NCERT Solutions for Class 11 Business Studies Chapter 6 - Social Responsibilities of Business and Business Ethics

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Short Answer Questions:

1. What do you understand by social responsibility of business? How is it different from legal responsibility?

Ans. Social responsibility refers to obligations of business towards society is different forming mobility social responsibilities are broader than legal responsibilities. Legal responsibilities may be fulfilled by mere compliance with the law whereas social responsibility includes voluntary obligations towards society not covered by law along with the obligations laid by law.

2. What is environment? What is environmental pollution?

Ans. Environment is the sum total of external forces (natural and man-made) which around us. The quality of environment is deteriorating at a very fast rate, due to industrial activities.
Environmental Pollution is the injection of harmful substances into the environment that changes the physical, chemical and biological characteristics of air, land and water. It causes damage to environment, human, natural and man-made resources.

3. What is business ethics? Mention the basic elements of business ethics.

Ans. Business ethics refers to the set of moral values or standards or norms which govern the activities of a businessman. Ethics defines what is right and what is wrong. It involves critical analysis of human acts to determine whether these are right or wrong.
The basic elements of business ethics are as follows:
(a) Top management commitment
(b) Publication of a ‘code’
(c) Establishment of compliance mechanisms
(d) Involving employees at all levels.

4. Briefly explain (a) Air pollution (b) Water pollution and (c) Land pollution.

Ans.

Air Pollution: Air pollution refers to injection of harmful substances in the atmosphere which results in lowering the quality of air we breathe in. Air pollution is a serious problem for the whole world as it has created a hole in the ozone layer of atmosphere. Smoke chemicals emitted by factories and smoke emitted by vehicles are the main causes of air pollution.
Water Pollution: Water pollution refers to the dumping of chemical and other wastes in rivers, lakes, etc. Generally the factories located near the rivers, streams dump their waste into rivers, lakes, streams, etc. thereby causing pollution of water.
Land Pollution: Land pollution refers to dumping of toxic waste in the land which affects the fertility of land and makes it unfit for agriculture. There are two aspects of land pollution one is how to improve the quality of land which is already damaged and second is how to check further contamination of land. In order to check land pollution, methods of solid waste disposal are used. The combustible wastes are now separated and are used as fuel in industrial boilers, etc.

5. What are the major areas of social responsibility of business?

Ans. The major areas of social responsibility of business are:

Responsibility towards the Workers:
- To create and provide proper and safe working conditions.
- To ensure fair wages and a fair deal from the management.
- To provide opportunities for personal growth and development.
- To provide opportunities to the workers for meaningful work.
- To respect the democratic rights of the workers to form unions.
Responsibility towards the Consumers:
- To supply right quality and quantity of goods and services at reasonable prices
- To follow fair trade practices and take proper precautions against malpractices like adulteration, poor quality, misleading advertising, etc.
- To provide full information about the product and the company to the consumers.
- To ensure regular supply of goods and services.
Responsibility towards the Government:
- To abide by rules and regulations of the country.
- To pay taxes regularly and honestly.
- To adopt fair trade policies and practices.
- To assist the government in achieving their economic and social objectives.

6. State the meaning of Corporate Social Responsibility as per the Companies Act, 2013.

Ans. Corporate Social Responsibility (CSR) is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental. The Corporate Social Responsibility in India as governed by the Companies Act, 2013 (under Clause 135) applies to those companies which have an annual turnover of `1,000 crores and more, or those having a net worth of `500 crores and more, or a net profit of `5 crores and more. To engage in Corporate Social Responsibility (CSR) means that, in the ordinary course of business, a company is operating in ways that contribute towards betterment of society and the environment, instead of contributing negatively to them.

Long Answer Questions:

1. Build up arguments for and against social responsibilities.

Ans. ARGUMENTS FOR SOCIAL RESPONSIBILITY
The arguments advanced in favor of business assuming social responsibility are as follows:

Justification for Existence and Growth: As business is the creation of society, it is expected to satisfy human needs by providing goods and services. Through, profit motive is an important justification for undertaking business activity but it should be looked upon as an outcome of service to the people. Business with a good public image enjoys the support of society and it can prosper and grow only when it continuously assumes social responsibility. As business is a part and parcel of the society, it must think of social obligations.
Long-term Interest of the Firm: A firm and its image stands to gain maximum profits in the long run when it has its highest goal as ‘service to society’. It is in the long-term self-interest of the business to fulfill its social responsibility towards various groups of society, like workers, consumers, shareholders, government officials, etc. A better social set improves its public image and prospects of growth in the long run.
Avoidance of Government Regulation: If the businessmen fails to meet their social responsibilities voluntarily, then the government may intervene and enact suitable legislations to force them to assume social responsibility. However, businessmen do not like government legislation as it restricts their freedom and flexibility. Hence, it is in the interest of businessmen to voluntarily fulfill its obligations towards the society.
Maintenance of Society: If a business does not meet its social responsibilities, then people related to the business may resort to anti-social activities, if they feel that they are not getting their dues from the business. This may be harmful for the business. So, business enterprises must fulfill social responsibilities.

Arguments against Social Responsibility are as follows:

Violation of Profit Maximisation Objective: According to this argument, business exists only for profit maximisation and social responsibility is against this objective. Social responsibility of business is fulfilled if it maximises profits through increased efficiency and reduced costs.
Burden on Consumers: It is argued that social responsibilities like pollution control and environmental protection involve huge costs which are likely to be shifted on to the consumers in the form of higher prices.
Lack of Social Skills: According to this argument, social problems should be solved by specialised agencies as businessmen do not have the necessary understanding and training to solve social problems.
Lack of Broad Public Support: According to this argument, the public, in general, does not like business involvement or interference social programmes because of which business cannot operate successfully in solving social problems.

2. 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: The interest of general public is to be safeguarded by the government. Thus, if a business is not socially morale towards society, then it can regulate the operations of that enterprise accordingly.
Pressure of labour movement: The increase in capital mobility over time has increased the pressure on business enterprises to pay attention to the welfare of workers, by providing them with healthy working conditions along with good remuneration.
Impact of consumer consciousness: Consumers education has led to a change in the mindset as consumers today are aware of their rights and responsibilities. The principle of emptor (or let the buyer beware) has been substituted by the principle of ‘customer is king’. Therefore, business enterprises need to be more efficient and productive to satisfy their customers.
Relationship between social interest and business interest: There is a need to maintain the correct balance between social and business interest. Profitability and social responsibility go hand in hand. No business enterprise can work in isolation from society and can grow by doing the maximum good to society.
Development of a professional managerial class: The core objective of profit maximisation was a traditional aspect. But today’s professional managers make efforts to satisfy the interests of all members of society.

3. ‘Business is essentially a social institution and not merely a profit making activity’ Explain.

Ans. Business is an organisation established with the prime aim of earning profits by selling goods in which they satisfy the needs of individuals who are part of society. Thus, business is a creation of society. For survival, growth and long term profits it is a must that business performs its responsibilities to gain confidence of the society and build its good image. This will help business to produce goods and services and stay in the industry for long and eventually earn profit. Thus, it can be concluded that business cannot earn profit in the long run unless it is part of society and works for society. Hence, we say that a business enterprise is a social institution and not merely a profit making entity. In this regard, the following are some of the responsibility that must be fulfilled an enterprise:

Paying taxes on time.
Paying fair arranged to employees.
Supplying quality products at reasonable prices to customers.
Co-operating with the government in solving social problems, such as unemployment, poverty and illiteracy.

4. Why do the enterprises need to adopt pollution control measures?

Ans. Business enterprises need to take suitable measures for pollution control not merely to avoid criticisms against them but also to enjoy other benefits which are:

Reduction of health hazards: Pollutants in environment causes many diseases like cancer, heart attacks and lung complications etc. Pollution control measures cannot only check the seriousness of such diseases but can also supportive of a healthy life on earth.
Reduced risk of liability: It is possible that an enterprises is held liable to pay compensation to people affected by the toxicity of gaseous liquid and solid wastes it has released into the environment. Pollution control helps in reducing the risk of such liabilities.
Cost savings: An effective pollution control programme is also needed to save cost of operating business. Efficient pollution control mechanisms help in reducing the cost of waste disposal and the cost of cleaning up production plants.
Improved public image: As society becomes increasingly conscious of environmental quality, a firm policies and practices for controlling wastes will increasingly influence people’s attitude towards its working.

5. What steps can an enterprise take to protect the environment from the dangers of pollution?

Ans. Steps for Business Enterprises to protect the environment from Pollution are as follows:

Top Management Commitment: Ensure a definite commitment from top management to create a work culture for environmental protection.
Involving Employees at All Levels: Ensure commitment to environmental protection is shared throughout the enterprise by involving all divisions and employees.
Laying Down Policies for Environment Protection: Develop clear policies and programs for purchasing quality raw materials, using superior technology, disposing of waste scientifically, and developing employee skills for pollution control.
Legal Compliance: Comply with government laws and regulations for preventing pollution.
Voluntary Participation: Participate voluntarily in government programs for hazardous substances, river clean up, plantation of trees, and checking deforestation.
Measuring Results: Assess pollution control programs periodically in terms of costs and benefits to ensure steady progress in environmental protection.
Education and Training: Arrange educational workshops and training materials to actively involve suppliers, dealers, and customers in pollution control programs.

6. Explain the various elements of business ethics.

Ans. Elements of Business Ethics

Some of the basic elements of business ethics while running a business enterprise are:

Top management Commitment: Top management has a crucial role in guiding the entire organisation towards ethical behaviour The CEO and other top level managers must be openly and strongly committed towards ethical conducts and guide people working at middle and low level is follow ethical behaviour.
Publication of a “Code”: Generally ethical organisations define a code of conduct and at this for all the employees in the organisation. These ethics cover various areas such as health and safety in the place, fair dealing in selling and marketing activities etc.
Involving Employers at all levels: While making ethical programmers employees must be involved because these have to be practiced by them only. By forming small groups of employees the ethical policies can be discussed by them and we can examine their attitude towards these policies.
Measuring Result: Although it is very difficult to measure the ethical results but it much be verified and audited that how far work is being carried on according to ethical standards from time to time the top level must meet the employees to set the future plan of action.

7. Discuss the guideline enumerated by the Companies Act, 2013 for Corporate Social Responsibility.

Ans. The concept of Corporate Social Responsibility (CSR) refers to the duties and responsibility of businesses towards society. In India, CSR is governed by the Companies Act, 2013. This law applies to companies with an annual turnover of ₹1,000 crore or more, or with a net worth of ₹500 crore or more, or with a net profit of ₹5 crore or more. The Act provides guidelines for companies to follow when implementing CSR policies, including the requirement to establish a committee for CSR consisting of at least 3 board members, spending at least 2% of average net profits over the previous 3 years on CSR activities, and undertaking only those activities that are specified in the Schedule VII of the Act. Additionally, activities exclusively for employees or their families are not considered part of CSR.

CSR activities can include a wide range of initiatives such as education, healthcare, poverty alleviation, environmental protection, and promotion of sports and culture.
The Companies Act, 2013 requires companies to disclose their CSR policy and initiatives in their annual reports and on their websites.
Companies may collaborate with NGOs, government agencies, or other stakeholders to implement their CSR initiatives.

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