CONCEPT OF SOCIAL RESPONSIBILITY NOTES 2021
CONCEPT OF SOCIAL RESPONSIBILITY NOTES 2021
The term social responsibility is defined in various ways. Some people defines it
as the responsibility of business to perform its basic economic function of
producing and supplying products and services in the most efficient manner as to
maximize profits. Others define it as the obligation to consider the interests of
society while performing its economic function. Still others views it as the
philanthropic and charitable activities to promote education, health, employment,
rural development and other social cause.
* Social responsibility means that individuals and companies have a duty to act in the best interests of their environment and society as a whole. Social responsibility, as it applies to business, is known as corporate social responsibility(CSR)
Three concept of social responsibility
• profit responsibility
• stakeholders responsibility
❖ In fact, social responsibility implies responsibility to society beyond the basic
economic responsibility of efficiency and profitability. As an economic agent of
society, a business enterprise must use its economic power to protect and
promote public interest and social values.
❖ In the words of DRUCKER, “Social responsibility requires managers to consider
whether their action is likely to promote the public good, to advance the basic
beliefs of our society, to contribute to its stability, strength and harmony”.
❖ According to Keith Davis, “social responsibility is the obligation of the decision
makers to take decisions which protect and improve the welfare of the society
as a whole along with their own interests.
The Need for Social Responsibility
• Self-interest: It is in the self-interest of the business to have a social
responsibility as it opens opportunities for understanding the problems and
issues of society.
• A better environment for Business: In today’s cynical age, social
responsibility keeps the businesses honest and the markets stable.
• Public image: When a business takes initiative to solve the problems of the
society, it puts the business in the goodwill of the people.
• Social power: A leader is a helper. Helping the society is a form of social
• responsibility. Executing social work helps the business attain social power within
• the society.
Case For Social Responsibility
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•The justification for existence and growth:-
•The primary goal of business is to
make profits as only profits can help the business sustain and expand. Profits
should only be made as a return of service to the society by producing goods and
services.
• The long-term-term interest in the firm: A firm is to gain maximum profits in
• the long run if it has it’s the highest goal as service to society. As humans are
• social beings, when they notice that a particular corporation is not serving its the
• best interest socially, they do not support the organization further.
• Avoidance of government regulations: Government is the highest authority
in the nation. When a government feels that the business is not socially
responsible or is creating problems like pollution, the government limits its
freedom.
• Maintenance of Society: Business is one of the important pillars on which
• society survives. It is the responsibility of business to take care of society’s
• needs. Law alone can’t help people with the issues they face. Therefore
• businesses contribute to the well being, peace and harmony of society.
• • Availability of resources with Business: Business enterprises have huge
financial resources, very efficient managers & contacts and thereby they can
ensure that a social problem can be solved easily.
• Converting problems into opportunities: Business means risk. And turning
• risky situations into profits can also be related to solving social problems.
• Holding Business responsible for Social problems: Business enterprises
are responsible for many problems such as pollution, discriminated employment,
corruption, etc. It is the duty of the business to solve the problems created by
them.
Case Against Social Responsibility
• Violation of maximization of the profit motive: This statement argues that
• business exists only for maximizing profits and businesses fulfill their social
• responsibility best by maximizing profits by increasing efficiency and reducing
• costs. They need not take up any additional obligations.
• Side effects on Consumers: Customers suffer because of the solving social
problems and taking social care requires a huge financial investment. As the
money within the business is used in social help, the business increase the cost
of their products and services.
• Lack of Social skills: It is often stated that businessmen don’t fully under the
• social problems and thus can’t solve them efficiently.
• Personal resistance: People tend to dislike interference from businesses in
their problems.
Social Responsibilities for Different Groups
Responsibility Towards the Shareholders:-
• Shareholders are the owners of the company.
• The company should make all the efforts to maximize and protect shareholder’s
wealth.
• Sharing of useful information with the shareholders, utilization of funds etc.
• Responsibility Towards the Employees:-
• Workers are the key persons behind company success.
• Management of the enterprise must provide the proper working conditions to
• the workers.
• Workers should get fair salaries and wages.
Responsibility Towards the Consumers :
• It is the consumer who buys the company’s product & services.
• So, it is the responsibility of the company to provide the right quality, right
quantity with the right price to the consumer.
• There should not be the unfair trade practices like adulteration, poor quality,
• courtesy to the customers etc.
Responsibility Towards the Government & Community :-
• Enterprises must follow the laws and regulations of the country/ state in which it
is operating.
• The organization should interact with society to know what they require.
• It should maintain proper infrastructure, proper disposal system and should not
cause harm to the society in any manner.
• To keep the environment healthy and free from all types of pollution.
• To contribute to the upliftment of the weaker sections of society
• To encourage fair trade practices.
• CORPORATE SOCIAL RESPONSIBILITY (CSR)
• UNDER THE COMPANIES ACT, 2013
• Introduction:
• ➢ Corporate Social Responsibility (CSR) can be defined as a Company’s
• sense of responsibility towards the community and environment (both
• ecological and social) in which it operates. Companies can fulfill this
• responsibility through waste and pollution reduction processes, by
• contributing educational and social programs, by being environmentally
• friendly and by undertaking activities of similar nature. CSR is not charity
• or mere donations. CSR is a way of conducting business, by which
• corporate entities visibly contribute to the social good. Socially responsible
• companies do not limit themselves to using resources to engage in
• activities that increase only their profits. They use CSR to integrate
economic, environmental and social objectives with the company’s
operations and growth. CSR is said to increase reputation of a company’s
brand among its customers and society.
➢ The Companies Act, 2013 has formulated Section 135, Companies
(Corporate Social Responsibility) Rules, 2014 and Schedule VII which
prescribes mandatory provisions for Companies to fulfill their CSR. This
article aims to analyze these provisions (including all the amendments
therein).
Corporate Social Responsibility Applicability
• CSR is Applicable from 1st April 2014.
• Section 135(1) of Company Act 2013 mandates the CSR expenditure /
CSR. Applicability for the following companies– Every company having
a) net worth of Rs.500 crore,
b) turnover of Rs.1000 crores
c) or net profit of Rs.5.00 crore
• Where net profit excludes income from overseas branch & divided distributed
by company on which this section apply.
• If any company on which CSR provisions were applicable cease to come in
above criteria for consecutive three years , they are not required to follow the
provision of CSR.
Functions of CSR Committee
The CSR Committee shall—
• Formulate and recommend to the Board, a CSR Policy which shall indicate the
activities to be undertaken by the Company.
• Recommend the amount of expenditure to be incurred on the activities referred
to in clause(i).
• Monitor the CSR Policy of the company from time to time.
• Institute a transparent monitoring mechanism for implementation of the CSR
projects or programs or activities undertaken by the company.
CSR Policy
The CSR Policy of the company shall, inter-alia, include the following namely:-
• A list of CSR projects or programs which a company plans to undertake
• specifying modalities of execution of such project or programs and
• implementation schedules for the same.
• Monitoring process of such projects or programs.
• A clause specifying that the surplus arising out of the CSR projects or
• programs or activities shall not form part of the business profit of the company.
Conclusions
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