GSEB Class 11 Organization of Commerce and Management Solutions Chapter 11 Social Responsibility of Business

Exercise 11(A)

Question 1. As per the provisions of the Company's Act, 2013, it is mandatory for the following company to perform social responsibility:
(A) A company with a yearly turnover of Rs. 5 crore
(B) A company with a yearly turnover of Rs. 50 crore
(C) A company with a yearly turnover of Rs. 500 crore
(D) A company with a yearly turnover of Rs. 1000 crore
Answer: (D) The company which has a yearly turnover worth Rs. 1000 crore
In simple words: Under the Company's Act, 2013, businesses exceeding a specific annual turnover threshold, specifically Rs. 1000 crore, are legally required to engage in corporate social responsibility activities.

🎯 Exam Tip: Remember the specific financial threshold (Rs. 1000 crore turnover) for mandatory CSR under the Company's Act, 2013, as this is a key compliance detail.

 

Question 2. As per the provisions of the Company's Act, 2013, it is mandatory for a company to allocate expenditure for its social responsibility activities. This expenditure must be:
(A) A minimum of 2% of its average yearly profit
(B) A minimum of 5% of its average yearly profit
(C) A maximum of 2% of its average yearly profit
(D) A maximum of 5% of its average yearly profit
Answer: (A) Minimum 2% of its average yearly profit
In simple words: The Companies Act, 2013, mandates that eligible companies must spend at least two percent of their average net profits from the preceding three financial years on Corporate Social Responsibility (CSR) initiatives.

🎯 Exam Tip: The mandatory 2% expenditure on CSR activities, calculated on average net profit, is a critical figure to recall for questions on corporate governance and social responsibility.

 

Question 3. Identify a stake-holding group that is considered an external stake-holding group within a company:
(A) Employee
(B) Investor
(C) Owner
(D) Consumer
Answer: (D) Consumer
In simple words: Consumers are external stakeholders because, while they are crucial to a business's success, they do not have direct internal control or ownership within the company's operational structure.

🎯 Exam Tip: Differentiate between internal stakeholders (like employees, investors, owners) and external stakeholders (like consumers, government, community) for comprehensive understanding of business responsibilities.

 

Question 4. Social responsibility of a business refers to:
(A) The responsibility of society towards a business
(B) The responsibility of the consumer towards society
(C) The responsibility of a business towards society
(D) The responsibility of society towards a consumer
Answer: (C) Responsibility of a business towards the society
In simple words: Social responsibility for a business means its obligation to act in ways that benefit society and the environment, not just its own profits.

🎯 Exam Tip: Focus on the direct relationship: a business's obligations *to* society, encompassing ethical practices and community welfare, as the core definition.

 

Question 5. Towards how many stake-holding groups does a business have social responsibility?
(A) Five
(B) Two
(C) Seven
(D) Eight
Answer: (B) Two
In simple words: A business generally has social responsibilities towards two main categories of stakeholders: internal groups like owners and employees, and external groups such as customers, suppliers, government, and the broader society.

🎯 Exam Tip: While there are many individual stakeholder groups, broadly categorize them into internal and external to simplify the understanding of a business's social obligations.

 

Question 6. Who is considered the "king of the market" concerning social responsibility?
(A) Investor
(B) Consumer
(C) Owner
(D) Employee
Answer: (B) Consumer
In simple words: The consumer is often called the "king of the market" because their preferences, demands, and satisfaction are central to a business's operations and social responsibility efforts.

🎯 Exam Tip: Recognize the consumer's paramount role in a market economy; understanding their needs and protecting their interests is a fundamental aspect of business social responsibility.

 

Question 7. Not depicting obscenity or sexual discrimination through advertisements:
(A) Is a political responsibility
(B) Is a religious responsibility
(C) Is a financial responsibility
(D) Is a social responsibility
Answer: (D) Is a social responsibility
In simple words: Avoiding harmful or discriminatory content in advertisements is a social responsibility, ensuring respect for societal norms and promoting ethical communication.

🎯 Exam Tip: This question highlights that ethical advertising practices, free from discrimination or obscenity, fall under a business's broader social obligations, contributing to a respectful public discourse.

 

Question 8. The implementation of business ethics is:
(A) As per Companies Act
(B) As per Partnership Act
(C) Voluntarily
(D) As per Co-operative Society Act
Answer: (C) Voluntarily
In simple words: While laws like the Companies Act might mandate certain aspects of social responsibility, the broader adoption and implementation of business ethics are generally a voluntary choice driven by a company's moral compass and values.

🎯 Exam Tip: Distinguish between legal mandates (like CSR spending) and the voluntary embrace of ethical principles, which guides a business's conduct beyond mere legal compliance.

 

Question 9. The discipline that interprets the ethical behavior of humans refers to:
(A) Sociology
(B) Psychology
(C) Political science
(D) Ethics
Answer: (D) Ethics
In simple words: Ethics is the philosophical study of moral principles that govern human conduct, determining what is right and wrong.

🎯 Exam Tip: Define ethics as the study of moral principles guiding human actions; this foundational understanding is crucial for comprehending business ethics.

 

Question 10. According to the Companies Act, 2013, under which section has the concept of social responsibility been made mandatory?
(A) 135
(B) 143
(C) 153
(D) 137
Answer: (A) 135
In simple words: Section 135 of the Companies Act, 2013, is the specific legal provision that makes Corporate Social Responsibility (CSR) mandatory for certain companies in India.

🎯 Exam Tip: Memorize Section 135 of the Companies Act, 2013, as it is the direct legal basis for mandatory CSR in India, often tested in exams.

2. Answer the following questions in one sentence each :

Question 1. Give the meaning of social responsibility.
Answer: Social responsibility of a business refers to its obligation to give back to society for the services and contributions received from its inception to its growth, thereby fulfilling its social duties.
In simple words: Social responsibility means a business's duty to contribute positively to society, acknowledging the resources and support it receives from the community.

🎯 Exam Tip: When defining, emphasize the reciprocal relationship: a business benefits from society and, in turn, has a duty to contribute to society's well-being.

 

Question 2. Producing zero pollution in the atmosphere is called what type of responsibility?
Answer: Producing zero pollution in the atmosphere is an environmental responsibility focused on preserving air quality and other atmospheric gases.
In simple words: Ensuring no pollution in the atmosphere is an environmental responsibility, aiming to protect the quality of air and natural gases.

🎯 Exam Tip: Connect "zero pollution" directly with "environmental responsibility"; this highlights a business's commitment to ecological preservation.

 

Question 3. What is a reasonable price?
Answer: A reasonable price is one that is considered fair for both the buyer and the seller for a given good or service.
In simple words: A reasonable price is a fair cost for a product or service, acceptable to both the person buying and the person selling.

🎯 Exam Tip: The key to a reasonable price is its fairness to both parties involved in the transaction, ensuring neither is exploited.

 

Question 4. Give the meaning of ethics.
Answer: Ethics encompasses a set of accepted principles and standards that guide a business on how it should operate and behave.
In simple words: Ethics are the fundamental moral rules and standards that determine how a business should conduct itself.

🎯 Exam Tip: Emphasize that ethics are about "principles and standards" that dictate "behavior and operation" for a business.

 

Question 5. To preserve the atmosphere is called which type of responsibility?
Answer: Preserving the atmosphere is classified as an environmental responsibility.
In simple words: Keeping the atmosphere healthy is an environmental responsibility.

🎯 Exam Tip: Clearly link the act of "preserving the atmosphere" to the category of "environmental responsibility."

3. Answer the following question in brief :

Question 1. 'Timely and appropriate wages become a social responsibility of a unit' – describe.
Answer:

• An employee's standard of living is directly influenced by their remuneration, including salary or wages.
• Companies have a responsibility to offer fair compensation, including incentives and bonuses at predetermined intervals, based on their financial health, to ensure employees can maintain a reasonable standard of living.
• Consistent and proper wage payments also significantly boost employee motivation and loyalty towards the company, encouraging them to deliver their best efforts.
• Therefore, providing wages in a timely and appropriate manner is crucial for a business unit's social responsibility.

In simple words: Paying employees fair and timely wages is a social responsibility because it directly impacts their standard of living, motivation, and loyalty, which are essential for the business's success.

🎯 Exam Tip: Highlight the direct correlation between timely and fair wages and employee well-being, motivation, and ultimately, organizational efficiency as the core argument.

 

Question 2. 'Protecting the interest of the consumer increases the reputation of a unit' – Explain.
Answer:

• A business cannot exist without customers, as they are central to its operations.
• Consumers seek quality products, efficient after-sales service, and assurance against malpractice in terms of equality, weight, measurement, and adulteration.
• When a business successfully meets these consumer needs and safeguards their interests, it builds trust and loyalty.
• This trust encourages customers to repeatedly purchase products/services from that brand and recommend them to others, significantly enhancing the business unit's overall reputation.

In simple words: A business thrives on customers; by offering quality products, fair practices, and good service, it earns consumer trust and loyalty, which greatly improves its market reputation.

🎯 Exam Tip: Emphasize that consumer trust, built through quality, fairness, and good service, directly translates into customer loyalty and positive word-of-mouth, which are vital for a strong business reputation.

 

Question 3. Which elements are included in business ethics?
Answer: The following elements are integral to business ethics:

• Commitment from top management
• Publication of clear directional rules
• Establishment of a structure to uphold business ethics
• Active participation of employees in decision-making processes
• Regular evaluation of results and ethical performance

In simple words: Business ethics involve strong leadership commitment, clear rules, a structured approach, employee involvement, and regular assessment to ensure moral conduct in all operations.

🎯 Exam Tip: Remember these five key elements as they cover the hierarchical, structural, participative, and evaluative aspects essential for robust business ethics implementation.

4. Answer the following questions in brief :

Question 1. Explain in detail: In which sector should a business unit serve regarding the environment?
Answer: Given the current global challenges of global warming and other environmental concerns, it is a social responsibility for businesses to adhere to environmental laws and standards. This helps minimize or prevent environmental damage.
With respect to the environment, a business must fulfill its social responsibility in the following four key sectors:
1. Land and forest preservation:

• If a business requires land for operations and must clear trees, it should plant an equivalent or proportionate number of trees to offset the environmental impact.
• Any waste, such as chemicals or polluted water, discharged into the surrounding area must be treated effectively before disposal. If waste degrades land fertility or contaminates water resources, society should not hesitate to boycott such businesses.

2. Preservation of water resources:
Businesses must ensure that pollutants are not discharged in a way that contaminates or harms surrounding water bodies. Waste needs proper treatment before disposal to protect water resources.
3. Preservation of atmosphere:
Pollutants released by a unit must be adequately treated to prevent harm to the atmosphere. Smoke, fumes, and harmful chemicals from industries can otherwise degrade the quality of air.
4. Preventing noise pollution:

• Production processes should be carried out in a manner that generates minimal noise to prevent noise pollution.
• All forms of pollution negatively impact human health and the environment, leading to issues like allergies, various diseases, and deafness. Therefore, businesses have a social responsibility to prevent pollution and conserve the environment.

In simple words: Businesses have an environmental responsibility to minimize harm by preserving land and forests, protecting water sources from pollution, keeping the atmosphere clean, and reducing noise.

🎯 Exam Tip: Categorize environmental responsibilities into land, water, air, and noise pollution to ensure a comprehensive answer that covers all major environmental aspects a business should address.

 

Question 2. "A business unit can increase its goodwill by performing social responsibilities." - Explain.
Answer:

• A business cannot operate without diverse internal and external stakeholder groups, who contribute directly or indirectly to its functioning.
• By fulfilling its social responsibilities, a business expresses gratitude to these stakeholders and simultaneously reaps numerous indirect benefits. For instance, consistent tax payments and legal compliance demonstrate loyalty to the government.
• Providing fair wages, bonuses, and incentives helps keep the workforce motivated and dedicated.
• Offering high-quality products and services builds customer trust and popularity. Furthermore, ensuring regular payments to suppliers and keeping them informed about business needs strengthens relationships.
• Overall, by consistently meeting its social obligations, a business can cultivate a strong reputation and establish a trustworthy brand in the market.

In simple words: Fulfilling social responsibilities builds trust with stakeholders like employees, customers, and the government, leading to enhanced reputation, customer loyalty, and overall business goodwill.

🎯 Exam Tip: Connect specific social responsibilities (e.g., fair wages, quality products, tax compliance) to their direct benefits in terms of goodwill, trust, and reputation among different stakeholder groups.

 

Question 3. "Social responsibility towards employees eliminates displeasure from the unit." How?
Answer:

• Employees are the foundation of any business; without their full dedication, a business unit cannot operate at peak efficiency.
• Dedicated contributions from employees are only possible if the business unit fulfills its obligations towards them. If a unit fails to provide adequate salaries, incentives, or bonuses, employees will become demotivated, their standard of living will suffer, impacting their work efficiency and morale.
• The absence of basic amenities such as cleanliness, transportation, sanitation, air-conditioning, and proper ventilation also contributes to workplace dissatisfaction.
• Therefore, to maintain employee efficiency and motivation, a business unit must ensure a pleasant work environment, which is achieved by fulfilling its social responsibilities towards its workforce.

In simple words: By ensuring fair pay, incentives, and good working conditions, a business fulfills its social responsibility to employees, which keeps them motivated, productive, and satisfied, thus reducing workplace unhappiness.

🎯 Exam Tip: Focus on how addressing employee needs (remuneration, facilities, morale) directly translates into a more productive and harmonious work environment, eliminating dissatisfaction.

 

Question 4. Implementation of business ethics is not possible by law.
Answer: Business ethics refers to a set of accepted principles and standards that guide how a business should behave and operate. In contrast, laws are rules and regulations formulated by the government to maintain social order. Business ethics are rooted in an individual's morality and beliefs, without definitive rules to enforce them. For instance, one business might choose to use recycled paper to preserve nature, while another might prefer fresh paper to maintain prestige among clients. Both choices are ethically sound from their respective viewpoints. It is impossible to legally compel the second unit to use recycled paper, as its choice is not illegal. Business ethics are purely driven by an individual's approach to various societal segments and personal principles, making them distinct from legal enforcement. Laws intervene when individuals or units fail to comply with government-set rules. As long as legal compliance is maintained, ethical conduct cannot be legally mandated. Thus, the implementation of business ethics cannot be achieved solely through law.
In simple words: Business ethics are based on personal morals and principles, not strict legal mandates, making their full implementation a voluntary choice rather than a legal requirement. Laws dictate what is permissible, while ethics guide what is right.

🎯 Exam Tip: Clearly differentiate between ethics (voluntary, moral compass, personal belief) and law (mandatory, enforced by government, punishment for non-compliance) to explain why ethics cannot be fully legislated.

 

Question 5. Explain the difference between Ethics and law.
Answer:

Ethics	Law
1. Ethics are guidelines that prescribe how a business should conduct itself morally.	1. Laws are rules established by the government that must be obeyed without exception.
2. Ethics originate from an individual's understanding of right and wrong.	2. Laws are enforced by the government, requiring businesses to understand and comply with legal requirements.
3. Ethics comprise moral principles that individuals should uphold for a healthy society.	3. Laws are rules that everyone must follow to ensure the welfare and control of society.
4. A person who violates ethical norms generally faces no legal penalty.	4. A person who breaks the law is subject to legal punishment.

In simple words: Ethics are voluntary moral guidelines for good behavior, stemming from personal values, with no legal penalties for violation. Laws are mandatory, government-enforced rules with legal consequences for non-compliance, designed to maintain societal order.

🎯 Exam Tip: Focus on the core distinctions: ethics are voluntary moral codes, while laws are mandatory government regulations, differing in origin, enforcement, and consequences.

5. Answer the following questions in detail :

Question 1. Describe the social responsibility of a business towards the owner.
Answer: Social responsibility of a business towards customers:
The existence of any business is impossible without its customers, who are often referred to as the 'king of the market'.
A business must fulfill the following responsibilities towards its customers:
1. Proper selling of goods and services:
A business has a social responsibility to ensure the stated quality and quantity of goods and services provided to customers. It should also guarantee appropriate packaging and delivery, avoid tampering with weight, and refrain from offering adulterated products or services.
2. Reasonable profit:
In today's competitive landscape, a business unit should aim for reasonable profits rather than overcharging or exploiting customers. It should satisfy its customers by maintaining fair profit margins.
3. Maintaining continuity of supply in the market:
A business unit should ensure a consistent supply of its products in the market, avoiding hoarding or creating artificial scarcity.
4. Refrain from issuing misleading advertisements:

• Some businesses exaggerate their products and services through advertisements, which may not reflect the actual worth of the products.
• Customers are often deceived by these misleading advertisements, only to realize they have been cheated upon purchase. Therefore, a business unit should not publish advertisements that mislead or deceive its customers.
• Businesses should also avoid releasing obscene advertisements.

5. After-sales service:

• The true assessment of a product or service begins not at its production or sale, but after it has been sold.
• It is the social responsibility of a business to provide adequate after-sales service to its customers. The business unit must establish proper provisions for addressing customer grievances regarding faulty or damaged products, including facilities for repair, return, and refund.

In simple words: A business's social responsibility to customers involves ensuring quality products, fair prices, continuous supply, honest advertising, and robust after-sales service to build trust and satisfaction.

🎯 Exam Tip: Detail the various aspects of customer responsibility—from product integrity and pricing to service and communication—to show a comprehensive understanding of a business's obligations to its primary market.

 

Question 2. Describe the social responsibility of a business towards society.
Answer: Social responsibility of business towards society:
According to management consultant Mr. Peter F. Drucker, a business should be managed in a way that balances the interests of the business unit with those of various communities and sections of society. The business unit must uphold both the economic and social interests of society.
It should fulfill the following responsibilities towards society:
1. Preserve environment:
The business unit should conduct production and other processes in a manner that minimizes pollution, thereby preserving the environment.
2. Contribution in national development works:

• When every business unit focuses on growth and development, it collectively contributes to national progress and prosperity.
• The unit must optimally utilize its financial and other resources to enhance productivity, thereby supporting national development.

3. Give importance to research:
A company should prioritize research, investing a portion of its profits in research and development. This enables it to improve product quality, enhance business processes, and boost productivity. Through research, the company can offer better products at fair prices, benefiting a wide segment of society and helping to maintain its competitive position.
4. Remain helpful during natural calamities:
During times of natural disasters, business units must assist the government by providing food packets, medical facilities, and other aid to victims.
5. Conserve social and cultural heritage of the country:
Business units should neither produce goods/services nor adopt policies and practices that undermine the nation's social and cultural legacy. Advertisements, for instance, should avoid vulgarity or sexual discrimination that harms this heritage.
6. Participate in social encouragement:
Business units should strive to promote equality in society, focusing on creating opportunities for backward and downtrodden sections.
7. Create employment opportunities:
A business unit should aim to grow and increase employment, thereby contributing to national equality and boosting the national growth rate.
8. Maintain human rights:
Business units must adhere to national and constitutional rights to uphold human rights within society.
In simple words: A business has broad social responsibilities, including environmental preservation, contributing to national development, investing in research, aiding during calamities, protecting cultural heritage, promoting social equality, creating jobs, and respecting human rights.

🎯 Exam Tip: For this comprehensive answer, break down societal responsibility into distinct categories like environment, national development, research, disaster aid, cultural preservation, social equity, employment, and human rights to ensure all facets are covered.

 

Question 3. Explain the Internal Social Responsibilities of a business in detail.
Answer: The social responsibility of a business towards its internal stakeholder groups can be categorized into three main parts:
A. Social responsibility of business towards owners:
Owners typically refer to shareholders, who are the true proprietors of a company. As businesses have grown, separating ownership from management, companies bear certain social responsibilities towards their owners:
1. Allow participation in decision-making:
Shareholders are the company's owners, making it essential to maintain their confidence and trust. It is the company's social responsibility to allow owners to participate in the decision-making process.
2. Provide capital security and growth:
Company managers must set aside personal interests and utilize their skills and experience to safeguard the capital invested by shareholders, ensuring good returns through company growth.
3. Protecting the interests of the owners:
The company should prioritize the safety and growth of the capital invested by shareholders. It must fulfill its responsibility to provide long-term company growth and sustain owners' interests.
4. Priority in the development of the company:
When a company plans to expand or develop and requires capital, it should first offer existing owners the opportunity to invest, such as through rights issues.
B. Social responsibility of a business towards investors:
When a company needs additional capital, it raises funds from investors, which may include banks, preference shareholders, or debenture holders. Social responsibilities towards these investors are as follows:
1. Timely payment of good returns:
Investors expect high returns at regular or predetermined intervals. Thus, it is the business unit's social responsibility to pay good returns to investors promptly.
2. Provide necessary information:
It is the business unit's responsibility to inform investors about its current financial position and future plans.
3. Provide growth to the invested value:
Better financial results lead to a higher market value for the funds invested in the company. Therefore, a unit should make decisions that enhance the growth of investor investments.
4. Security of money:
Investors entrust their money to a business unit believing it will operate efficiently and yield good returns. It is the business's social responsibility to use investor funds wisely to ensure they remain safe and grow. This practice also helps the company secure more capital from investors in the future.
5. Welcome suggestions:
Investors are typically well-informed about market trends. Thus, business units should welcome their suggestions and endeavor to incorporate them for the company's betterment.
C. Social responsibility of business towards employees:
Employees form the backbone of any business unit; without their wholehearted contribution, a business cannot operate at full efficiency. Therefore, it is a business unit's social responsibility to prioritize employee welfare, which includes:
1. Maintaining standard of living:
An employee's remuneration (salary/wages) directly impacts their standard of living. Based on its financial standing, a company must provide reasonable compensation that enables employees to maintain their living standards. In addition to remuneration, businesses should offer incentives, bonuses, and other benefits at pre-decided intervals.
2. Provide proper work atmosphere and facilities:

• The business unit must cultivate a positive work environment that fosters strong peer relationships and loyalty towards the company.
• Depending on its size, a unit can provide facilities such as a canteen, transportation, and a clean, well-ventilated environment for employees.
• If feasible, a business unit should also provide air-conditioning and separate arrangements for female employees.

3. Provide social security:
In addition to timely and reasonable salaries, employees should receive social security benefits such as provident fund, pension, sick and casual leaves, and medical and life insurance.
4. Give recognition to employees (labor) union:
Employees form unions to collectively present their problems and demands to management. Management must recognize these unions and address their reasonable demands to maintain employee motivation and morale.
5. Maintaining a compromising attitude by top management:

• Top management should adopt a flexible and compromising attitude to benefit the business unit.
• It should be recognized that employees are valuable assets who will perform efficiently and remain motivated only if their legitimate demands are met and genuine complaints resolved.
• By adopting a compromising approach, the business can overlook minor errors or egoistic decisions and policies, adjusting them for employee welfare and business growth.
• A warm and cordial relationship with employees is essential to maintain a healthy, family-like atmosphere within the company.

6. Motivation:

• A business unit must create numerous opportunities to continuously motivate its employees.
• This includes organizing competitions for top performance, arranging tours or dinners, and rewarding employees for their specific contributions with increments, promotions, cash vouchers, and travel vouchers.

7. Other responsibilities:

• A business unit should involve employees in decision-making, inform them about important company decisions and plans, and clearly state terms and conditions of work before employment.
• The unit should also prioritize the education and health of employee families.

In simple words: Internal social responsibilities cover duties towards owners (participation, capital security), investors (timely returns, information, growth), and employees (fair pay, good working conditions, social security, union recognition, motivation, and involvement in decision-making).

🎯 Exam Tip: Structure your answer by clearly delineating responsibilities towards owners, investors, and employees. For each group, list specific actions a business should take, such as ensuring capital growth for owners, providing timely returns for investors, and offering fair wages and good facilities for employees.

 

Question 4. Describe the External Social responsibility of a business in detail.
Answer: The social responsibility of a business towards its external stakeholder groups can be categorized into four types. They are:
(A) Social responsibility of a business towards customers:
The very existence of a business depends on its customers, who are central to its operations and often referred to as the 'king of the market'.
A business needs to fulfill the following responsibilities towards its customers:
1. Selling goods and services properly:
It is a business's social responsibility to uphold the promised quality and quantity of goods and services. This includes ensuring proper packaging and delivery, avoiding weight discrepancies, and preventing the sale of adulterated products.
2. Reasonable profit:
In a competitive environment, a business unit should focus on earning fair profits rather than overcharging or exploiting customers. Businesses should satisfy their customers by maintaining reasonable profit margins.
3. Maintaining continuity of supply in the market:
A business unit should ensure a regular supply of its products to the market, refraining from hoarding or creating artificial scarcity.
4. Should not issue misleading advertisements:

• Some businesses exaggerate their products and services through advertisements, making them seem more valuable than they are in reality.
• Customers are often swayed by these misleading ads, only to discover they have been deceived after purchase. Therefore, businesses must avoid issuing such advertisements to mislead and cheat consumers.
• Businesses should also refrain from publishing obscene advertisements.

5. After-sales service:

• The true quality of a product or service becomes evident not at the point of sale, but after it has been sold.
• It is a business's social responsibility to provide proper after-sales service to customers. This includes establishing mechanisms for grievance redressal for faulty or damaged products, offering facilities for repair, returns, and refunds.
• It is both a social and legal right for customers to receive solutions for their products and services.

In simple words: External social responsibility means a business's duty to act ethically towards groups outside its immediate structure, such as customers, suppliers, the government, and the broader society, ensuring fair practices and contributions to community well-being.

🎯 Exam Tip: When detailing external responsibilities, structure your points clearly for each stakeholder group (customers, suppliers, government, society). For customers, cover product quality, pricing, supply, advertising ethics, and after-sales support.

 

(A) Social responsibility of a business towards customers:
The very existence of a business is predicated on its customers, who are often referred to as the "king of the market." Without customers, a business cannot function.
Businesses must fulfill the following responsibilities towards their customers:
1. Proper provision of goods and services:
It is the social obligation of a business to uphold the declared quality and quantity of products and services supplied to customers. This includes ensuring proper packaging and delivery, avoiding tampering with weight, and preventing the sale of adulterated goods or services.
2. Earning reasonable profit:
In today's competitive landscape, a business entity should prioritize earning a fair profit rather than resorting to overcharging or exploiting customers. Businesses should aim to satisfy their customers by maintaining reasonable profit margins.
3. Sustaining market supply continuity:
A business enterprise must ensure a consistent supply of its products in the market, refraining from hoarding or creating artificial scarcity.
4. Avoiding misleading advertisements:
• Some businesses tend to overstate the benefits of their products and services through advertising, even when the products may not genuinely possess such value.
• Customers are often enticed by these deceptive advertisements, only to realize they have been misled upon purchase. Therefore, a business unit should not publish advertisements that mislead or deceive its customer base.
• Furthermore, businesses should also avoid releasing advertisements that are obscene.
5. Providing after-sales service:
• The true assessment of a product or service begins not at its point of production and sale, but after it has been sold.
• It is a business's social responsibility to offer appropriate after-sales service to its customers. The business unit must establish adequate provisions for addressing customer grievances regarding faulty or damaged products, including facilities for repair, return, and refunds.
• It is both a social and legal right for a customer to receive resolutions for their products and services.

(B) Social responsibility of a business towards suppliers:
Suppliers provide raw materials, finished products, and/or services to businesses on a continuous and consistent basis. Businesses then sell these in the market to generate profit.
Therefore, a business owner is expected to fulfill the following social responsibilities towards their suppliers:
1. Advance notification to suppliers:
A business unit should inform its suppliers well in advance about the products or services it will require. This practice helps the business secure a steady supply of materials, ensuring that products can be processed and brought to market on time and without interruption. This also enhances the business's market creditworthiness, as it ensures product availability for customers when needed.
2. Clear quality and quantity specifications:
The business unit must clearly outline quality and quantity requirements in advance to prevent any misunderstandings later. This practice saves time and effort for both the supplier and the business, and it prevents disruptions in the production cycle.
3. Timely payments:
The business unit should ensure timely payments to its suppliers according to the mutually agreed terms and conditions.

(C) Social responsibility of business towards government:
Adherence to laws: It is both a social and legal obligation for a business to comply with the laws established by the government.
• Honest tax payment: The business unit must pay all its taxes honestly and on time.
• Participation in government programs: The government organizes various programs for the welfare of the nation. A business unit should engage in such programs to support the government's vision. For instance, businesses should participate in initiatives like Swachh Bharat Abhiyan and Make in India to strengthen the nation and foster its growth.
• Involvement in industrial policy implementation: The government formulates and adjusts its industrial policies as needed. It is the social responsibility of the business unit to actively participate in the successful implementation of these policies.

(D) Social responsibility of business towards society:
According to management consultant Mr. Peter F. Drucker, a business should be managed in a way that balances the interests of the business unit with those of various communities and sections of society. The business unit must uphold both the economic and social interests of society.
It should fulfill the following responsibilities towards society:
1. Environmental preservation:
The business unit should conduct its production and other processes in a manner that minimizes pollution, thereby preserving the environment.
2. Contribution to national development:
• When every business unit prioritizes growth and development, it contributes to national prosperity.
• The unit must optimally utilize its financial and other resources to boost productivity and support national development.
3. Emphasis on research:
A company should prioritize research, investing a portion of its profits in research and development. This enables the company to enhance product quality, improve business processes, and increase productivity. Through research, the company can offer superior products at fair prices, benefiting a wide segment of society. This also helps the company maintain its competitive standing.
4. Assistance during natural calamities:
During times of calamities, business units must support the government by providing food-packets, medical facilities, and other aid to victims.
5. Preservation of national social and cultural heritage:
Business units should avoid producing goods or services, or adopting policies and practices that harm the nation's social and cultural legacy. They should not use advertisements that damage this heritage. For example, company advertisements should not depict vulgarity or sexual discrimination.
6. Promotion of social equality:
Business units should strive to promote equality within society, working to provide equal opportunities for all societal segments, with a particular focus on raising opportunities for backward and downtrodden sections of society.
7. Creation of employment opportunities:
A business unit should aim for growth that also creates employment. By doing so, it helps the country achieve national equality and increase its national growth rate.
8. Upholding human rights:
Business units should adhere to national and constitutional rights to ensure the maintenance of human rights within society.
In simple words: Businesses have external social responsibilities towards customers, suppliers, government, and society at large. This involves ensuring fair practices, quality products, timely payments, tax compliance, environmental protection, and contributing to societal well-being and national development.

🎯 Exam Tip: When describing external social responsibilities, remember to categorize them by stakeholder group (customers, suppliers, government, society) and provide specific examples for each to demonstrate comprehensive understanding.

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