR incorporation in business since its incorporation affects the short-term profit motives of the businesses.

Social responsibility theory defines the basic idea of giving back to society and contributing to its betterment. It generally includes principles and practices that entities worldwide follow to maintain a balance between profit generation and to create a better society. In essence, it explains the accountability of individuals and organizations toward society.

It can take different forms. Its scope is so wide that it can be done in endless ways. For example, people avoiding plastic usage is a simple and effective step toward protecting the environment. Switching to renewable energy sources is another way of implementing activities benefitting society.

Let's look into social responsibility example for better understanding:

Example #1

Mary runs a retail clothing chain store and has grown her venture into a popular brand. She has made an immense profit in the fashion industry. As a social responsibility, Mary often organizes blood donation camps every year in each store; this way, Mary contributes to society, fulfilling her purpose as a form of individual social responsibility. She also annually donates a fixed sum to different charities and NGOs.

Because most of her staff and workers are female, she strictly follows flexible timings, paid maternal leave policies, and labor rights. In addition, she ensures that the working standards are well maintained, and employees in her company are reasonably paid. Lastly, she also ensures minimum or no wastage during the manufacturing process. This way, Mary takes care of all types of social responsibility while doing business.

Example #2

Nike is one of the world-renowned companies. The company follows standards strictly and practices good CSRs; the company has a diversity and inclusion program to provide a healthy work environment. Nike stated that by 2025, people from racial and ethnic minorities in the United States should make up 35% of its global business workforce. In 2020, the company also allocated $4 million to support diversity in North America. Nike has also spent $89 million to help 17 million kids to get active in sports and exercises.

Corporate social responsibility or CSR occurs when companies and business organizations engage in social responsibility. They may follow different CSR models as per their concerns, interest, and mode of operations. However, it is not compulsory for every company.

A small example is from Apple Inc; the company removed the plastic wrap from the packaging of the iPhone 13 to reduce plastic usage. In addition, companies may indulge in donations and charities. Some may use green initiatives to build their products and services following environmental protection policies. These cases point to some corporate social responsibility examples.

Many companies still follow a more capitalistic behavior and try to earn more and more at the cost of environmental damage, causing social harm to people, and exploiting workers. Many capitalistic economists disfavor it because businesses spend their funds on activities like charities and campaigns. Opponents advocate that indulging in and spending funds on such activities results in forgoing certain good profit-making opportunities.

Companies with CSR activities usually have a CSR manager or coordinator to manage CSR activities and ensure the business operations positively impact society and the environment. There are majorly four types of social responsibility - economic, environmental, philanthropic, and ethical CSR. These types form the blocks in the pyramid of CSR in an organization. The bottom part represents the economic responsibility to become profitable, followed by legal responsibility indicating the responsibility to obey the law, then ethical responsibility indicating the importance of following ethics. Finally, the topmost block denotes philanthropic responsibilities and sets to create good corporate citizens.

• It is important to keep the environment clean and protected.
• In a general sense, people live in a social environment; hence it is the duty of people to contribute to its growth and welfare. It helps in creating a balance between economic growth and social welfare.
• It helps maintain a check on a firm's business activities, ensuring they do not support an absolute capitalistic mindset.
• By incorporating corporate social responsibility, companies reap the benefits like creating goodwill, enhancing brand value, reducing the cost of operation, etc.
• It is important to develop an emotional connection and sentimental bonding with people, increasing the customer base. A company can also use social responsibility in marketing, advertising, and promotion. Consumers trust companies and buy products of such socially responsible companies, so in a way, indirect promotion of companies occurs while working towards a social cause.
• Companies with a strong reputation are appealing to employees. CSR events include volunteering programs to promote qualities like loyalty and empathetic behavior. Employee bonding and coordination improve as a result. Altogether leading to employee retention and engagement.
• CSR helps relieve poverty in various ways, such as by enhancing compensation, ensuring economic stability, and creating more jobs for the unemployed.

This article has been a guide to Social Responsibility & its definition. We explain its types, social responsibility in business, importance, and examples. You can also go through our recommended articles on corporate finance -

• Profit Motive
• Ethical Investing
• Business Ethics