NCERT Solutions - Social Responsibilities of Business and Business Ethics

Short Answer Questions

Difference from legal responsibility:

• Scope: Social - voluntary and wider; Legal - mandatory and limited
• Nature: Social - moral/ethical; Legal - statutory
• Consequences: Legal failure leads to penalties; Social failure harms reputation
  Thus, social responsibility goes beyond mere legal compliance.

Q2: What is environment? What is environmental pollution?
Ans:  Environment refers to the surroundings including biotic (living) and abiotic (non-living) components that affect life. Environmental pollution means contamination of these surroundings by harmful substances.

Types of pollution:

• Air: Harmful gases from industries/vehicles
• Water: Sewage and industrial waste in water bodies
• Land: Dumping of toxic and non-biodegradable waste
• Noise: Excessive sound from machines/traffic
  Pollution harms health, ecosystems and overall quality of life.

Q3: What is business ethics? Mention the basic elements of business ethics?
Ans:  Business ethics refers to moral principles guiding business behaviour to ensure fairness, honesty and responsibility towards stakeholders.

Elements of business ethics:

• Top management commitment: Leaders set ethical standards
• Code of conduct: Clear guidelines for behaviour
• Compliance mechanism: Monitoring and corrective action
• Employee involvement: Training and participation
• Measurement of results: Regular evaluation of ethical practices
  These elements help build trust and ensure responsible business conduct.

Q4: Briefly explain
(a) Air pollution
(b) Water pollution
(c) Land pollution.
Ans:

• Air pollution: Caused by the release of harmful gases, smoke and particulates from industries, vehicles and burning of fuels. It lowers air quality, contributes to acid rain and results in respiratory and cardiovascular illnesses.
• Water pollution: Results from discharge of untreated industrial effluents, sewage and chemical run-off into rivers, lakes and seas. It harms aquatic life, reduces availability of safe drinking water and causes water-borne diseases.
• Land pollution: Caused by dumping of industrial and household wastes, plastics and toxic chemicals on land. It degrades soil fertility, contaminates crops and can lead to long-term ecological damage and health hazards.

Q5: What are the major areas of social responsibility of business?
Ans: The following are the major areas of social responsibility of businesses.

• Economic responsibility: Produce goods and services to meet consumer needs and earn profits while charging reasonable prices and using resources efficiently.
• Legal responsibility: Obey the laws and regulations of the country and operate within the legal framework designed to protect society and fair competition.
• Ethical responsibility: Follow practices that are consistent with social values and expectations, such as honesty, fairness and respect for cultural and religious sentiments.
• Discretionary responsibility: Voluntary activities that promote social welfare, for example running charitable schools or hospitals, disaster relief and employing persons with disabilities.

Q6: State the meaning of Corporate Social Responsibility as per the Companies Act 2013.
Ans: Corporate Social Responsibility (CSR) under the Companies Act, 2013 refers to the obligation of certain companies to contribute to social welfare. It applies to companies with net worth ₹500 crore+, turnover ₹1000 crore+, or net profit ₹5 crore+.

Companies must:

• Form a CSR policy
• Undertake activities like poverty removal, education and environmental protection
• Report CSR performance in annual reports
  Thus, CSR ensures corporate contribution to sustainable development.

Long Answer Questions

Q1: Build up argument for and against social responsibilities.
Ans: The case in favour of taking up social responsibilities

• Existence and growth: Long-term success of a business depends on healthy relations with society. By addressing social needs, firms build goodwill and trust, which support sustainable growth and market acceptance.
• Avoidance of government intervention: Proactive social responsibility reduces the risk of restrictive regulation or heavy-handed legal controls; it shows that industry can self-regulate to protect public interest.
• Better environment for doing business: By addressing unemployment, poverty and other social problems, businesses help create a more stable and prosperous market for their products and services.

The case against taking up social responsibilities

• Violation of profit-maximisation objectives: Critics argue that diverting resources to social causes may reduce funds available for core profit-generating activities and shareholder returns.
• Burden on consumers: Additional costs of socially oriented programmes may be passed on to consumers through higher prices, affecting affordability.
• Lack of social skills: Business managers may lack the specialised training needed to solve complex social problems; specialised public agencies or NGOs may be better suited for some tasks.

Q2: Discuss the forces which are responsible for increasing concern of business enterprises towards social responsibility.
Ans: The following are the forces which are responsible for increasing the concern of business enterprises for social responsibility.

• Threat of public regulation: Governments may intervene if businesses ignore social welfare; to avoid restrictive regulations, firms adopt socially responsible practices.
• Pressure of labour movement: With greater mobility of capital and stronger labour organisations, firms face pressure to improve working conditions, ensure job security and pay fair wages.
• Impact of consumer consciousness: Educated and informed consumers demand better quality, safety and ethical behaviour from firms, forcing improvements in product standards and marketing practices.
• Development of social standards: Rising social expectations and norms require businesses to meet higher standards of social welfare and corporate conduct.
• Development of business education: Better education has made consumers, investors, employees and owners more aware of social issues, increasing pressure on firms to act responsibly and transparently.
• Relationship between social interest and business interest: Business cannot thrive in an unhealthy society; balancing social and business interests supports long-term success. Development of a professional managerial class: Modern professional managers are trained to consider stakeholder interests, not only immediate profit, which encourages socially responsible decisions.

Q3: 'Business is essentially a social institution and not merely a profit making activity'. Explain.
Ans: While profit is the primary objective of business, a business is also a social institution because it is created by society and depends on social resources. Businesses use human labour, natural resources and public infrastructure. Their operations affect social issues such as employment, health and environment. Therefore, businesses must balance profit goals with social obligations to ensure long-term survival and public support.
Responsibilities that illustrate this point include:

• Paying taxes on time to support public services.
• Paying fair wages to employees and ensuring decent working conditions.
• Supplying quality products at reasonable prices to customers.
• Cooperating with the government and civil society to address social problems such as unemployment, poverty and illiteracy.

Q4: Why do business enterprises need to adopt pollution control measures?
Ans: Pollution control is essential to preserve and improve environmental quality. Business activities - production, transportation, storage and consumption - can cause significant environmental damage. Therefore, firms must adopt measures to reduce pollution for both social and commercial reasons.

Reasons for adopting pollution control measures:

• Reduced health hazards: Lower pollution means fewer diseases and better public health for employees and communities.
• Reduced risk of liability: Firms face fewer legal claims, fines and compensation demands if they control pollution effectively.
• Cost savings: Efficient waste management and cleaner production often reduce disposal and clean-up costs and save raw material.
• Improved public image: Environmentally responsible firms enjoy better reputation, customer trust and may gain competitive advantage.
• Other social benefits: Cleaner surroundings, improved employee wellbeing and sustainable availability of resources for future use.

Q.5. What steps can an enterprise take to protect the environment from the dangers of pollution?
Ans: Enterprises must limit their environmental impact through planned measures. The following practical steps can help control pollution:

• Control by top managers: Senior management should promote an organisational culture that prioritises environmental protection and provide resources for pollution-control initiatives.
• Control by employees: Encourage employee participation in cleanliness drives, waste reduction and recycling programmes and seek suggestions from staff for improvements.
• Better technology: Adopt cleaner production methods, energy-efficient processes, pollution-control devices and scientific waste-disposal techniques.
• Follow rules: Comply with environmental laws, standards and guidelines set by the government and obtain necessary clearances and permits.
• Increased awareness: Conduct workshops and training to sensitise employees and stakeholders about conservation, efficient use of resources and pollution prevention.
• Assessment programmes: Periodically evaluate pollution-control measures to assess effectiveness and costs, publish results and make improvements where necessary.

Q6: Explain the various elements of business ethics?
Ans: Business ethics are the principles that guide conduct so that business activities are acceptable to society. These ethical elements help firms operate fairly and responsibly in daily business activities.

The following are some of the elements of business ethics:

• Commitment by top management: Senior leaders must sincerely follow and promote the ethical code and act as role models so that ethical conduct is embedded in corporate culture.
• Publication of a 'code': A clear written code should define acceptable behaviour, quality and safety standards, and legal compliance requirements to guide employees.
• Establishment of compliance mechanism: Create systems to monitor and assess adherence to ethical standards, investigate breaches and enforce corrective action.
• Involvement of employees at all levels: Employees should be trained and involved so that ethical practices are implemented consistently in daily operations.
• Measurement of results: Regular monitoring, reporting and corrective action are necessary to ensure that ethical standards are upheld and improved over time.

Q7: Discuss the guidelines enumerated by the Companies Act 2013 for Corporate Social Responsibility.
Ans: Corporate Social Responsibility (CSR) under the Companies Act, 2013 applies to companies meeting specified financial thresholds (annual turnover of Rs. 1,000 crore or more, net worth of Rs. 500 crore or more, or net profit of Rs. 5 crore or more). The Act provides rules and guidelines to ensure structured CSR activity.

Key guidelines under the Companies Act, 2013:

• Companies must set up a CSR committee of the board with at least three members, including at least one independent director (where applicable), to oversee CSR policy and projects.
• Companies are required to spend at least 2% of their average net profits made during the three immediately preceding financial years on CSR activities, according to the prescribed rules.
• CSR activities must be undertaken as per the company's approved CSR policy, formulated on the recommendations of the CSR committee and disclosed in the annual report.
• Eligible CSR activities are those listed under Schedule VII of the Act, such as poverty eradication, education, gender equality, environmental sustainability and healthcare.
• Activities exclusively benefiting employees or their families do not qualify as CSR for the purposes of the Act; CSR should benefit the wider community.