Social responsibility is an ethical framework that obliges every member of the society to act and behave in a manner that benefits the entirety. Even business organizations have a social responsibility. According to the socioeconomic model, one of the two competing theories of corporate social responsibility, a business is responsible for promoting and upholding the interest not only of its shareholders but also of its entire stakeholders—including customers, employees, suppliers, and the public.
An Overview of the Four Social Responsibilities of a Business Organization
The social responsibility to these stakeholders is actually an assortment of specific duties that follow a successive fashion, thus highlighting their interdependence. They also represent the synergy between the shareholder or economic model and stakeholder or socioeconomic model of CSR. Below are the four social responsibilities of a business:
1. Economic Responsibility of a Business
The most basic responsibility of a business organization is to maximize its profitability not only to attend to the interests of its shareholders but also to contribute to the progress of the economy.
A business is thereby an integral actor in economic development and nation-building. The more traditional economic model of corporate social responsibility echoes this role. American economist Milton Friedman once mentioned that the prime responsibility of a business is to maximize profits and ensure that it can pay all taxes levied by the government.
It is important to note that if a business cannot produce profitable products and maintain sustainability, it is impossible to attend to all other succeeding social responsibilities.
2. Legal Responsibility of a Business
The concept of laissez-faire business is virtually inexistent in modern free-market economies. In the United States, particularly before 1930, businesses were free to act as they pleased without restrains or restrictions. This resulted in deplorable practices that made laborers and consumers vulnerable to exploitation.
Governments have now become regulators of businesses to maintain the integrity of business practices and protect the interest of the public. Like individual members of the citizenry, a business also has an obligation to follow all written and codified laws that concern its existence.
Some of the laws affecting a business include basic business permits and requirements, tax laws, labor rights, intellectual property rights, consumer protection, contracts and obligations, and anti-trust and competition laws, among others.
3. Ethical Responsibility of a Business
The decisions and actions of a business organization affect the stakeholders in several and varied ways. This fact makes it a moral actor. It also gives a business an obligation to follow ethical standards, norms, and values of the communities wherein it operates.
An ethically responsible business is able to recognize, interpret, and act upon multiple principles and values according to standards prescribed by a particular context or within a given field. It can distinguish right from wrong and make decisions and actions that serve the interests of concerned parties.
Several business organizations have adopted a written Code of Conduct to standardize the way managers and employees act or behave within an identified ethical boundary. However, some businesses do not have any written code. In this case, managers become the prime moral actors, and they base their decisions on their own standards of morality.
4. Philanthropic Responsibility of a Business
The fourth social responsibility of a business is dependent on whether it sees itself as an active member and contributing entity in society. This philanthropic responsibility implies that a business has a duty to give back in some ways and contribute to the betterment of society.
Take note that the first three responsibilities are straightforward. Business organizations are obligated to fulfill their economic, legal, and ethical obligations to ensure their survival. However, the fourth responsibility is not mandatory. Some businesses do not have any philanthropic programs. This is especially true for smaller or struggling businesses with limited resources. But over the years, some businesses take pride in their philanthropic works. This responsibility gives them a sense of purpose while also promoting their public image.
Of course, philanthropy does not necessarily mean giving cash donations. There are several ways an organization can become philanthropic without spending too much. Some large businesses hold capacity-building seminars for budding and emerging entrepreneurs. Others participate in fundraising activities.
FURTHER READINGS AND REFERENCES
- Freeman, R. E. 1984. Strategic Management: A Stakeholder Approach. New York: HarperCollins
- Friedman, M. 1962. Capitalism and Freedom. Chicago: University of Chicago Press
- Friedman, M. 1970. “The Social Responsibility of Business is to Increase its Profits.” The New York Times. Available online.
- Porter, M. E. and Kramer, M. R. 2006. “Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility.” Harvard Business Review. Available online
- Porter, M. E. and Kramer, M. R. 2011. “Creating Shared Value: Redefining Capitalism and the Role of the Corporation in Society.” Harvard Business Review. Reprint. Available online.