Social Responsibility

AAA

DEFINITION of 'Social Responsibility'

The idea that companies should embrace its social responsibilities and not be solely focused on maximizing profits. Social responsibility entails developing businesses with a positive relationship to the society which they operate in. According to the International Organization for Standardization (ISO), this relationship to the society and environment in which they operate is "a critical factor in their ability to continue to operate effectively. It is also increasingly being used as a measure of their overall performance."

INVESTOPEDIA EXPLAINS 'Social Responsibility'

Many companies, particularly "green" companies have made social responsibility an integral part of their business models. What's more, some investors use a company's social responsibility - or lack thereof - as an investment criterion. For example, one who has a moral (or other) objection to smoking, may not want to invest in a tobacco company.

That said, not everybody believes that business should have a social conscience. Noted economist Milton Friedman noted that the "social responsibili­ties of business are notable for their analytical looseness and lack of rigor." Friedman believed that only people could have social responsibilities. Businesses, by their very nature, cannot.

RELATED TERMS
  1. Sin Stock

    A stock of a company that is either involved in or associated ...
  2. Corporate Accountability

    The performance of a publicly traded company in non-financial ...
  3. True Cost Economics

    An economic model that seeks to include the cost of negative ...
  4. Land Rehabilitation

    A re-engineering process that attempts to restore an area of ...
  5. Socially Responsible Investment ...

    An investment that is considered socially responsible because ...
  6. Marginal Social Cost - MSC

    The total cost to society as a whole for producing one further ...
RELATED FAQS
  1. How do you conduct effective social responsibility training?

    One way to provide employees with effective social responsibility training is to base training sessions on resources offered ... Read Full Answer >>
  2. Is there a difference between socially responsible investing (SRI) and green investing?

    There isn't a huge difference between socially responsible investing (SRI) and green investing; green investing is actually ... Read Full Answer >>
  3. What is socially responsible investing?

    In the financial world, where profit and return are often the priorities of the average investor, the vehicles we use to ... Read Full Answer >>
  4. How can I calculate funds from operation in Excel?

    In general, the terms "work in progress" and "work in process" are used interchangeably to refer to products midway through ... Read Full Answer >>
  5. Are investments in the drug sector appropriate for ethical investors?

    A number of aspects are factored for ethical investors considering the drug sector, such as animal testing or the type of ... Read Full Answer >>
  6. What are examples of businesses that exhibit social responsibility?

    In the 21st century, companies that exhibit corporate social responsibility are winning high marks from consumers and investors ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    Proxy Voting Gives Fund Shareholders A Say

    You have the right to take part in important company decisions - even if you cannot attend the meetings.
  2. Investing Basics

    Sinful Investing: Is It For You?

    Sin stocks may seen outright undesirable to some, but these "naughty" industries bring stable returns - even in hard times.
  3. Mutual Funds & ETFs

    Socially Responsible Mutual Funds

    It is possible to avoid unethical investments and still profit from mutual funds. Find out how!
  4. Retirement

    Working With Islamic Finance

    There is no division between the spiritual and the secular in this type of socially responsible investing.
  5. Personal Finance

    Building Green For Your House And Wallet

    The earth-smart money is on these environmentally friendly housing projects.
  6. Economics

    What's Involved in Customer Service?

    Customer service is the part of a business tasked with enhancing customer satisfaction.
  7. Economics

    What is Involved in Inventory Management?

    Inventory management refers to the theories, functions and management skills involved in controlling an inventory.
  8. Economics

    What is Price Discrimination?

    Price discrimination occurs when a company charges different customers different prices for the same goods or services.
  9. Economics

    What Does Asymmetric Information Mean?

    Asymmetric information describes a situation where one party in a transaction knows more than the other.
  10. Economics

    What Does Accretive Mean?

    In the business world, accretive most often to refers to additional growth from outside sources.

You May Also Like

Hot Definitions
  1. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  5. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  6. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
Trading Center