Social Responsibilities of Business and Business Ethics | Class 11 Notes, Important Questions & Quiz

Social Responsibilities of Business and Business Ethics – Class 11 Complete Notes, Q&A

A business enterprise is allowed by society to carry on industrial and commercial activities and earn profits. In return, it is expected to act in ways that do not harm society and preferably contribute positively to it. 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.

Social responsibility is broader than legal responsibility. Legal responsibility may be fulfilled by mere compliance with law, while social responsibility involves voluntary efforts that go beyond legal requirements, such as protecting the environment, providing fair working conditions and being honest in advertising.

Business must be socially responsible because:

It uses society’s resources.
Its decisions affect various sections of society.
It has the power and resources to help solve social problems.
Long-term success of business depends on public support and trust.

Justification for existence and growth
Business exists to provide goods and services to satisfy human wants. Profit is a reward for serving society, not the sole purpose of existence. Continuous service to society justifies the existence and growth of business.
Long-term interest of the firm
A firm with a good public image enjoys long-term support of customers, employees, government and community. This ultimately leads to stable profits and growth.
Avoidance of government regulation
When businesses voluntarily act responsibly, there is less need for strict governmental control and regulations, which otherwise limit business freedom.
Maintenance of society
Laws cannot cover every situation. If people feel business is unfair, they may adopt anti-social methods that ultimately harm business. Social responsibility helps maintain a healthy and stable society.
Availability of resources with business
Business has financial resources, managerial talent and experience in problem-solving. These can be used effectively to tackle social problems.
Converting problems into opportunities
Business has a tradition of converting risks into profitable opportunities. Social problems can become new areas for innovation, products and services.
Better environment for doing business
A society with fewer social tensions, pollution and inequalities provides a better environment for business operations.
Business responsible for social problems
Many problems like environmental pollution, unsafe workplaces, corruption and discrimination are created or worsened by business itself. It has a moral duty to help solve them.

Violation of profit maximisation objective
Critics argue that business exists primarily to maximise profit for owners. Spending on social responsibility may reduce profits.
Burden on consumers
Costs of social activities, pollution control and welfare schemes may be passed on to consumers through higher prices.
Lack of social skills
Businesspersons may not have the training or expertise to solve social problems, which should be handled by specialised social agencies.
Lack of broad public support
Some people feel that business should “stick to business” and not interfere in social programmes, which may lead to suspicion and lack of cooperation.

In practice, modern businesses increasingly accept that they must fulfil social responsibilities alongside economic goals. Several forces have encouraged this change:

Threat of public regulation and government control.
Pressure and organisation of labour unions.
Growth of consumer awareness and activism.
Development of social standards for evaluating business.
Expansion of business education highlighting social impact.
Realisation that social and business interests are complementary, not contradictory.
Emergence of a professional managerial class that considers multiple stakeholder interests.

Business is now seen as a socio-economic institution that must balance short-term profits with long-term social welfare.

Social responsibility of business can be grouped into four major categories:

Economic Responsibility
The primary responsibility of business is economic – to produce and supply goods and services that society wants, and to sell them at a profit. Without fulfilling economic responsibility, business cannot survive.
Legal Responsibility
Business must operate within the framework of laws and regulations of the country. This includes obeying tax laws, labour laws, environmental laws, competition laws and so on.
Ethical Responsibility
This covers behaviour that society expects from business but is not necessarily written into law. Examples include: fairness in advertising, respect for religious and cultural values, avoiding exploitation of workers, and maintaining integrity in dealings.
Discretionary Responsibility
These are purely voluntary responsibilities undertaken by business as a matter of choice. Examples include: charitable donations, supporting schools and hospitals, helping people during floods and earthquakes, sponsoring cultural or sports events.

Once business recognises its social role, it must identify its specific responsibilities towards various stakeholders.

Responsibility Towards Shareholders / Owners

Provide a fair return on their capital investment.
Ensure safety of investment by avoiding reckless speculation and maintaining sound financial policies.
Provide regular, accurate and complete information about the company’s operations and future plans.

Responsibility Towards Workers

Provide opportunities for meaningful work and career growth.
Create safe, healthy and humane working conditions.
Respect the democratic right of workers to form unions.
Ensure fair wages and benefits and treat workers with dignity and fairness.

Responsibility Towards Consumers

Supply the right quality and quantity of goods and services at reasonable prices.
Avoid adulteration, defective and unsafe products.
Refrain from misleading and dishonest advertising.
Provide proper after-sale service, courteous behaviour and full information about products.

Responsibility Towards Government and Community

Respect and obey all laws and regulations.
Pay taxes honestly and on time.
Protect the natural environment and avoid damaging emissions, waste and ugly or unsafe facilities.
Build a positive image by participating in community development and interacting regularly with social groups.

Business and Environmental Protection (Pollution and Control)

The environment includes all natural and man-made surroundings of human beings – land, water, air, plants, animals, buildings, institutions and cultural heritage. Rapid industrialisation and unplanned economic activity have led to serious environmental problems.

Pollution is the introduction of harmful substances into the environment beyond its absorption capacity. It changes the physical, chemical and biological characteristics of air, water and land, and can harm human health, degrade living conditions, and damage resources and monuments.

Major Types of Pollution

1. Air Pollution

Caused mainly by emissions from vehicles and industrial smoke from factories and power plants.
Leads to respiratory diseases, smog, and damage to the ozone layer, contributing to global warming.

2. Water Pollution

Caused by dumping untreated industrial waste, sewage and chemicals into rivers, lakes and seas.
Kills aquatic life, contaminates drinking water and poses serious health risks to humans and animals.

3. Land Pollution

Caused by dumping toxic and hazardous waste on land, excessive use of fertilisers and pesticides, and improper solid waste disposal.
Makes land infertile and unfit for agriculture or plantation and is very difficult to reverse.

4. Noise Pollution

Created by running factories, heavy machinery, loudspeakers and traffic.
Causes irritation, loss of hearing, high blood pressure, heart problems and mental stress.

Need for Pollution Control

Pollution control is necessary to preserve environmental resources and improve quality of life. Some key reasons are:

Reduction of Health Hazards
Pollution is linked to serious diseases like cancer, asthma, heart attacks and lung problems. Controlling pollution helps reduce these health risks.
Reduced Risk of Liability
Businesses may have to pay compensation for damage caused by their pollution. By controlling pollution, they reduce the risk of legal action and penalties.
Cost Savings
Efficient production processes reduce waste, which lowers the cost of waste treatment, disposal and cleaning, and often saves raw material and energy.
Improved Public Image
As environmental awareness increases, firms that actively protect the environment enjoy better reputation and consumer loyalty.
Other Social Benefits
Clean air, clean water, preserved monuments and a pleasant living environment improve the overall quality of life in society.

Role of Business in Environmental Protection

All sections of society share responsibility for environmental protection, but business must play a leading role because it:

Uses large quantities of natural resources.
Is a major source of pollution and waste.
Has financial, technological and managerial capabilities to tackle environmental problems.

Key steps business can take include:

Commitment by top management to create and maintain a culture of environmental protection.
Ensuring that this commitment is shared by all divisions and employees.
Developing clear policies for:
- Using good quality raw materials and superior technology.
- Scientific treatment and disposal of wastes.
- Training employees in pollution control.
Strictly complying with environmental laws and regulations.
Participating in government programmes such as cleaning rivers, planting trees and controlling deforestation.
Periodically reviewing pollution control programmes in terms of cost and benefits.
Organising workshops and providing training material to suppliers, dealers and customers to involve them in pollution control.

Environmental Protection in India – Laws and Government Measures

The Government of India has taken various steps to protect the environment:

Enacting important environmental laws such as:
- Wildlife Protection Act, 1972
- Water (Prevention and Control of Pollution) Act, 1974 (amended)
- Air (Prevention and Control of Pollution) Act, 1974 (amended)
- Environment (Protection) Act, 1986
- Forest (Conservation) Act, 1980 (amended)
- Hazardous Wastes Act, 1989
Creating regulatory bodies and departments, such as the Department of Environment (later Ministry of Environment).
Setting up boards like the National Afforestation and Eco-development Board and National Wastelands Development Board.
Issuing court orders for closing or shifting polluting industries away from cities like Delhi, Agra and Kanpur.
Promoting environmental education, awareness programmes and developing Environment Action Plans.

Business Ethics – Meaning, Importance and Elements (Class 11)

Meaning of Business Ethics

Ethics refers to moral principles and values that guide human behaviour about what is right and wrong. Business ethics refers to socially determined moral principles that should guide business activities and decisions.

Ethical business behaviour includes:

Charging fair prices.
Using correct weights and measures.
Providing safe and quality products.
Treating workers fairly.
Earning reasonable profits without exploitation.

Businesspeople are expected to maintain higher ethical standards because they control large resources and their decisions affect the entire society.

Importance of Business Ethics

Improves public image and builds trust.
Attracts and retains customers, employees and investors.
Reduces legal problems and conflicts with various groups.
Enhances long-term profitability and sustainability.
Helps create a fair, just and humane society.

Elements of Business Ethics

To promote ethical behaviour, enterprises should focus on:

Top Management Commitment
Senior managers, especially the CEO, must openly support ethical conduct and lead by example.
Publication of a Code of Ethics
A written code that defines principles of conduct regarding honesty, legal compliance, product safety, workplace safety, conflict of interest, fair marketing and financial reporting.
Establishment of Compliance Mechanisms
Systems to ensure decisions and actions follow ethical standards, including ethics-based recruitment, training, regular audits and channels to report unethical behaviour.
Involving Employees at All Levels
Involving employees in discussions and training on ethical issues helps integrate ethics into daily decision-making.
Measuring Results
Periodic reviews and audits of ethical performance help identify gaps and improve ethical practices.

Corporate Social Responsibility (CSR) refers to the responsibility of enterprises for their impact on society and their commitment to balanced economic, social and environmental development.

Key provisions under the Companies Act, 2013 (India):

CSR applies to companies that meet specific financial thresholds (net worth, turnover or net profit).
Such companies must form a CSR Committee of the Board, including at least one independent director.
They are encouraged to spend at least 2% of their average net profit of the last three years on CSR activities listed in Schedule VII of the Act.
Only CSR activities carried out in India are counted, and activities meant exclusively for employees and their families do not qualify as CSR.

I. Very Short Answer Questions (1 Mark)

Q1. Define social responsibility of business.
Answer: Social responsibility of business is its obligation to take decisions and perform actions that are desirable in terms of the objectives and values of society.

Q2. Give any one example of socially undesirable business practice.
Answer: Manufacture and sale of adulterated goods.

Q3. Name the type of responsibility which is purely voluntary.
Answer: Discretionary responsibility.

Q4. Which principle has replaced “caveat emptor” in modern markets?
Answer: The principle of “customer is king”.

Q5. What is environment?
Answer: Environment is the totality of man’s surroundings, both natural and man-made.

Q6. Name the type of pollution caused by factory smoke.
Answer: Air pollution.

Q7. What is business ethics?
Answer: Business ethics refers to socially determined moral principles which should govern business activities.

Q8. Which law in India deals with overall environment protection?
Answer: The Environment (Protection) Act, 1986.

Q9. Give one element of business ethics.
Answer: Top management commitment.

Q10. Expand CSR.
Answer: Corporate Social Responsibility.

II. Short Answer Questions (3–4 Marks)

Q1. Differentiate between legal responsibility and ethical responsibility of business.
Answer:

Legal responsibility: Obligation of business to operate within the laws of the country, such as paying taxes and following labour and environment laws.
Ethical responsibility: Behaviour expected by society but not necessarily written into law, such as fairness in advertising and respect for people’s dignity.

Q2. State any three arguments in favour of social responsibility of business.
Answer:

It justifies the existence and growth of business by ensuring continuous service to society.
It serves the long-term interest of the firm by building a favourable public image and securing long-term support.
It helps avoid government regulation by encouraging voluntary responsible behaviour.

Q3. State any three arguments against social responsibility of business.
Answer:

It may reduce profit, thus violating the profit maximisation objective.
It may increase the burden on consumers if costs are passed on through higher prices.
Businesspersons may lack the expertise to deal with social problems.

Q4. What are the responsibilities of business towards consumers? (Any four)
Answer:

Supply right quality and quantity of goods and services at reasonable prices.
Avoid adulteration and poor quality goods.
Refrain from misleading and dishonest advertising.
Provide proper service, courtesy and full information about products.

Q5. State any four responsibilities of business towards workers.
Answer:

Provide opportunities for meaningful work.
Create safe and healthy working conditions.
Respect their right to form unions.
Ensure fair wages and fair treatment.

Q6. What is noise pollution? State its two harmful effects.
Answer:
Noise pollution is pollution caused by excessive and unwanted sound from sources like factories and vehicles.
Harmful effects:

Can cause loss of hearing.
Can lead to heart problems and mental disorders.

Q7. State any four benefits of pollution control.
Answer:

Reduces health hazards like respiratory and heart diseases.
Reduces the risk of legal liability and compensation claims.
Saves costs by reducing waste and improving efficiency.
Improves public image of the business.

Q8. Write any four elements of business ethics.
Answer:

Top management commitment.
Publication of a code of ethics.
Establishment of compliance mechanisms.
Involving employees at all levels and measuring results.

III. Long Answer Questions (5–6 Marks)

Q1. Explain the various kinds of social responsibility of business.
Answer:
Social responsibility can be classified into four categories:

Economic responsibility: Produce and supply goods and services that society wants and sell them at a profit.
Legal responsibility: Operate within the legal framework of the country, obeying all relevant laws and regulations.
Ethical responsibility: Follow norms and standards of behaviour expected by society beyond legal requirements, e.g., fairness, honesty and respect for people.
Discretionary responsibility: Voluntary activities like donations, supporting education and health, and helping in natural calamities.

Q2. Describe the role of business in environmental protection.
Answer:
Business must lead environmental protection because it is a major user of resources and generator of pollution. It should:

Ensure strong commitment from top management towards environmental protection.
Spread this commitment throughout the organisation.
Use better technology, quality materials and scientific waste disposal methods.
Comply with all environmental laws.
Participate in government programmes such as river cleaning and tree plantation.
Regularly review pollution control programmes.
Educate suppliers, dealers and customers to involve them in environmental protection.

Q3. What is business ethics? Explain its importance and elements.
Answer:
Business ethics are the moral principles and standards that guide business behaviour. They are important because they improve public image, build trust, minimise legal issues and support long-term profitability and social welfare.
Elements include:

Top management commitment to ethics.
Publication of a code of ethics.
Establishment of compliance mechanisms, including training and audits.
Involving employees at all levels in ethical discussions and decisions.
Measuring and reviewing ethical performance regularly.

Q4. “There is a growing realisation that business has social responsibilities.” Explain any six factors responsible for this change.
Answer:
The main factors include:

Threat of public regulation when business is irresponsible.
Pressure of organised labour demanding better wages and conditions.
Rising consumer consciousness supported by education and media.
Development of social standards that require business to serve social needs.
Growth of business education emphasising social responsibilities.
Emergence of professional managers who consider multiple stakeholder interests.

IV. Assertion–Reason Questions (CBSE Pattern)

Choose the correct option:
A. Both Assertion (A) and Reason (R) are true and R is the correct explanation of A.
B. Both A and R are true but R is not the correct explanation of A.
C. A is true but R is false.
D. A is false but R is true.

Q1.
Assertion (A): Social responsibility of business is wider than legal responsibility.
Reason (R): Legal responsibility includes all voluntary actions expected by society.
Answer: C

Q2.
Assertion (A): Business enterprises should control pollution to improve their public image.
Reason (R): Society is becoming increasingly conscious of environmental quality.
Answer: A

Q3.
Assertion (A): Business ethics is concerned only with obeying the law.
Reason (R): Ethical behaviour goes beyond government rules and regulations.
Answer: D

Q4.
Assertion (A): Discretionary responsibility of business is compulsory.
Reason (R): It includes activities like charitable contributions and helping during natural calamities.
Answer: D

V. Case-Based / Source-Based Questions

Case 1
A large manufacturing company located near a river discharges untreated chemical waste into the river to save costs. Local residents begin to suffer from health problems and fish in the river die in large numbers. Environmental groups protest and file a case in court. The court orders the company to install an effluent treatment plant and pay compensation to affected people.

a) Identify the type of pollution caused in the above case.
b) Name any two reasons that make pollution control necessary for business.
c) State any two steps the business should take to protect the environment.

Answers:
a) Water pollution.
b) Reduction of health hazards; reduced risk of liability and compensation.
c) Install proper treatment technology and scientific waste disposal; comply with environmental laws and regularly review pollution control measures.

Case 2
XYZ Ltd. is a highly profitable company. It pays good dividends to shareholders but is often criticised for poor working conditions, low wages and discouraging workers from forming unions. It also uses misleading advertisements to sell its products.

a) Which interest groups are being ignored by the company?
b) Mention any two responsibilities of business towards these groups.
c) Which concept of business discussed in this chapter is being violated?

Answers:
a) Workers and consumers.
b) Towards workers: fair wages and safe, healthy working conditions; respecting their right to form unions.
Towards consumers: providing quality goods at reasonable prices; avoiding misleading advertisements.
c) Social responsibility of business.

Case 3
ABC Enterprises publishes a written document explaining its rules on honesty in advertising, product safety, use of fair weights and measures, and accurate financial reporting. It also conducts regular training programmes to make employees aware of these rules.

a) What is the written document called?
b) Name the concept of business being promoted here.
c) Identify any two elements of this concept from the case.

Answers:
a) Code of ethics (or code of conduct).
b) Business ethics.
c) Publication of a code; establishment of compliance mechanisms through training.

Student Resources for Class 11 Business Studies

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Always follow the guidance, assignments and updates provided by your school and teachers, as they are closely aligned with CBSE exam requirements. For official circulars, syllabus updates and examination information, visit the CBSE website:
https://www.cbse.gov.in/

Social Responsibility of Business – Meaning and Need (Class 11 Notes)

Arguments for and Against Social Responsibility (Class 11 Business Studies)

Arguments in Favour of Social Responsibility

Arguments Against Social Responsibility

Reality of Social Responsibility

Types of Social Responsibility of Business (Economic, Legal, Ethical, Discretionary)

Social Responsibility Towards Different Interest Groups (Stakeholders)