Business Studies - Class 11th (CBSE) - Chapter 6 (Social Responsibility of Business and Business Ethics)

There are two names for Class 11 Business Studies Chapter 1. In some textbooks, it is Nature and Purpose of Business. However, in the official textbook of NCERT, it is Business, Trade & Commerce.

We are aware of this naming variation, so you don’t need to worry.

Our Business Studies notes are prepared by expert CBSE BST teachers, and you can learn from the quick revision notes below for Class 11 Chapter 1.

Here are the quick details:

Subject: Business Studies
Class: 11th (CBSE)
Chapter Number: 6
Chapter Name: Social Responsibility of Business and Business Ethics

Table of Content

Social Responsibility	Business and Environment Protection
Business Ethics

Definition of Social Responsibility

Social responsibility of business refers to its obligation to take those decisions and perform those actions which are desirable in terms of the objectives and values of our society.

Arguments for Social Responsibility

Argument	Explanation
Justification for Existence and Growth	Business exists to provide goods and services to satisfy human needs. The profit motive is an important justification for undertaking business activity; it should be looked upon as an outcome of service to the people. The growth of business is possible only through continuous service to society.
Avoidance of Government Regulation	From the business point of view, government regulations are undesirable because they limit freedom. Therefore, it is believed that businessmen can avoid the problem of government regulations by voluntarily assuming social responsibilities.
Availability of Resources with Business	This argument holds that business institutions have valuable financial and human resources which can be effectively used for solving the problems of society.
Long-term Interest of the Firm	A firm can earn maximum profits in the long run when its highest goal is service to society. When an increasing number of members of society feel that a business enterprise is not serving their best interests, they tend to withdraw their cooperation from the enterprise concerned.
Better Environment for Doing Business	If business is to operate in a society that is full of complicated problems, it may have little chance of success. A society with fewer problems provides a better environment for a firm to conduct its business.

Arguments against Social Responsibility

Argument	Explanation
Burden on Consumers	It is argued that social responsibilities like pollution control are very costly and require huge investments. So, businessmen are likely to shift this burden to customers by charging consumers higher prices instead of bearing it themselves.
Violation of Profit Maximization Objective	According to this argument, business exists only for profit maximization. In fact, business can best fulfill its social responsibility if it maximizes profits through increased efficiency and reduced costs.
Lack of Broad Public Support	According to this argument, the public generally does not like business involvement. Therefore, business cannot operate successfully because of a lack of public confidence and cooperation in solving social problems.
Lack of Social Skills	All social problems cannot be solved easily. Hence, businessmen do not have the necessary understanding and training to solve these problems. According to this argument, social problems should be solved by other specialized agencies.

Social Responsibility towards Different Interest Groups

Interest Group	Responsibility
Responsibility towards Shareholders or Owners	It provides a fair return to the shareholders or owners on their capital investment. It ensures the safety of such investment. It also provides the shareholders with regular, accurate, and full information about its working.
Responsibility towards the Workers	It is responsible for providing opportunities to the workers for meaningful work. It should try to win the cooperation of workers. They should be given fair wages and a fair deal from the management. They should be allowed to form unions.
Responsibility towards the Consumers	Supplying the right quality and quantity of goods and services to consumers at reasonable prices constitutes the responsibility of an enterprise towards its customers. It should provide full information about the product. It must take proper precautions against adulteration, poor quality, lack of desired service, and so on.
Responsibility towards the Government and Community	It must respect the laws of the country and pay taxes regularly and honestly. It must also develop a proper image in society through continuous interaction with various groups of people. It must protect the natural environment and should avoid harmful effluents and smoky chimneys.

Business and Environment Protection

Protection of the environment is a serious issue that confronts managers and decision makers. The environment is defined as the totality of man’s surroundings, both natural and man-made.

Pollution: The injection of harmful substances into the environment, mainly because of industrial production. Pollution has harmful effects on both human life and the life of other species.

Causes of Pollution

Type of Pollution	Causes
Land Pollution	Dumping toxic waste on land causes land pollution. It damages the quality of land, making it unfit for agriculture or plantation. It is a big problem to restore the quality of the land.
Air Pollution	It is the result of a combination of factors that lower air quality. It is mainly due to harmful gases such as carbon monoxide emitted by automobiles and smoke released by manufacturing plants, which pollute the air. This has created a hole in the ozone layer, leading to the dangerous warming of the earth.
Water Pollution	Dumping waste and chemicals from industries into rivers, streams, and lakes causes water pollution. It leads to the death of several animals and poses a serious threat to human life.
Noise Pollution	Noise caused by the running of factories and vehicles is not only annoying but also a serious health hazard. Noise pollution can be responsible for many diseases, such as loss of hearing, malfunctioning of the heart, and mental disorders.

Need for Pollution Control

Need	Explanation
Cost Savings	An effective pollution control programme is also needed to save the cost of operating the business. The cost of waste disposal and the cost of cleaning plants, etc., can be saved through pollution control measures.
Reduction of Health Hazards	There is increasing evidence that many diseases, such as cancer, heart attacks, and lung diseases, are caused by pollutants in the environment. Pollution control measures can also support a healthy life on earth.
Improved Public Image	A firm’s policies and practices for controlling waste will increasingly influence people’s attitudes towards its work. A firm that promotes the cause of the environment will be able to enjoy a good reputation and will be perceived as a socially responsible enterprise.
Reduced Risk of Liability	It is possible that an enterprise is held liable to pay compensation to people affected by the toxicity of gaseous, liquid, and solid wastes it has released into the environment. Therefore, it is sound business policy to install pollution control devices on its premises to reduce the risk of liability.
Other Social Benefits	Pollution control results in many other benefits, such as: Clearer visibility Cleaner buildings Better quality of life The availability of natural products in a purer form

Some Specific Steps That Can Be Taken by Business Enterprises for Environmental Protection

Step	Explanation
Step 1	A definite commitment by top management to create, maintain, and develop a work culture for environmental protection and pollution control.
Step 2	Ensuring that commitment to environmental protection is shared throughout the enterprise by all divisions and employees.
Step 3	Developing policies and programmes for purchasing good quality raw materials, employing superior technology, using disposal techniques, and developing employee skills for the purpose of pollution control.
Step 4	Complying with the laws and regulations enacted by the government for pollution control.
Step 5	Participation in government programmes relating to the management of hazardous substances, cleaning up polluted rivers, planting trees, and checking deforestation.

Business Ethics

The word “ethics” is derived from the Greek word “ethics,” which means norms, ideals, values, or character prevailing in a group or society.
Ethics is concerned with what is right and what is wrong in human behaviour, judged on the basis of a standard form of conduct as approved by society. Business ethics can be defined as socially determined moral principles which should govern business activities.

Elements of Business Ethics

Element	Explanation
Top Management Commitment	Top management has a crucial role in guiding the entire organization. To achieve results, higher-level managers need to be openly and strongly committed to ethical conduct. They must work as role models for the entire firm.
Publication of a Code	Enterprises with effective ethics programmes define the principles of conduct for the whole organization in the form of written documents, which are referred to as the code. The code covers areas such as fundamental honesty, product safety and quality, conflicts of interest, employment practices, and financial reporting.
Establishment of Compliance Mechanisms	In order to ensure that actual decisions and actions comply with the firm’s ethical standards, suitable mechanisms should be established.
Involving Employees at All Levels	It is the employees at different levels who implement ethics policies to make ethical business a reality. Therefore, their involvement in ethics programmes becomes a must.
Measuring Results	Although it is difficult to accurately measure the end results of ethics programmes, firms can certainly audit to monitor compliance with ethical standards.

The End

👉

A List of Notes:

CBSE Class 11th Business Studies Notes - n6