Definition of Social Responsibility in Business

by Stephanie Faris - Updated August 07, 2018
Cleaning the environment together

There’s no shortage of people who want to believe they can make a difference in the world. Whether it’s improving conditions in developing areas of the world or assisting local residents who need it, there are things every person can do each day to help. As valuable as each contribution is, businesses have the power to reach even further, especially large corporations that have unlimited resources. Do businesses have a social responsibility to improve society as a whole?

Tips

  • Social responsibility refers to the concept of businesses having an obligation to better society through their actions.

Definition of Social Responsibility in Business

Businesses generally focus the majority of their efforts on generating revenue. Even if their mission revolves around meeting customer demand or creating superior products, it all boils down to cash flow. Doing this requires relying on customers to spend their hard-earned money on a recurring basis. Once a business has hired employees, it is even more dependent on customer dollars both to survive and to be able to meet payroll twice a month.

Social responsibility can be defined as the concept that states that businesses have a duty to use their power for the greater good. In other words, by regularly making money off their respective communities, companies have an obligation to pay it back by somehow helping the people who make up those communities. For local businesses, this may mean giving back to area nonprofits, but companies that operate nationally or globally may see expectations that they help out charities beyond their own geographic boundaries.

Types of Social Responsibility

There are numerous examples of social responsibility, with some organizations getting fairly creative with their efforts. Here are some of the most popular types of social responsibility.

  • Ethical practices – Social responsibility starts with who a business is, which translates to what that business does. This includes ensuring that the products and services they provide are safe for public consumption.
  • Environmental sustainability – Businesses can show their social responsibility through efforts like recycling, using recycled materials, reducing packaging and choosing environmentally responsible manufacturing methods.
  • Financial responsibility – As businesses earn a profit, this principle states that they have a duty to put some of that money back into the community. This goes beyond simply providing jobs to finding ways to help that show appreciation for the customers who support them.
  • Educational advancement – Training and education programs can help communities grow. This type of social action can take the form of classes to help disadvantaged members join the work world, training for disabled adults, education programs for youth and courses that relate to the products or services a business provides.
  • Scholarships and grants – Assisting college students with the high cost of going to college is a great way businesses can give back. Often this is most effective if the scholarship in some way relates to the work the organization does. A tech company may fund a scholarship to help a student get the technology education necessary to work in the industry, for instance.
  • Mentorship – Programs like Big Brothers Big Sisters of America specialize in pairing community members with youth who need mentorship. Corporations can participate in these types of programs or choose their own methods of mentoring those in need.
  • Political activism – This type of community service can be complicated since businesses can alienate a portion of their customer base if they choose political sides. However, becoming active in encouraging residents to vote or embracing a local political cause can be safe ways to get involved.
  • Disaster relief – Whether or not businesses make social responsibility part of their daily operations, disasters can bring a great opportunity to give back.
  • Employee support – Empowering employees to take action on causes they find important can both satisfy a business’s social responsibility and improve morale. An increasing number of businesses are allowing employees to take time off to volunteer.

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Financial Donations Vs. Hard Work

Realizing the importance of social responsibility, many businesses make an effort each year to donate money to one or more charitable organizations. It’s something fairly simple a successful company can do to give back. In doing so, they may even have their name included on a nonprofit’s materials, providing brand exposure that can serve as a form of advertising. A company that sponsors a local fundraiser, for instance, will become known by everyone associated with that charity as a company that supports the local community.

One big bonus of financial contributions is that the amount given is usually tax deductible. The business will need to provide proof of the donation, but being able to claim it each year can offset the taxes a business would have to pay on the income earned throughout the year. Realizing this, charities often will contact businesses to request donations, realizing that a certain amount is set aside each year for charitable giving. Although there’s no discounting the value those donations bring to recipients, it can devalue the impact of the donation if consumers realize that many companies give for tax purposes.

Consumer awareness has grown in recent years, with 47 percent of customers revealing that they’ll patronize a brand that supports a good cause at least once per month. This highlights the increasing importance of having a mission that includes social responsibility in some form. Although money can serve the same purpose, many businesses will need to incorporate social responsibility into everything they do to ensure that their efforts are visible enough to boost their brand.

Individual Social Responsibility

Corporate responsibility goes beyond what the public believes a business should do to support communities. It also extends to the individual people who make up an organization. Many pay close attention to the social responsibility of management, including chief executive officers, chief operating officers and team leaders. Since many workers will follow a good example, it’s important that the people running the organization embrace social responsibility. A boss who takes time off once a month to help the homeless is more likely to earn the respect of those working beneath her.

This is especially important in an era with sites like Glassdoor, which allow current and former employees to review the corporate culture as well as the behavior of business leaders. News that management of an organization doesn’t care about the community, the business’s customers or its employees can affect whether a business is able to recruit top talent moving forward. In a competitive field, this can easily affect a business’s bottom line.

Leaders who embrace social responsibility can also improve work culture by providing employees with opportunities to pursue their own social interests. Setting up a booth at a local charity event and letting employees volunteer to man that booth is one way to help employees support causes in which they believe. Asking workers from the start to vote on which nonprofits to support can make a big difference in itself. Of course, giving employees paid time off to volunteer is a great way to win over the many younger workers who have stated a preference for working with companies with a history of activism.

Community Involvement

Businesses don’t have to invest significant time and resources into supporting socially responsible causes. In fact, one of the most important things a business can do is get involved in the local community. Joining the local Chamber of Commerce and attending events has the dual benefit of getting support and helping strengthen the local community. Businesses that make a conscious effort to shop local and do everything they can to boost nearby businesses usually benefit from that extra effort. Even providing helpful tips online that are relevant to the work they do can help businesses get the word out about their brand while also showing that they are responsive to their customers.

Although the social responsibility of business may encourage leaders to get involved, it’s actually a great networking opportunity. When businesses help other businesses, they make a connection that can pay off down the line if, say, the leader they helped is asked for a referral or needs to buy the items they sell. In general, getting to know the other business owners in the community can be a huge plus for any business owner, even if all of their transactions are with distant online purchasers. The support and camaraderie that can come from in-person interactions can make a difference in the course of running and growing a business.

Regulatory Obligations

In some instances, though, social responsibility is a requirement of the type of business being operated. A company may receive grant money, for instance, and be socially accountable, whether they must report in on a regular basis or it’s simply something the grantor watches. Businesses with shareholders or investors may also find that their supporters want to see a certain amount of community involvement or nonprofit activity, especially if they feel their name and reputation are attached to that company.

On a more general basis, businesses across all industries must answer to ISO 26000, which was released by the International Organization for Standardization. ISO 26000 is designed to offer guidance to businesses for the work they do. ISO 26000 is especially concerned with sustainable development in the hopes that businesses across the globe will begin to give serious thought to reducing their carbon footprint. Although no business is required to follow the standards set by ISO 26000, there is social pressure to conform, especially if companies are trying to compete with the many others in their industry who do closely adhere to the guidelines. There are seven key principles to ISO 26000:

  • Accountability
  • Transparency
  • Ethical behavior
  • Respect for stakeholder interests
  • Respect for the rule of law
  • Respect for international norms of behavior
  • Respect for human rights

As businesses outline their social responsibility, these principles can help ensure that they’re creating a mission that benefits the greater community. Each of these principles can be applied to every type of organization, from small e-commerce startups to globally-minded nonprofit organizations.

Issues with Social Responsibility

Everything has at least a few negatives, and social responsibility is no exception. In fact, economist Milton Friedman strongly believed that business and social responsibility did not mix. The entire application of social responsibility, Friedman argued, is loose and without rigor. For that reason, he stressed that only individuals can have social responsibility, not corporations and organizations. Other experts believe that social responsibility flies in the face of what business itself is all about: making a profit. However, many companies have made it work, so it is doable with the right motive behind it.

One of the biggest barriers to successful social responsibility for businesses is that they don’t always do it for the right reasons. They may give money for the tax deduction, for instance, or help out with a disaster out of fear of bad press if they don’t. It’s important that leaders find something in which they believe and tie it to the mission of the business. Only then will it be authentic and worthwhile.

About the Author

Stephanie Faris is a novelist and business writer whose work has appeared on numerous small business blogs, including Zappos, GoDaddy, 99Designs, and the Intuit Small Business Blog.

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