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Arguments For and Against CSR

This document summarizes arguments for and against the social responsibility of businesses. Arguments for include that businesses are part of society and should benefit society, that social responsibility benefits long-term business self-interest, and that it can help avoid government regulations. Arguments against include that social responsibility contradicts the basic function of profit-making, can conflict with profit motives, and can distort resource allocation or impose business values on society. The document concludes that businesses cannot ignore social demands and that economic and social concerns are often consistent.

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3K views

Arguments For and Against CSR

This document summarizes arguments for and against the social responsibility of businesses. Arguments for include that businesses are part of society and should benefit society, that social responsibility benefits long-term business self-interest, and that it can help avoid government regulations. Arguments against include that social responsibility contradicts the basic function of profit-making, can conflict with profit motives, and can distort resource allocation or impose business values on society. The document concludes that businesses cannot ignore social demands and that economic and social concerns are often consistent.

Uploaded by

kirthi nair
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Arguments for and against Social

Responsibility of Business

Why should business be concerned about social


responsibility?
This question has attracted the attention of many thinkers, both from
academics as well as from practitioners. There have been arguments
and counter-arguments in favor of and against social responsibility of
business. In an effort to present a balanced view of social responsibility
of business and its role as an objective of business, it is worthwhile to
present briefly the arguments for and against it that have surfaced over
time. It should be pointed out, however, that each argument for and
against social responsibility assumes a certain understanding of the
concept that may vary.

Arguments for and against Social Responsibility of Business


Arguments for Social Responsibility
There are several core ideas about social responsibility of business.
Over the period of time, the things have changed too much giving new
thoughts and replacing the classical economic view of profit
maximization in the business. Based on this feature in the present
context, arguments for social responsibility are as follows:

1. Business is a part of society


Business is a part of society. Society is a system and business is one of
its subsystems. Every subsystem of a system functions for the
betterment of the whole system and not for its own betterment only.
This version applies to business too. Therefore, business is responsible
for the society as a whole and profit motive of the business cannot have
precedence over other motives of the society.

2. Long-term Self-interest of Business


Social responsibility is in the long-term self-interest of the business.
Existence of any business is because of existence of various social
organs like financiers, employees, customers, society as a whole, etc.,
and not otherwise. Therefore, business should provide satisfaction to
all these organs on continuous basis for its continued existence. By
discharging social responsibility, the business may provide this
satisfaction.

3. Moral Justification
Social responsibility has moral justification. This moral justification
emerges from the fact that if any one takes something from others, he
must give something to them in return. On moral ground, this equation
must be based on equity so that it continues. A business takes various
inputs (money, materials, people, information, etc.) from the society
and gives outputs (goods and services) to the society by using various
inputs. System of taking inputs and giving outputs works well only if it
fulfills social requirements.

4. Creating Better Public Image


Any business which involves in fulfilling the aspirations of the society
creates better image in the public. Creation of this type of image is a
source of satisfaction itself for those who operate business. This also
helps in increasing the business volume, both in terms of taking inputs
and giving outputs.

5. Avoidance of Government Regulations


Government aims at maintaining equilibrium in the society on long-
term basis. For this purpose, it tries to ensure that every organ of society
meets social requirements. If any organ fails to do so, government has
power to take actions against it. Since business is an organ of the
society, government may take actions against those business
organizations which involve in activities not meeting social
requirements. In order to avoid such actions having long-term negative
impact, it is preferable to adopt social responsibility.

6. Maintenance of Society
For maintaining society, there are legal provisions but these provisions
cannot be comprehensive because of social changes on continuous
basis. Therefore, the business has to be socially responsible in order to
avoid anti-social activities so that society is maintained on continuous
basis.

Arguments against Social Responsibility


There are various arguments against social responsibility though most
of these are based on classical economics. These arguments are as
follows:

1. Contrary to Basic Function of Business


The basic function of a business is to provide a product to its customers
at a price which is lower than the level of satisfaction provided by the
use of the product or, at the most, equal to that. If this relationship is
reversed, the product becomes meaningless. Generally, cost of
production is a significant factor in determining the product price.
Discharge of social responsibility adds to cost, hence product price
which may reverse the above equation and business may not remain
viable in the long term. Because of this phenomenon, Milton Friedman,
a noted economist, has observed,
there is one and only one responsibility of business — to use its resources
and engage in activities designed to increase its profit so long as it stays
within the rules of the game.

2. Conflict with Profit Motive


Social responsibility is in conflict with profit motive of business.
Undertaking business involves assuming risk. Earning profit is the
reward for this risk. If social responsibility is added as an objective of
business, it reduces profit margin which is against the concept of profit
optimization even if not profit maximization. Thus, social
responsibility and profit motive do not proceed in the same direction.

3. Distortion in Resource Allocation


Social responsibility leads to distortion of resource allocation.
Resources in an economic system are allocated on the principle that
every resource finds its most optimum utilization. This utilization is
best possible without social responsibility and not with it. Thus, social
resources may go in waste if the concept of social responsibility is
added to business operations.
4. Imposition of Business Values
Discharging social responsibility involves lot of influence of the
business on the society. Therefore, by undertaking social responsibility,
a business is likely to impose its own values on the society, thereby
replacing the social values with business values. This phenomenon has
taken place in many cases. This is highly undesirable from social point
of view.

5. Inefficiency in the System


Social responsibility brings inefficiency in the system. There is no
substitute for the power of self-interest to get people to act. Any
replacement of self-interest will, therefore, be fatal to the efficiency of
the system. Social responsibility tends to replace self-interest of
business defined in terms of profit motive to a great extent, thus,
making the business as a system inefficient.

6. Operational Problems
There are certain operational problems in implementing social
responsibility. Conceptually as well as operationally, social
responsibility is a confusing term. Therefore, managers involved in
managing business affairs are not very clear about what they are
expected to do under social responsibility. As a result, actions ranging
from mere showing lip sympathy to undertaking multi-crore concrete
programmes are included in social responsibility.

Conclusions
The arguments of those who argue that business organizations have
nothing to do with social responsibility except the maximization of
shareholders’ wealth are weak on two points.

1. First, they overstate the trend and ultimate magnitude of business’s


voluntary assumption of social responsibility.

2. Second, they want business organizations to do something they


cannot do and that is to ignore societal demands on them.
In fact, no business can survive for long in total disregard to its social
concern. Many forces will come in its way to destroy it. Therefore, even
if business is involved in making profit, it is done through the creation
of utility to the social needs. Better these social needs served, better
will be the prospect of its survival and progress. Even in Western
countries, where economic activities are comparatively free from
controls, it has been accepted that profit is not the sole criterion for
measuring the success of a business organization.

Usually, people misinterpret the concept of business objective and


view the social responsibility as a focus which detracts from or is
counter to the profit making. This is not the case at all. Economic
concerns and social concerns need not be viewed as opposite ends of
a continuum as shown in the image Mistaken view of Social
Responsibility. The correct position is according to Realistic view of
business responsibility.

What this figure shows is that although there may be some clearly
distinct economic versus social concerns, there is a rather broad area in
which economic and social concerns are consistent with one another. It
is corporate activities that fall into this overlapped area that provide the
more realistic view of social responsibility. Therefore, the issue is not
whether business has social responsibility; it has. The fundamental
issue is to identify this responsibility in general and for individual
companies in particular.

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