Social Responsibility of Business

This essay explores the concept of social responsibility in business and critically discusses whether increasing profits is the only responsibility. It analyzes contrasting theories such as Friedman's shareholder theory and Freeman's stakeholder theory. The essay also provides an extended example of a socially responsible organization and evaluates the ethical and sustainability standing of various organizations.

Social Responsibility of
Business

Contents
Essay topic.......................................................................................................................................1
Introduction......................................................................................................................................1
Main body........................................................................................................................................1
Critically discussing the statement using contrasting theories....................................................1
Critically discussing the statement using extended example that illustrates Socially
Responsible behaviour.................................................................................................................4
Evaluate the ethical and sustainability standing of a range of organisations..............................5
Conclusion.......................................................................................................................................6

Essay topic
“The social responsibility of business is to increase its profits” (Friedman, 1970). Critically
discuss this statement using contrasting theories and an extended example that illustrates Socially
Responsible behaviour”.
Introduction
Social responsibility is both a theory and an activity which is performed by an organisation
in order to ensure welfare of the society from their operations. According to Friedman, the most
significant social responsibility of an organisation is increase its profits (Brammer, Jackson and
Matten, 2012). This statement analysing social responsibility has various layers to understand. In
order to fulfil this aim, in this essay, various contrasting theories of social responsibility has been
analysed. Later in this essay, extended examples will be evaluated to analyse the organisation’s
Social Responsibility and their sustainability strategy at the operational level.
Main body
Critically discussing the statement using contrasting theories
Social responsibility refers to the responsibilities and duties of an organisation that they are
required to fulfil in order to welfare people who are related with their organisations. There are
several arguments which analyse this topic of social responsibility. The theories of social
responsibility will help in analysing the statement that whether or not profit is the only social
responsibility of an organisation. For this the theories of shareholders and stakeholders will also
be compared below as shareholder theory focuses on earning profit and stakeholder theory
focuses on earning profit and maintaining sustainability. The arguments relating to social
responsibility are diverse due to which few theories of social responsibility are critically
discussed below:
Friedman v Freeman
Friedman’s shareholder theory
Milton Friedman was an Economist who believed that it is important for a nation to have a
free market system and no government intervention in the operations of an organisation.
Friedman developed a doctrine according to which, they only social responsibility of an
organisation is to increase its profits for their shareholders. This theory of Friedman shaped the
corporate culture of 20th century where capitalism and freedom were the agendas of business
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which helped them to earn higher profits. According to this theory, organisations must develop
their strategies and plans which are appropriate for their operations and which can earn higher
profits (Mansell, 2013).
Freeman’s stakeholder theory
The theory of Freeman is a contrasting theory of Freidman. This stakeholder theory is a
more evolved theory which was designed for the businesses of 21st century. This theory suggests
that besides increasing profits, there are various other social responsibilities of an organisation
which are important to be fulfilled. Instead of focusing on only shareholders. This theory focuses
on all the stakeholders of an organisation. Freeman suggested that an organisation has a social
responsibility against all their stakeholders. This theory is analysed below in order to analyse
various social responsibilities of a business organisation:
Employees and managers – These are the internal stakeholders of an organisation who are
behind the operations of a business. It is social responsibility of an organisation to satisfy the
needs of their employees and managers. Organisation must ensure that their employees and
manages are getting appropriate wage, rewards and recognition that they deserve. Also, it is a
social responsibility of an organisation to develop their employees by providing them valid and
reliable training in order to educate them to sustain in market. By analysing this, it has been seen
that employees are also essential stakeholders of an organisation due to which only earning profit
cannot be only a social responsibility of a company. Therefore, I do not agree with the statement
that earning profits are the only responsibility of a company.
Owners / shareholders – These are also the internal stakeholders of an organisation who
invests their money in the shares of a company and provide capital to the company so that it can
effectively operate. The only responsibility of an organisation towards their owners is to increase
their profits so that owners can get benefitted. This increased profit must be distributed to the
shareholders as dividend.
Suppliers – This stakeholder group is an external stakeholder group of an organisation
which supplies raw material to their organisation through which organisations operate in market.
Although, suppliers are not directly related with the company but then also, it is a responsibility
of an organisation to contribute towards their suppliers by providing them timely payments and
fair trade agreements (Phillips, 2011).
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Customers – This is an external stakeholder group who is responsible for the profits and
revenue generated by an organisation. Considering the fact that customers are the reason for
success of an organisation, it is important for an organisation to fulfil their social responsibility
towards their customers as well. The social responsibility of a company towards their customers
include quality services products, after sales services and an opportunity to provide feedback to
the company.
Society – This external group is indirectly related with the business organisation. While
operating in society, society provides various resources to a company including premises, human
resources, basic amenities and more. So, it levies a social responsibility on an organisation that
they must also contribute towards society. The social responsibility of organisations towards the
society includes environment preservation, effective waste management and more.
Government – This is also an external stakeholder of an organisation which has the
authority to intervene in the operations and decisions of an organisation. An organisation has few
responsibilities against the government of the nation in which they operate; these responsibilities
include timely and correct payment of taxes and fulfilment of all formalities (Mainardes, Alves
and Raposo, 2011).
From the above analysis of theory, it has been analysed that only increasing profit cannot
fulfil the social responsibility of an organisation. To further analyse this discussion, triple bottom
line theory is discussed below:
Triple bottom line theory
This theory is a framework which recommends business organisations to fulfil their social
responsibility. This theory is a contrasting theory to Freidman’s shareholder theory as the triple
bottom line does not only focus upon profit, but it focuses upon three parameters which are
profit, planet and people. This theory is further discussed below to analyse the social
responsibility of an organisation:
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(Source: Triple bottom line theory. 2020)
Profit – Under this social responsibility, employees are responsible towards their
shareholders and investors to earn more profit. This responsibility can be fulfilled by effectively
operating in market.
Planet – This responsibility is towards environment and society that can be fulfilled by using
sustainable methods of operations by which environment will be preserved and responsibility
towards the society will be fulfilled.
People – This responsibility of an organisation is against the employees and customers of
the company which is fulfilled by providing better environment to employees while providing
them appropriate rewards and recognition and by providing appropriate services to the
customers. This triple line theory has provided me the insights that along with profit, people and
planet are also equally important for an organisation and therefore I do not agree with the
statement of Freidman and his shareholder’s theory.
Critically discussing the statement using extended example that illustrates Socially Responsible
behaviour
An organisation must be socially responsible and work towards development and
wellbeing of society. Today, being a socially responsible organisation is very crucial in order to
get growth and success in market and attain high profits. There are four kinds of Corporate
Social responsibilities including environment conservation, philanthropy, volunteerism and
diversity and labor practices. The biggest companies globally aligned with the efforts of
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philanthropy (Newman and et, al., 2016). Now a days, small organizations put their efforts
towards welfare of society and are becoming socially responsible. For instance: Webexpenses is
a small business of United Kingdom which deals in information technology sector and renders
digital expense management system to organisations. The company is providing software to
around 800 companies all over the world. The company work effectively towards providing
innovative solutions to customers and is committed to bring technology to societies or
communities all around the world. The firm understand that the success needs not just constant
innovation, but developing a next generation which is capable of understanding, utilizing as well
as enhancing technology.
Apart from this, people are more concerned towards environment and it is the top most
priority for all. The concerns include long-term issues like climate change or local issue like
toxic chemical spill. The organizations which are socially responsible align themselves in the
effects of minimizing environmental issues by taking such steps like reducing carbon footprint.
Webexpenses is also committed towards it and perform its business operations in such a manner
that it will not harm the environment in any way (Maric, and et, al., 2017). Social responsibility
is the main focus of organisation and the company is environmentally conscious and take active
steps to perform activities and operations of business in sustainable way. In addition to this, the
organisation also involves in communities and charities in a productive way. The company is
working with different charities on distinct fundraising activities as well as encourage all its team
members to take participation in raising money for the purpose of welfare of society. During the
lockdown, the workforce of the company across its three offices in United States, Australia and
United Kingdom took participation in campaign to raise funds called "Miles of May" (Best thing
about Webexpenses that people might not know about, 2020). The main purpose of conducting
this campaign was to finish as many miles in May through cycling, walking or running. By this
campaign, the employees of the company raised over 1000 pounds for Headway Oxfordshire
which is a brain injury charity.
Evaluate the ethical and sustainability standing of a range of organisations
Ethics are characterised as the moral principles that directs behaviour and conducting of an
activity of business. An ethical organisation is referred as a company which works ethically and
with transparency by following all the law and regulations. Webexpenses has developed its
compliance and ethics program so as to ensure that all the activities are conduct ethically. In
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order to prevent the compliance issues, company emphasize on promoting the culture of integrity
and ethics by developing culture of compliance within the firm and by standards of business
conduct, training and policies, while utilising data analysis, proactive investigations, risk
assessment, third party vetting as well as other reports to reduce potential risk. The company
understand the requirement to reduced cost, comply with HMRC requirements as well as mental
sustainable expenses policies. It develops appropriate policies that helps in achieving all the
goals of the company (Ganescu, and Gangone, 2017).
In today’s business environment, for running the business in an ethical way, transparency is
necessary. The company brings transparency in its policies and procedures and communicate all
these to its employees. This will help company in ensuring ethical working within firm. It also
assists in developing good image in market which ensures sustainability of the company for long
term in market. Apart from this, within the organisation, the employees who violate its standards
face disciplinary action including their employment termination. In order to maintain
sustainability, company frame some policies and strategies. On the other hand, Webexpenses
also follows ethical codes of conducts and practices in order to ensure that ethical working takes
place in the organisations (Zorzini, and et. al., 2015). A strict action is taken against to those
individuals who does not follow the ethical principles and values and violates the codes of
conduct. It detects potential compliance issues and identify the root cause of issue and improve
controls and processes on continuous basis in order to reduce the risk of recurrence. It is a key
aspect which leads to develop growth mind-set culture within the firm and leads it towards
success.
Conclusion
As per the above mentioned report, it has been concluded thatsocially responsible behaviour
of a business helps in improving its profitability and image in market. It helps in in attaining
growth and long term success in the market. It helps in developing effective culture within the
organisation that ultimately supports in improving profitability and morale of employees.
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REFERENCES
Books and Journals
Brammer, S., Jackson, G. and Matten, D., 2012. Corporate social responsibility and institutional
theory: New perspectives on private governance. Socio-economic review. 10(1). pp.3-28.
Mainardes, E.W., Alves, H. and Raposo, M., 2011. Stakeholder theory: issues to
resolve. Management decision. 49(2). pp.226-252.
Mansell, S., 2013. Shareholder theory and Kant’s ‘duty of beneficence’. Journal of Business
Ethics. 117(3). pp.583-599.
Phillips, R.A. ed., 2011. Stakeholder theory. Edward Elgar Publishing.
Newman, A., and et, al., 2016. The impact of socially responsible human resource management
on employees' organizational citizenship behaviour: the mediating role of organizational
identification. The international journal of human resource management, 27(4), pp.440-
455.
Maric, R.M., and et, al., 2017. Socially responsible behavior of sales staff: evidence from
Western Balkans supermarkets. Engineering Economics, 28(1), pp.110-119.
del Mar Miras‐Rodríguez, M., Carrasco‐Gallego, A. and Escobar‐Pérez, B., 2015. Are socially
responsible behaviors paid off equally? A Cross‐cultural analysis. Corporate Social
Responsibility and Environmental Management, 22(4), pp.237-256.
Ganescu, C. and Gangone, A., 2017. A model of socially responsible organizational
culture. Studia Universitatis „Vasile Goldis” Arad–Economics Series, 27(2), pp.45-59.
Zorzini, M., and et. al., 2015. Socially responsible sourcing: reviewing the literature and its use
of theory. International Journal of Operations & Production Management.
Online
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