The Social Responsibilities of Businesses in Economics
The social responsibilities of businesses in economics are also known as corporate social responsibilities. Corporate social responsibility is a type of self-regulation in which the business adjusts its operations to conform to the prevailing ethics, legalities and the social norms of the society in which it operates as well as to international norms. It involves the inclusion of public good into business concerns, with the aim of making the business appear favorable in a public light while still ensuring profitability.
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Dimensions
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There are several dimensions to corporate social responsibility. These include economics and the responsibility to the business to provide a profit to shareholders, the legal responsibility to comply with all applicable laws, the ethical responsibility to uphold fair play and justice, the societal responsibility to promote goodwill and benefit society, and the responsibility to contribute to society in a meaningful way, giving something back rather than just taking for selfish gain.
Debate
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There is some debate as to whether social responsibility should apply to business. According to Milton Friedman, the social responsibility of business is to increase its profits. He posits that a business cannot have responsibilities as only people can have responsibilities. He also argues that in a free market economy, pursuing corporate social responsibility can be detrimental to the bottom line of the business, as the business is essentially paying a social tax.
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Free Market
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According to the free market view, the role of the business is to create wealth for its shareholders by providing goods and services to its customers. The social responsibility of the business it to create a profit for itself, using the most efficient and effective means at its disposal, providing it operates within an acceptable legal framework. Social responsibility is effected by the executives, whose job is to make profit for the organization and who have no right to give the organization's money away to social causes. The social benefits to society come as a result of the improvement to the economy from efficient business operations and not from a self-imposed social tax. As the company pays better workers more money, the society in turn benefits from wealth creation and dispersion, resulting in a better standard of living. Any failures in the free market system or failure of society to benefit from the organization are problems to be handled by the government, not the organization.
Benefits
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Despite the free market view, corporate social responsibility is widely practiced by businesses. This is because there are tangible and intangible benefits associated with being seen as a socially responsible firm. Highly visible environmental awareness movements have led to consumers expecting organizations to be socially responsible. Demonstrating social responsibility can lead to increased business and better relationships with suppliers. It leads to goodwill and an organization with a good reputation can attract better quality employees. It can provide competitive advantage and lead to long-term financial gain. In some cases, it can even lead to a reduction in tax expenses.
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