In a business establishment, social responsibility refers to the activities or actions by the business establishment which impacts positively on the consumers, communities, stakeholders and the environment. The practice of social responsibility came to fore in the late 1960s and earlier 1970s when most multinationals formed the term stakeholder, referring to the people whom a business’s activities have an impact on. Since that time, two different schools of thought have emerged, one in support and the other opposing this practice by business establishments.
In as much as there are two diverse schools of thought on this topic, the benefits of social responsibility within a business organization, outweighs the disadvantages though they are difficult to measure and they vary from one organization to the other.
There are several ways in which a social responsibility of a business enterprise benefits the stakeholders and the community. For one, it helps to minimize the negative economic effects to the society. For instance, refraining from increasing the price of a product will contribute to the social objective of preventing inflation, even if an increase in price would mean more profit returns for the business enterprise. Now, with increased inflation, the price of the inputs for a business enterprise will also increase and in the long run the profits of the business will also decrease.
Secondly, social responsibility contributes to the social objective of improving the environment (Milton Friedman, 1970). A clean business environment increases the profits of an organization in the sense that little resources will be used as inputs for the final product. Take an example of an industry that uses oxygen as its input. If the environment of this industry is clean environment, little effort will be put into purifying the air to extract oxygen for use as an input to such industry. This will mean less input costs and more profits for this industry.
References
Friedman Milton (1970, September). The Social Responsibility of Business is to increase its profit. The New York Times Magazine [New York].
