NCERT Textbook - Social Responsibilities of Business & Business Ethics | Business Studies (BST) Class 11 - Commerce PDF Download

 Page 1


Chapter 6
Social Re Spon Sibilitie S of b u Sine SS and 
b u Sine SS e thic S
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
explain the concept of social responsibility;
•	
discuss the need for social responsibility;
•	
identify the social responsibility towards different interest groups;
•	
analyse the relationship between business and environmental 
protection; and
•	
define 	 the 	 con cept 	 of 	 bu siness 	 ethics 	 and 	 state 	 the 	 elemen ts 	 of	
business ethics.
Chapter 6.indd   133 9/2/2022   2:11:36 PM
2024-25
Page 2


Chapter 6
Social Re Spon Sibilitie S of b u Sine SS and 
b u Sine SS e thic S
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
explain the concept of social responsibility;
•	
discuss the need for social responsibility;
•	
identify the social responsibility towards different interest groups;
•	
analyse the relationship between business and environmental 
protection; and
•	
define 	 the 	 con cept 	 of 	 bu siness 	 ethics 	 and 	 state 	 the 	 elemen ts 	 of	
business ethics.
Chapter 6.indd   133 9/2/2022   2:11:36 PM
2024-25
134 BUSINESS  STUDIES
6.1 i nt Roduction A business enterprise should do 
business and earn money in ways that 
fulfill 	 the 	 expectations 	 of 	 the 	 society.	
Every individual living in society has 
certain obligations towards society. 
He has to respect social values and 
norms of behaviour. A business 
enterprise is permitted by society to 
carry on industrial or commercial 
activities 	 and 	 thereby 	 earn 	 profits. 	 But	
it is obligatory on part of the business 
enterprise not to do anything, that 
is undesirable from society’s point 
of view. Manufacture and sale of 
adulterated goods, making deceptive 
advertisements, not paying taxes which 
are due, polluting the environment and 
exploiting workers are some examples 
of socially undesirable practices which 
may	 increase 	 the 	 profit 	 of	 enterprises	
but which have adverse effect on society 
at large. On the other hand, supplying 
good quality goods, creating healthy 
working conditions, honestly paying 
taxes prevention/installing pollution 
devices in the factory, and sincerely 
attending to customer complaints are 
examples of socially desirable practices 
which improve the image of enterprises 
and also make them profitable. In 
fact, it is through socially responsible 
and ethically upright behaviour that 
business enterprises can get durable 
success.
6.2 c oncept of Social Re Spon Sibility Social responsibility of business refers  
to its obligation to take those decisions 
and perform those actions which are 
desirable in terms of the objectives and 
values of our society. The assumption 
of social responsibilities by business 
enterprises implies that they respect 
the aspirations of society and would 
try their best to contribute to the 
achievement of these aspirations along 
with 	 their 	 profit 	 interests. 	 This 	 idea 	 is 	
in contrast to the common notion that 
Mani is a young newspaper reporter and has been writing for almost six months 
on malpractices by business enterprises including such issues as misleading 
advertisements, supply of adulterated products, poor working conditions, 
environmental	 pollution, 	 bribing	 government	 officials, 	 and	 so 	 on.	 He 	 has 	 started	
believing that business people tend to do anything to mint money. He happens 
to take an interview of Mr. Raman Jhunjhunwala, chairman of a leading truck 
manufacturing company which is known for its fair dealing with customers, 
employees, investors as well as other social groups. Through this interview, Mani 
develops the understanding that it is possible for a business enterprise to be socially 
responsible	 and	 ethically	 upright 	 and,	 at	 the 	 same	 time,	 be	 highly	 profitable. 	 He 	
then gets busy with studying more about the social responsibility of business and 
business ethics.
Chapter 6.indd   134 9/2/2022   2:11:36 PM
2024-25
Page 3


Chapter 6
Social Re Spon Sibilitie S of b u Sine SS and 
b u Sine SS e thic S
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
explain the concept of social responsibility;
•	
discuss the need for social responsibility;
•	
identify the social responsibility towards different interest groups;
•	
analyse the relationship between business and environmental 
protection; and
•	
define 	 the 	 con cept 	 of 	 bu siness 	 ethics 	 and 	 state 	 the 	 elemen ts 	 of	
business ethics.
Chapter 6.indd   133 9/2/2022   2:11:36 PM
2024-25
134 BUSINESS  STUDIES
6.1 i nt Roduction A business enterprise should do 
business and earn money in ways that 
fulfill 	 the 	 expectations 	 of 	 the 	 society.	
Every individual living in society has 
certain obligations towards society. 
He has to respect social values and 
norms of behaviour. A business 
enterprise is permitted by society to 
carry on industrial or commercial 
activities 	 and 	 thereby 	 earn 	 profits. 	 But	
it is obligatory on part of the business 
enterprise not to do anything, that 
is undesirable from society’s point 
of view. Manufacture and sale of 
adulterated goods, making deceptive 
advertisements, not paying taxes which 
are due, polluting the environment and 
exploiting workers are some examples 
of socially undesirable practices which 
may	 increase 	 the 	 profit 	 of	 enterprises	
but which have adverse effect on society 
at large. On the other hand, supplying 
good quality goods, creating healthy 
working conditions, honestly paying 
taxes prevention/installing pollution 
devices in the factory, and sincerely 
attending to customer complaints are 
examples of socially desirable practices 
which improve the image of enterprises 
and also make them profitable. In 
fact, it is through socially responsible 
and ethically upright behaviour that 
business enterprises can get durable 
success.
6.2 c oncept of Social Re Spon Sibility Social responsibility of business refers  
to its obligation to take those decisions 
and perform those actions which are 
desirable in terms of the objectives and 
values of our society. The assumption 
of social responsibilities by business 
enterprises implies that they respect 
the aspirations of society and would 
try their best to contribute to the 
achievement of these aspirations along 
with 	 their 	 profit 	 interests. 	 This 	 idea 	 is 	
in contrast to the common notion that 
Mani is a young newspaper reporter and has been writing for almost six months 
on malpractices by business enterprises including such issues as misleading 
advertisements, supply of adulterated products, poor working conditions, 
environmental	 pollution, 	 bribing	 government	 officials, 	 and	 so 	 on.	 He 	 has 	 started	
believing that business people tend to do anything to mint money. He happens 
to take an interview of Mr. Raman Jhunjhunwala, chairman of a leading truck 
manufacturing company which is known for its fair dealing with customers, 
employees, investors as well as other social groups. Through this interview, Mani 
develops the understanding that it is possible for a business enterprise to be socially 
responsible	 and	 ethically	 upright 	 and,	 at	 the 	 same	 time,	 be	 highly	 profitable. 	 He 	
then gets busy with studying more about the social responsibility of business and 
business ethics.
Chapter 6.indd   134 9/2/2022   2:11:36 PM
2024-25
135 SOCIAL RESPONSIBILITIES OF BUSINESS AND BUSINESS ETHICS
business exists only for maximising 
pr ofit s 	 f o r 	 i t s 	 ow ne r s 	 and 	 i t 	 i s 	 i r r e l ev ant	
to talk of public good. It follows that a 
responsible business, and indeed any 
responsible member of society, must 
act with due concern for the effects on 
the lives of other people.
In this sense, social responsibility 
is broader than legal responsibility 
of business. Legal responsibility may 
be 	 fulfilled 	 by	 mere	 compliance 	 with	
the law. Social responsibility is more 
t han 	 t hat . 	 I t 	 i s 	 a 	 fir m ’s 	 r ec o gni t i on	
of social obligations even though 
not covered by law, along with the 
obligations laid down by law. In other 
words, social responsibility involves 
an element of voluntary action on the 
part	 of 	 business 	 people	 for	 the	 benefit 	
of society.
6.3 n eed fo R Social Re Spon Sibility What is the right thing to do when 
it comes to social responsibility? 
Should a business enterprise be 
run 	 for 	 the	 benefit 	 of	 its	 owners 	 who	
may desire to get as much profit 
as is possible or else, it needs to be 
responsible for serving the interest 
of other sections of society such as 
customers, employees, suppliers, 
government and community? The 
very concept of social responsibility 
implies that it is essentially an ethical 
issue, since it involves the question 
of what is morally right or wrong in 
relation	 to 	 the 	 firm’s 	 responsibilities.	
Social responsibility also has an 
element of voluntary action on the 
part of the business person who may 
feel free to perform or not to perform 
such responsibilities. They may also 
exercise their freedom for deciding 
the extent to which they would like 
to serve various sections of society. 
In fact, all business people do not feel 
equally responsible towards society. 
There has been a debate, for some time 
now whether business should assume 
social responsibilities or not. Some 
people 	 strongly 	 believe 	 that 	 a 	 firm’s 	
Corporate Social Responsibility
Corporate sustainability refers to the role that companies can play in meeting the 
agenda of sustainable development and entails a balanced approach to economic 
progress, social progress and environmental protection.
There 	 is 	 no 	 single 	 universally 	 accepted 	 definition 	 of 	 CSR, 	 each 	 definition 	 that	
currently exists underpins the impact that businesses have on society at large and 
the societal expectations of them.
	 i.	 The 	 European 	 Commission 	 defines 	 CSR	 as 	 “the	 responsibility 	 of 	 enterprises 	
for their impacts on society”.
	 ii.	 Th e 	 World 	 Bu siness 	 Cou n cil 	 for 	 S ustain able 	 Develop men t 	 defines 	 CSR 	 as 	 “th e	
continuing commitment by business to contribute to economic development 
while improving the quality of life of the workforce and their families, as well 
as, of the community and society at large”.
Chapter 6.indd   135 9/2/2022   2:11:36 PM
2024-25
Page 4


Chapter 6
Social Re Spon Sibilitie S of b u Sine SS and 
b u Sine SS e thic S
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
explain the concept of social responsibility;
•	
discuss the need for social responsibility;
•	
identify the social responsibility towards different interest groups;
•	
analyse the relationship between business and environmental 
protection; and
•	
define 	 the 	 con cept 	 of 	 bu siness 	 ethics 	 and 	 state 	 the 	 elemen ts 	 of	
business ethics.
Chapter 6.indd   133 9/2/2022   2:11:36 PM
2024-25
134 BUSINESS  STUDIES
6.1 i nt Roduction A business enterprise should do 
business and earn money in ways that 
fulfill 	 the 	 expectations 	 of 	 the 	 society.	
Every individual living in society has 
certain obligations towards society. 
He has to respect social values and 
norms of behaviour. A business 
enterprise is permitted by society to 
carry on industrial or commercial 
activities 	 and 	 thereby 	 earn 	 profits. 	 But	
it is obligatory on part of the business 
enterprise not to do anything, that 
is undesirable from society’s point 
of view. Manufacture and sale of 
adulterated goods, making deceptive 
advertisements, not paying taxes which 
are due, polluting the environment and 
exploiting workers are some examples 
of socially undesirable practices which 
may	 increase 	 the 	 profit 	 of	 enterprises	
but which have adverse effect on society 
at large. On the other hand, supplying 
good quality goods, creating healthy 
working conditions, honestly paying 
taxes prevention/installing pollution 
devices in the factory, and sincerely 
attending to customer complaints are 
examples of socially desirable practices 
which improve the image of enterprises 
and also make them profitable. In 
fact, it is through socially responsible 
and ethically upright behaviour that 
business enterprises can get durable 
success.
6.2 c oncept of Social Re Spon Sibility Social responsibility of business refers  
to its obligation to take those decisions 
and perform those actions which are 
desirable in terms of the objectives and 
values of our society. The assumption 
of social responsibilities by business 
enterprises implies that they respect 
the aspirations of society and would 
try their best to contribute to the 
achievement of these aspirations along 
with 	 their 	 profit 	 interests. 	 This 	 idea 	 is 	
in contrast to the common notion that 
Mani is a young newspaper reporter and has been writing for almost six months 
on malpractices by business enterprises including such issues as misleading 
advertisements, supply of adulterated products, poor working conditions, 
environmental	 pollution, 	 bribing	 government	 officials, 	 and	 so 	 on.	 He 	 has 	 started	
believing that business people tend to do anything to mint money. He happens 
to take an interview of Mr. Raman Jhunjhunwala, chairman of a leading truck 
manufacturing company which is known for its fair dealing with customers, 
employees, investors as well as other social groups. Through this interview, Mani 
develops the understanding that it is possible for a business enterprise to be socially 
responsible	 and	 ethically	 upright 	 and,	 at	 the 	 same	 time,	 be	 highly	 profitable. 	 He 	
then gets busy with studying more about the social responsibility of business and 
business ethics.
Chapter 6.indd   134 9/2/2022   2:11:36 PM
2024-25
135 SOCIAL RESPONSIBILITIES OF BUSINESS AND BUSINESS ETHICS
business exists only for maximising 
pr ofit s 	 f o r 	 i t s 	 ow ne r s 	 and 	 i t 	 i s 	 i r r e l ev ant	
to talk of public good. It follows that a 
responsible business, and indeed any 
responsible member of society, must 
act with due concern for the effects on 
the lives of other people.
In this sense, social responsibility 
is broader than legal responsibility 
of business. Legal responsibility may 
be 	 fulfilled 	 by	 mere	 compliance 	 with	
the law. Social responsibility is more 
t han 	 t hat . 	 I t 	 i s 	 a 	 fir m ’s 	 r ec o gni t i on	
of social obligations even though 
not covered by law, along with the 
obligations laid down by law. In other 
words, social responsibility involves 
an element of voluntary action on the 
part	 of 	 business 	 people	 for	 the	 benefit 	
of society.
6.3 n eed fo R Social Re Spon Sibility What is the right thing to do when 
it comes to social responsibility? 
Should a business enterprise be 
run 	 for 	 the	 benefit 	 of	 its	 owners 	 who	
may desire to get as much profit 
as is possible or else, it needs to be 
responsible for serving the interest 
of other sections of society such as 
customers, employees, suppliers, 
government and community? The 
very concept of social responsibility 
implies that it is essentially an ethical 
issue, since it involves the question 
of what is morally right or wrong in 
relation	 to 	 the 	 firm’s 	 responsibilities.	
Social responsibility also has an 
element of voluntary action on the 
part of the business person who may 
feel free to perform or not to perform 
such responsibilities. They may also 
exercise their freedom for deciding 
the extent to which they would like 
to serve various sections of society. 
In fact, all business people do not feel 
equally responsible towards society. 
There has been a debate, for some time 
now whether business should assume 
social responsibilities or not. Some 
people 	 strongly 	 believe 	 that 	 a 	 firm’s 	
Corporate Social Responsibility
Corporate sustainability refers to the role that companies can play in meeting the 
agenda of sustainable development and entails a balanced approach to economic 
progress, social progress and environmental protection.
There 	 is 	 no 	 single 	 universally 	 accepted 	 definition 	 of 	 CSR, 	 each 	 definition 	 that	
currently exists underpins the impact that businesses have on society at large and 
the societal expectations of them.
	 i.	 The 	 European 	 Commission 	 defines 	 CSR	 as 	 “the	 responsibility 	 of 	 enterprises 	
for their impacts on society”.
	 ii.	 Th e 	 World 	 Bu siness 	 Cou n cil 	 for 	 S ustain able 	 Develop men t 	 defines 	 CSR 	 as 	 “th e	
continuing commitment by business to contribute to economic development 
while improving the quality of life of the workforce and their families, as well 
as, of the community and society at large”.
Chapter 6.indd   135 9/2/2022   2:11:36 PM
2024-25
136 BUSINESS  STUDIES
only social responsibility is towards its 
owners. Some others, however, hold an 
opposite 	 view 	 and	 argue 	 that	 the 	 firm 	
has a social responsibility to serve all 
sections of society who are affected by 
its decisions and actions. It would be 
useful to understand the arguments 
offered both in favour of and against the 
assumption of social responsibilities 
by business.
6.3.1 Arguments for Social 
Responsibility
(i)  Justification   for   existence   and 
growth: 	 Business	 exists 	 for	 providing	
goods and services to satisfy human 
needs. 	 Though, 	 pr ofit 	 m ot i ve 	 i s 	 an	
important 	 justification 	 for 	 undertaking	
business activity, it should be looked 
upon as an outcome of service to 
the people. In fact, the prosperity 
and growth of business is possible 
only through continuous service to 
society. Thus, assumption of social 
responsibility by business provides 
justifications for its existence and 
growth.
(ii) Long-te rm   interest   of  the  firm:  
A	 firm 	 and	 its	 image	 stands 	 to 	 gain 	
maxi mum 	 profits 	 in 	 the 	 long 	 run 	 when	
it has its highest goal as ‘service to 
society’. When increasing number 
of members of society — including 
workers, consumers, shareholders, 
government 	 officials, 	 feel 	 that 	 business	
enterprise is not serving its best 
interest, they will tend to withdraw 
their cooperation to the enterprise 
concerned. Therefore, it is in its own 
interest if a firm fulfills its social 
responsibility. The public image of any 
firm 	 would	 also	 be 	 improved	 when 	 it	
supports social goals.
In India, the concept of CSR is governed by Clause 135 of the Companies Act, 
2013, which was passed by both the Houses of the Parliament, and had received 
the assent of the President of India on 23 August 2013.
The CSR provisions within the Act is applicable to companies with an annual 
turnover of 1,000 crore and more, or a net worth of Rs. 500 crore and more, or a 
net	 profit 	of	 Rs.	 5	crore 	and 	 more.
	 1.	 The 	 new	 rules, 	 which	 are 	 applicable	 from 	 the	 fiscal 	 year 	 2014-15	 onwards,	
also require companies to setup a CSR committee consisting of their board 
members, including at least one independent director.
	 2.	 The 	 Act	 encourages	 companies 	 to	 spend	 at	 2% 	 of 	 their 	 average	 net 	 profit 	 in 	
the previous three years on CSR activities.
 3. The indicative activities, which can be undertaken by a company under CSR, 
have 	 been 	specified 	 under 	 Schedule	 VII 	of	the 	Act.
 4. Only CSR activities undertaken in India will be taken into consideration.
 5. Activities meant exclusively for employees and their families will not qualify 
under CSR.
Chapter 6.indd   136 9/2/2022   2:11:36 PM
2024-25
Page 5


Chapter 6
Social Re Spon Sibilitie S of b u Sine SS and 
b u Sine SS e thic S
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
explain the concept of social responsibility;
•	
discuss the need for social responsibility;
•	
identify the social responsibility towards different interest groups;
•	
analyse the relationship between business and environmental 
protection; and
•	
define 	 the 	 con cept 	 of 	 bu siness 	 ethics 	 and 	 state 	 the 	 elemen ts 	 of	
business ethics.
Chapter 6.indd   133 9/2/2022   2:11:36 PM
2024-25
134 BUSINESS  STUDIES
6.1 i nt Roduction A business enterprise should do 
business and earn money in ways that 
fulfill 	 the 	 expectations 	 of 	 the 	 society.	
Every individual living in society has 
certain obligations towards society. 
He has to respect social values and 
norms of behaviour. A business 
enterprise is permitted by society to 
carry on industrial or commercial 
activities 	 and 	 thereby 	 earn 	 profits. 	 But	
it is obligatory on part of the business 
enterprise not to do anything, that 
is undesirable from society’s point 
of view. Manufacture and sale of 
adulterated goods, making deceptive 
advertisements, not paying taxes which 
are due, polluting the environment and 
exploiting workers are some examples 
of socially undesirable practices which 
may	 increase 	 the 	 profit 	 of	 enterprises	
but which have adverse effect on society 
at large. On the other hand, supplying 
good quality goods, creating healthy 
working conditions, honestly paying 
taxes prevention/installing pollution 
devices in the factory, and sincerely 
attending to customer complaints are 
examples of socially desirable practices 
which improve the image of enterprises 
and also make them profitable. In 
fact, it is through socially responsible 
and ethically upright behaviour that 
business enterprises can get durable 
success.
6.2 c oncept of Social Re Spon Sibility Social responsibility of business refers  
to its obligation to take those decisions 
and perform those actions which are 
desirable in terms of the objectives and 
values of our society. The assumption 
of social responsibilities by business 
enterprises implies that they respect 
the aspirations of society and would 
try their best to contribute to the 
achievement of these aspirations along 
with 	 their 	 profit 	 interests. 	 This 	 idea 	 is 	
in contrast to the common notion that 
Mani is a young newspaper reporter and has been writing for almost six months 
on malpractices by business enterprises including such issues as misleading 
advertisements, supply of adulterated products, poor working conditions, 
environmental	 pollution, 	 bribing	 government	 officials, 	 and	 so 	 on.	 He 	 has 	 started	
believing that business people tend to do anything to mint money. He happens 
to take an interview of Mr. Raman Jhunjhunwala, chairman of a leading truck 
manufacturing company which is known for its fair dealing with customers, 
employees, investors as well as other social groups. Through this interview, Mani 
develops the understanding that it is possible for a business enterprise to be socially 
responsible	 and	 ethically	 upright 	 and,	 at	 the 	 same	 time,	 be	 highly	 profitable. 	 He 	
then gets busy with studying more about the social responsibility of business and 
business ethics.
Chapter 6.indd   134 9/2/2022   2:11:36 PM
2024-25
135 SOCIAL RESPONSIBILITIES OF BUSINESS AND BUSINESS ETHICS
business exists only for maximising 
pr ofit s 	 f o r 	 i t s 	 ow ne r s 	 and 	 i t 	 i s 	 i r r e l ev ant	
to talk of public good. It follows that a 
responsible business, and indeed any 
responsible member of society, must 
act with due concern for the effects on 
the lives of other people.
In this sense, social responsibility 
is broader than legal responsibility 
of business. Legal responsibility may 
be 	 fulfilled 	 by	 mere	 compliance 	 with	
the law. Social responsibility is more 
t han 	 t hat . 	 I t 	 i s 	 a 	 fir m ’s 	 r ec o gni t i on	
of social obligations even though 
not covered by law, along with the 
obligations laid down by law. In other 
words, social responsibility involves 
an element of voluntary action on the 
part	 of 	 business 	 people	 for	 the	 benefit 	
of society.
6.3 n eed fo R Social Re Spon Sibility What is the right thing to do when 
it comes to social responsibility? 
Should a business enterprise be 
run 	 for 	 the	 benefit 	 of	 its	 owners 	 who	
may desire to get as much profit 
as is possible or else, it needs to be 
responsible for serving the interest 
of other sections of society such as 
customers, employees, suppliers, 
government and community? The 
very concept of social responsibility 
implies that it is essentially an ethical 
issue, since it involves the question 
of what is morally right or wrong in 
relation	 to 	 the 	 firm’s 	 responsibilities.	
Social responsibility also has an 
element of voluntary action on the 
part of the business person who may 
feel free to perform or not to perform 
such responsibilities. They may also 
exercise their freedom for deciding 
the extent to which they would like 
to serve various sections of society. 
In fact, all business people do not feel 
equally responsible towards society. 
There has been a debate, for some time 
now whether business should assume 
social responsibilities or not. Some 
people 	 strongly 	 believe 	 that 	 a 	 firm’s 	
Corporate Social Responsibility
Corporate sustainability refers to the role that companies can play in meeting the 
agenda of sustainable development and entails a balanced approach to economic 
progress, social progress and environmental protection.
There 	 is 	 no 	 single 	 universally 	 accepted 	 definition 	 of 	 CSR, 	 each 	 definition 	 that	
currently exists underpins the impact that businesses have on society at large and 
the societal expectations of them.
	 i.	 The 	 European 	 Commission 	 defines 	 CSR	 as 	 “the	 responsibility 	 of 	 enterprises 	
for their impacts on society”.
	 ii.	 Th e 	 World 	 Bu siness 	 Cou n cil 	 for 	 S ustain able 	 Develop men t 	 defines 	 CSR 	 as 	 “th e	
continuing commitment by business to contribute to economic development 
while improving the quality of life of the workforce and their families, as well 
as, of the community and society at large”.
Chapter 6.indd   135 9/2/2022   2:11:36 PM
2024-25
136 BUSINESS  STUDIES
only social responsibility is towards its 
owners. Some others, however, hold an 
opposite 	 view 	 and	 argue 	 that	 the 	 firm 	
has a social responsibility to serve all 
sections of society who are affected by 
its decisions and actions. It would be 
useful to understand the arguments 
offered both in favour of and against the 
assumption of social responsibilities 
by business.
6.3.1 Arguments for Social 
Responsibility
(i)  Justification   for   existence   and 
growth: 	 Business	 exists 	 for	 providing	
goods and services to satisfy human 
needs. 	 Though, 	 pr ofit 	 m ot i ve 	 i s 	 an	
important 	 justification 	 for 	 undertaking	
business activity, it should be looked 
upon as an outcome of service to 
the people. In fact, the prosperity 
and growth of business is possible 
only through continuous service to 
society. Thus, assumption of social 
responsibility by business provides 
justifications for its existence and 
growth.
(ii) Long-te rm   interest   of  the  firm:  
A	 firm 	 and	 its	 image	 stands 	 to 	 gain 	
maxi mum 	 profits 	 in 	 the 	 long 	 run 	 when	
it has its highest goal as ‘service to 
society’. When increasing number 
of members of society — including 
workers, consumers, shareholders, 
government 	 officials, 	 feel 	 that 	 business	
enterprise is not serving its best 
interest, they will tend to withdraw 
their cooperation to the enterprise 
concerned. Therefore, it is in its own 
interest if a firm fulfills its social 
responsibility. The public image of any 
firm 	 would	 also	 be 	 improved	 when 	 it	
supports social goals.
In India, the concept of CSR is governed by Clause 135 of the Companies Act, 
2013, which was passed by both the Houses of the Parliament, and had received 
the assent of the President of India on 23 August 2013.
The CSR provisions within the Act is applicable to companies with an annual 
turnover of 1,000 crore and more, or a net worth of Rs. 500 crore and more, or a 
net	 profit 	of	 Rs.	 5	crore 	and 	 more.
	 1.	 The 	 new	 rules, 	 which	 are 	 applicable	 from 	 the	 fiscal 	 year 	 2014-15	 onwards,	
also require companies to setup a CSR committee consisting of their board 
members, including at least one independent director.
	 2.	 The 	 Act	 encourages	 companies 	 to	 spend	 at	 2% 	 of 	 their 	 average	 net 	 profit 	 in 	
the previous three years on CSR activities.
 3. The indicative activities, which can be undertaken by a company under CSR, 
have 	 been 	specified 	 under 	 Schedule	 VII 	of	the 	Act.
 4. Only CSR activities undertaken in India will be taken into consideration.
 5. Activities meant exclusively for employees and their families will not qualify 
under CSR.
Chapter 6.indd   136 9/2/2022   2:11:36 PM
2024-25
137 SOCIAL RESPONSIBILITIES OF BUSINESS AND BUSINESS ETHICS
(iii)  Avoidance   of   government 
regulation: From the point of view of 
a business, government regulations 
are undesirable because they limit 
freedom. Therefore, it is believed that 
businessmen can avoid the problem of 
government regulations by voluntarily 
assuming social responsibilities, which 
helps to reduce the need for new laws.
(iv) Maintenance of society: The 
argument here is that laws cannot be 
passed for all possible circumstances. 
People who feel that they are not 
getting their due from the business 
may 	 resort 	 to 	 anti-social 	 activities,	
not necessarily governed by law. This 
may harm the interest of business 
itself. Therefore, it is desirable that 
business enterprises should assume 
social responsibilities.
(v) Availability of resources with 
business: This argument holds that 
business institutions have valuable 
financial 	 and	 human	 resources 	 which	
can be effectively used for solving 
problems. For example, business 
has a pool of managerial talent and 
capital resources, supported by years 
of experience in organising business 
activities. It can help society to tackle 
its problems better, given the huge 
financial 	 and 	 human	 resources	 at	 its 	
disposal.
(vi) Converting problems into 
opportunities: Related with the 
preceding argument is the argument 
that business with its glorious history 
of converting risky situations into 
profitable 	 deals, 	 can 	 not 	 only 	 solve	
social problems but it can also make 
them effectively useful by accepting 
the challenge.
(vii)  Better   environment   for   doing  
business: If business is to operate in 
a society which is full of diverse and 
complicated problems, it may have 
little chance of success. Therefore, it 
is argued that the business system 
should do something to meet needs 
before it is confronted with a situation 
when its own survival is endangered 
due to enormous social illnesses. A 
society with fewer problems provides 
better environment for a firm to 
conduct its business.
(viii)  Holding   business   responsible 
for social problems: It is argued that 
some of the social problems have 
either been created or perpetuated 
by business enterprises themselves. 
Environmental pollution, unsafe 
workplaces, corruption in public 
institutions, and discriminatory 
practices in employment are some of 
these problems. Therefore, it is the 
moral obligation of business to get 
involved in solving these problems, 
instead of merely expecting that other 
social agencies will deal with them on 
their own.
6.3.2 Arguments against Social 
Responsibility
Major arguments against social 
responsibility are:
(i)  Violation   of  profit   maximisation  
objective: According to this argument, 
business exists only for profit 
maximisation. Therefore, any talk of 
social responsibility is against this 
objective. In fact, business can best 
fulfill its social responsibility if it 
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