Social Responsibility in the Finance Sector

This essay describes social responsibility in the finance sector, factors hindering social responsibility, and measures managers can take to address the challenges. It covers economic, legal, ethical, and philanthropic aspects of social responsibility. The benefits of social responsibility to the firm include improved brand recognition, reputation, and employee retention. The challenges include poor social responsibility reporting guidelines and green washing mentality. The essay recommends acting ethically and creating public awareness to address the challenges.

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Social responsibility in the finance sector
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Organizations exist in societies and they have the obligation to make sure they improve the
welfare of the surrounding society. As the organization strives to make more profit, the
organization should also strive to strike a balance between economic activities and
environmental sustainability. Social responsibility refers to ethical obligations that ensure a
business conducts its economic activities ethically and puts into considerations the culture, social
and environmental issues (SAguinis, and Glavas, 2012, p.945). Social responsibility ensures a
business is able to differentiate what is right from what is wrong so as to avoid hurting the
surrounding community. Social responsibility is divided into main groups which include
economic, legal, philanthropic and ethical. All organizations need to have social responsibility
initiatives even if the business does not pollute the environment. This essay is written to describe
social responsibility in the finance sector and highlight factors which hinder social responsibility
and measures which managers can take to address the challenges that hinder social responsibility
in the finance sector.
Economic social responsibility entails entity becoming profitable so that the society can also
benefit in various ways. For instance, financial institutions should offer financial advice to the
people of the society so that people can make better investment decisions that will help to
improve the welfare of the society (Kitzmueller, and Shimshack, 2012, p.65). The economic
aspect of the social responsibility entails providing employment opportunities to the people in
the surrounding environment so as to improve the living standards of people in the society.
Financial institutions can also construct structures that will ensure economic prosperity in the
society.
The legal aspect of social responsibility is concerned with ensuring that the business obeys all
the laws and regulations that govern businesses in the society. The financial institution should

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conform to all company acts which include providing financial statements to the public and the
financial statements should be prepared according to international accounting standards (Kim, et
al.2012, p.784). The firm should also pay taxes and rates as required by the government without
defaulting or engaging in tax evasion. The financial institutions are also supposed to pay the
imposed fines for breaking certain regulations. The firm is also supposed to obtain the relevant
licenses needed to conduct a certain type of business in the society. The firms should also renew
the operating licenses as required by the enacted laws in the society.
Ethical aspects of the social responsibilities of financial institutions involve recognizing and
following certain principles, moral and codes of conduct which have been established by the
society or the industry. Ethics help the business to make decisions that are right as the business
can judge what is right and wrong. Ethics ensures that the business provides equal opportunities
to all people in the society when employment opportunities arise without discrimination on basis
of gender or color (Wang, and Bansal, 2012, p.1145). All employees working the firm should
have equal benefits provided they hold the same position regardless of gender. Same positions in
the organization should also attract equal pay because that is morally right. The financial
institutions also should provide services without exploiting the target customers. The firm should
ensure that customers get value for their money. The services offered should be fairly priced.
The firm should also be in good relations with other stakeholders who help the financial
institutions to operate smoothly. This is done by ensuring timely payments to all the involved
stakeholders.
Philanthropic in social responsibility entails the firms in finance sector making donations to the
society so as to improve the welfare of the society. The donations can involve donating funds to
finance education for needy students in terms of scholarships and bursaries. The firm can also

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decide to construct social amenities in the society such as schools and dispensaries. The firms in
the finance sector can also decide to sponsor various events in the region such as sporting
competitions or academic competitions (Zhao, et al.2012, p.284). Philanthropic responsibility is
just a way of the financial institution being generous because there is no ethical, economical or
even legal regulations that force the business to donate funds to the society.
Financial institutions engaged in social responsibilities for various reasons. Social responsibility
benefits the organization to a large extent and that is the reason why institutions in finance sector
engage in social responsibility because there is no environment pollution involved. Finance
sector engages in social responsibility as it helps to improve brand recognition in the society.
Brand recognition in the society is achieved through promotions and advertisements and also by
engaging in social responsibility initiatives (Yin, and Zhang, 2012, p.308). Brand recognition
leads to more people in the society being aware of the products and services offered by the
organization. This will enable the firm to issue more loans to customers as they have the
advertised their products through engaging in social responsibility activities.
Social responsibility helps to improve the reputation of the business. Good public reputation
helps to improve the brand image. Many people in the society will want to be associated with
financial institutions that have a good reputation in relation to helping the society. This helps the
firms in the finance sector to attract more customers (Uadiale, and Fagbemi, 2012, p.51). Public
image plays a critical role in the performance of the company as customers hate to be associated
with organizations that are faced with a lot of scandals especially customer exploitation scandals.
Social responsibility can help to improve the damaged image of the firms in the finance sector as
helping the surrounding society will help to change the perspectives of the target market. The
good reputation will also enable the company to ensure there is customer loyalty as people in the

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society will want to be associated with the financial institutions as their own and they can do
anything to defend it.
Engaging in social responsibilities will also enable the involved financial institution to attract top
talent in the society. Such initiatives will also enable the firm to retain talented staff (Bravo, et
al.2012, p.139). This will help the business avoid disruptions that are associated with hiring new
staff and this will result in better services to customers. Top talents in the organization will also
ensure that the organization has various innovations which will help to create a competitive
advantage and position the firm in a better position than its competitors (Ni, and Van Wart, 2015,
p.185). Employee retention will also enable the firm to cut operational costs as costs associated
with the hiring process such as advertising for various vacancies in the organization will be
avoided. This will translate to lower prices for the offered which will help in attracting more
customers and be able to compete favorably. Firms in the finance sector engage in social
responsibility initiatives as there are more benefits to be gained even though there no
environmental degradation.
Firms in the finance sector may be willing to engage in social responsibility but there are various
factors that hinder them. Some of the factors include; poor social responsibility reporting
guidelines and regulations that ensure that organizations disclose their social responsibility
activities for the whole year correctly. Lack of the laws and regulations enable organizations to
engage in accounting manipulations so as to increase their social responsibility activity. The
loopholes enable financial institutions to avoid social responsibilities as there are no rules that
force organizations to conserve and enhance the welfare of the society (Dowling, 2017, p.303).
This is worsened by the fact that financial institutions do not engage in activities that lead to
environmental degradation. This also makes firms in the finance sector to neglect social

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responsibilities as they term such efforts wastage of limited resources that can be used to expand
the operations of the business.
Green washing mentality in the society has also forced many organizations in the finance sector
to neglect social responsibilities. This is due to the fact that members of the society do not
appreciate the efforts made by the organizations in trying to improve the welfare of the society.
Members of the public believe that financial institutions use their financial expertise to exploit
the society (Stecker, 2016, p.379). The member’s belief that the efforts made by the firms are not
genuine and will only benefit the organization and hurt the society at long last. This discourages
many firms in the finance sector from engaging in social initiatives that help the members of the
society.
There are various measures that managers in the firms can employ to ensure the identified
challenges are well addressed. The recommendations include acting ethically and ensuring that
all the existing rules and laws that govern the social responsibility disclosures during financial
statements preparations are followed. This will force the firm to engage in more social
responsibility initiatives as managers in the organization are guided by moral and ethics and will
not engage in social responsibility disclosure malpractices (Kansal, et al.2014, p.224). The other
recommendation is creating awareness among the members of the public about the social
responsibility initiatives and the aim of such initiatives. This will enlighten members of the
public and the society will start appreciating such initiatives. Such appreciation will motivate the
firms to engage in social initiatives as this will lead to good relations.
In conclusion, social responsibility plays a critical role in ensuring that firms in the finance sector
conserve the environment so as to avoid environmental pollution. Such responsibility enables an

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organization to differentiate what is right from what is wrong and this will enable the business to
act ethically so as to avoid exploiting the society for the sole purpose of making a profit. Social
responsibility helps both the society and the firm. The firm is able to improve public image and
enhance brand recognition in the society. Retention of staff and attraction of top talents in the
society is also associated with social responsibility initiatives carried out by the business. There
are various factors which hinder the engagement of firms in social responsibility and they
include green washing perceptions and poor laws guiding social responsibility reporting. Such
challenges can be addressed by following the existing laws governing social reporting initiatives
and creating public awareness about the importance of social responsibility initiatives in the
society

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References
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