Source: Image of forest, poor man, sign post, people around table, crowd of people, images by Video Scribe, License held by Jeff Carroll; Image of person buying product, Public Domain, http://bit.ly/1vvcsXg; Image of oil pump, Public Domain, http://bit.ly/1pHpQoF.
Hi, I'm Jeff, and in this lesson, we'll start to understand how being socially responsible can be based on varying levels of choice and how it might impact a business's stakeholders. So let's get started.
It is the goal of most businesses to be socially responsible, which is the responsibility to act in a way to benefit society at large. There are organizations in place that provide oversight to guarantee consumers are protected from those that are not socially responsible.
That was not always the case, though. Until the 1930s, businesses were able to operate as they wished. It was a system of caveat emptor, which means let the buyer beware. The Great Depression, a time of great economic turmoil, provided a trigger to change the behavior of business. President Franklin Roosevelt began programs to improve the social conditions that have continued today, and these changes had impact on businesses. Now businesses must consider the consequences of their decisions and the impact to the society because they might be punished if they are not socially responsible.
There are generally two models of social responsibility-- economic model, where the society will benefit when businesses focus on profit, and the socioeconomic model, where business is explicitly responsible to stakeholders and society. Stakeholders are the people and parties directly affected by an organization. The stakeholders to which businesses must be responsible are customers-- a business must provide safe products-- employees-- a business must provide a safe work environment-- investors-- safe and secure methods of investment must be provided by a business-- and communities and the environment-- a business is responsible to keep the air, water, and land clean.
There are many advantages to a business being socially responsible. Some of them are businesses can't ignore social issues. It will impact a company whether they plan for it or not. Business has the resources either technically, financially, or managerially to help with social issues so they can have a greater impact than individuals. A more stable environment is created which benefits all business operations. And it decreases the need for government intervention.
There are also some disadvantages to consider. A business's primary responsibility is to the shareholders, not society at large. So some decisions might be in conflict between those two parties. Business resources should be used for profit. Social problems can come from society, not business, so business may not be in the best position to solve such problems. And government officials who are responsible for society should be accountable instead of a business that is not responsible.
Now let's compare and contrast ethics versus social responsibility. Ethics are the core values that informed choices we make in life. They are driven by right and wrong and the moral consequences associated with the choice. Ethics inform choices that we make, but an ethical choice is not necessarily a socially responsible choice though there are overlaps between the two. Values which are ethical are often good for the society at large, and ethical behavior where we consider the impact of our choices is a good process to consider socially responsible choices, too.
Ethics are our individual behaviors and actions, and at times evaluating those actions must consider society's big picture view. In business, this must also be balanced against a business's needs such as profit and responsibility to all stakeholders. For example, imagine that you are part of a business that drills for oil. When operating your business, you should always be honest in your dealings with customers and suppliers and when communicating with stakeholders. That is ethical behavior.
But what choices should you make when drilling near environments that might be damaged by a spill? Should you choose not to drill? That is not necessarily an ethical decision but one based on social responsibility.
And there can be many levels of social responsibility. A company that is not socially responsible would drill without putting in place any safeguards, but a socially responsible company who also considers their stakeholders might drill but with numerous safety processes in place to prevent or at least dramatically reduce the likelihood of any damages. It is not a black and white, right or wrong decision. It is instead based on perspective.
We're all done with this lesson. We learned about social responsibility and how stakeholders should also be considered when making decisions. We talked about the advantages and disadvantages of being socially responsible, and we compared and contrasted ethics and social responsibility. Thanks for your time and have a great day.