Social Responsibilities of Business and Business Ethics

2.1 Core concepts

A business enterprise is permitted by society to carry on industrial or commercial activities and earn profits, but is obligated not to do anything undesirable from society's point of view (NCERT §6.1, p. 134). Durable success comes from socially responsible and ethically upright behaviour.

The concept of social responsibility (NCERT §6.2, pp. 134-135) is the obligation of business to take decisions and perform actions which are desirable in terms of the objectives and values of our society. It implies respecting society's aspirations along with profit interests. Social responsibility is broader than legal responsibility — legal responsibility is fulfilled by mere compliance with law, while social responsibility involves voluntary action by businesspeople for the benefit of society, going beyond what law requires. This is the master distinction, and NTA pulls assertion-reason items on it almost every year.

The Companies Act, 2013 (Clause 135) CSR thresholds (NCERT box, pp. 135-136): CSR provisions apply to companies with annual turnover of Rs. 1,000 crore or more, OR net worth of Rs. 500 crore or more, OR net profit of Rs. 5 crore or more. Such companies must set up a CSR Committee with at least one independent director and spend 2% of the average net profit of the previous three years on CSR activities. CSR is defined by the European Commission and World Business Council for Sustainable Development as the voluntary integration of social and environmental concerns into business operations and stakeholder interactions.

Arguments for social responsibility (eight) (NCERT §6.3.1, pp. 136-137): (i) justification for existence and growth; (ii) long-term interest of the firm; (iii) avoidance of government regulation; (iv) maintenance of society; (v) availability of resources with business; (vi) converting problems into opportunities; (vii) better environment for doing business; (viii) holding business responsible for social problems. Arguments against (four) (§6.3.2, pp. 137-138): (i) violation of profit maximisation objective; (ii) burden on consumers (cost shifted via higher prices); (iii) lack of social skills with businessmen; (iv) lack of broad public support. The seven reality forces (§6.3.3, pp. 138-139) pushing business towards social responsibility are: (i) threat of public regulation; (ii) pressure of the labour movement; (iii) impact of consumer consciousness (with caveat emptor replaced by "customer is king"); (iv) development of social standards for business; (v) development of business education; (vi) relationship between social interest and business interest (complementary, not contradictory); and (vii) development of the professional managerial class.

NCERT §6.4 (p. 140) classifies responsibility into four kinds: (a) Economic — produce goods/services society wants and sell at profit (little discretion; the primary responsibility); (b) Legal — operate within the laws of the land; (c) Ethical — behaviour expected by society but not codified in law (e.g., respecting religious sentiments in advertising), with an element of voluntary action; and (d) Discretionary — purely voluntary obligations such as charitable contributions to educational institutions or relief during floods and earthquakes. The order moves from least discretionary (economic) to most voluntary (discretionary). NCERT §6.5 (pp. 140-141) maps the responsibilities of business towards different interest groups: (i) Shareholders/owners — fair return on capital, safety of investment, regular accurate full information; (ii) Workers — meaningful work, right working conditions, respect for democratic right to form unions, fair wage and fair deal; (iii) Consumers — right quality and quantity of goods at reasonable prices, no adulteration/misleading advertising, right of information; (iv) Government and community — respect laws, pay taxes honestly, protect natural environment, develop proper image.

NCERT §6.6 (pp. 141-145) develops business and environmental protection. The environment is the totality of man's surroundings — natural and man-made; pollution is the injection of harmful substances into the environment, and is largely the result of industrial production. The four causes/kinds of pollution (§6.6.1) are: (i) Air pollution — chiefly carbon monoxide from automobiles and smoke/chemicals from manufacturing plants; created a hole in the ozone layer leading to global warming; (ii) Water pollution — chemical and waste dumping into rivers, streams, lakes; (iii) Land pollution — dumping of toxic wastes, making land unfit for agriculture; (iv) Noise pollution — from factories and vehicles, can cause loss of hearing, heart malfunction, mental disorder. The five reasons for pollution control (§6.6.2) are reduction of health hazards, reduced risk of liability, cost savings, improved public image, and other social benefits (clearer visibility, cleaner buildings, better quality of life, purer natural products). The role of business in environmental protection (§6.6.3) involves seven steps: (i) definite commitment by top management; (ii) sharing commitment across all divisions and employees; (iii) clear policies for purchasing good materials, superior technology, scientific disposal and employee skill development; (iv) complying with laws; (v) participation in government programmes; (vi) periodical cost-benefit assessment of pollution-control programmes; and (vii) educational workshops with suppliers, dealers and customers.

NCERT §6.7 (pp. 145-147) defines business ethics as "socially determined moral principles which should govern business activities". The word ethics derives from the Greek "ethics" meaning character. Ethical behaviour goes beyond law and government regulations — it is just and fair conduct expected by society. The five elements of business ethics (§6.7.2, p. 147) are: (i) Top management commitment — CEO and higher managers must give continuous leadership; (ii) Publication of a 'Code' — written code covering honesty, product safety, workplace safety, conflicts of interest, employment practices, fairness in selling and marketing, financial reporting; (iii) Establishment of compliance mechanisms — ethics in recruitment, hiring, training, auditing performance, and communication systems to report unethical behaviour; (iv) Involving employees at all levels — small groups of employees discuss ethics policies; (v) Measuring results — audit to monitor compliance and discuss results for further action.

2.2 Definitions to memorise

2.3 Diagrams / processes to remember

Four boxed visuals that CUET routinely picks from:

Box: Corporate Social Responsibility (NCERT pp. 135-136) reproduces the European Commission and World Business Council for Sustainable Development definitions of CSR, and lays out the Companies Act 2013 Clause 135 thresholds and the 2% spending rule. Students should be able to recite the three thresholds (Rs. 1,000 crore turnover / Rs. 500 crore net worth / Rs. 5 crore net profit) and the 2%-of-three-year-average rule from memory.

Box: Environmental Problems (NCERT p. 142) lists the UN's eight problems: (i) Ozone depletion, (ii) Global warming, (iii) Solid and hazardous wastes, (iv) Water pollution, (v) Freshwater quality and quantity, (vi) Deforestation, (vii) Land degradation, (viii) Danger to biological diversity. This box is the canonical source for any CUET stem on "global environmental problems".

Box: Environmental Protection in India (Steps by the Government) (NCERT p. 145) lists six laws — Wildlife Protection Act 1972, Water (Prevention and Control of Pollution) Act 1974, Air (Prevention and Control of Pollution) Act 1974, Environment (Protection) Act 1986, Forests (Conservation) Act 1980, Hazardous Wastes Act 1989 — and three institutions: Department of Environment (created 1980), National Afforestation and Eco-development Board, and Environment Action Plan (EAP). CUET assertion-reason items often pair an environmental problem with the relevant statute.

Box: Ground Rules of Ethics (NCERT p. 148) lists six universal virtues: (a) be trustworthy, (b) respect for others, (c) own responsibility, (d) fair in dealings, (e) caring towards well-being of others, (f) prove to be a good citizen. These six are the closest thing to a "principles of ethics" list and are a frequent source of fill-in-the-blank items.

A useful "logic diagram" to memorise is the classification tree of social responsibility: Social Responsibility branches into four kinds — Economic (primary, profit-bearing), Legal (compliance), Ethical (expected but uncodified), Discretionary (purely voluntary). Reading the tree left-to-right also captures the "discretion gradient" from low (economic) to high (discretionary).

2.4 Common confusions / NTA trap points

1. Social responsibility vs Legal responsibility — social is broader; it includes legal obligations PLUS voluntary action. CUET stems regularly invert this (NCERT §6.2, p. 134-135).
2. Four kinds of social responsibility — economic, legal, ethical, discretionary. Remember the order from least discretionary (economic) to most voluntary (discretionary). NTA picks examples and asks the student to classify (NCERT §6.4, p. 140).
3. CSR thresholds under Companies Act 2013 — Rs. 1,000 crore turnover / Rs. 500 crore net worth / Rs. 5 crore net profit — three independent thresholds. CSR spending is 2% of average net profit of previous three years — not five years, not current year.
4. Arguments count — arguments for social responsibility are eight; arguments against are four; reality forces are seven. CUET picks one item and asks which list it belongs to.
5. Caveat emptor vs customer is king — caveat emptor is the OLD principle ("let the buyer beware") REPLACED by 'customer is king'. NTA likes to flip these (NCERT §6.3.3 (iii), p. 139).
6. Discretionary vs Ethical responsibility — discretionary is purely voluntary (charity, disaster relief); ethical is what society expects but is not in law. These are distinct categories within the four-kind classification (NCERT §6.4, p. 140).
7. Functions of management vs elements of business ethics — these are unrelated lists but CUET sometimes drops a "publication of a Code" option into a management-functions question to test whether students conflate them.
8. Threat of public regulation appears in §6.3.3 as a reality factor — NOT as an argument against social responsibility. CUET frequently misplaces this option to test the student's recall of which list it belongs to (NCERT p. 138-139).
9. Element of business ethics — five not four — top management commitment, Code, compliance mechanism, employee involvement, measuring results. NTA distractors sometimes add "maximisation of shareholder dividend" (NCERT §6.7.2, p. 147).
10. Pollution types — four not three — air, water, land, noise. Students often forget noise pollution; CUET item-writers exploit this (NCERT §6.6.1, p. 142-143).
11. Environment Act 1986 is the umbrella statute; sector-specific Acts (Water 1974, Air 1974) preceded it. CUET sometimes tests the chronological order.

2.5 Case examples

• Tata Group CSR initiatives (NCERT context, §6.5) — Tata Sons' long history of community contribution (Jamshedpur township, JRD Tata Trusts, Tata Institute of Social Sciences) is the canonical Indian example of discretionary social responsibility, illustrating "developed proper image" and "social welfare beyond wage relations".
• ITC's e-Choupal (NCERT context, §6.5 community responsibility) — referenced as an example of how a business can deliver economic value to a rural community by combining commercial logic with social benefit (price transparency, direct procurement, digital literacy for farmers).
• Infosys Foundation (NCERT context, §6.4 discretionary responsibility) — invoked as a model of voluntary corporate philanthropy in education and healthcare, exemplifying the "discretionary" kind of responsibility — purely voluntary contributions to society beyond economic, legal and ethical obligations.
• Reliance Foundation (NCERT context, §6.4 discretionary responsibility) — community-development arm of Reliance Industries, cited as a contemporary CSR vehicle under the Companies Act 2013 framework with focused programmes on rural transformation, education and health.
• Maruti Suzuki ethics breach scenarios (NCERT §6.7) — product-safety codes and the need for ethical conduct on advertising and customer dealings apply directly to the auto industry. Cases of misleading advertising or product-safety lapses by major Indian companies are the live cases worth studying.