DEFINITION of 'Social Responsibility'
Social responsibility is the idea that businesses should balance profit-making activities with activities that benefit society; it involves developing businesses with a positive relationship to the society in which they operate. The International Organization for Standardization (ISO), emphasizes that the relationship to the society and environment in which businesses 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."
BREAKING DOWN 'Social Responsibility'Social responsibility means that individuals and companies have a duty to act in the best interests of their environments and society as a whole. Social responsibility as it applies to business is known as corporate social responsibility (CSR). Many companies, such as those with "green" policies, have made social responsibility an integral part of their business models.
Additionally, some investors use a company's social responsibility, or lack thereof, as an investment criterion. As such, a dedication to social responsibility can actually turn into profits, as the idea inspires investors to invest and consumers to purchase goods and services from the company. Put simply, social responsibility helps companies develop a good reputation.
In general, social responsibility is more effective when a company takes it on voluntarily, as opposed to being required by the government to do so through regulation. Social responsibility boosts company morale, and this is especially true when a company is able to get buy-in among its employees and actively engage them in its social cause.
Social Responsibility in Practice
Social responsibility takes on different meanings within industries and companies. For example, Starbucks Corporation and Ben & Jerry's Homemade Holdings Inc. have blended social responsibility into the core of their operations. Both companies purchase Fair Trade Certified ingredients to manufacture their products and actively support sustainable farming in the regions where they source ingredients. Conversely, big-box retailer Target Corporation, also well known for its social responsibility programs, has donated more than $875 million in grants to the communities in which the stores operate, including education grants, since 2010.
Social Responsibility Concerns
Not everyone believes that business should have a social conscience. Economist Milton Friedman stated the "social responsibilities of business are notable for their analytical looseness and lack of rigor." Friedman believed only individuals can have a sense of social responsibility. Businesses, by their very nature, cannot. Some experts believe that social responsibility defies the very point of being in business: profit above all else.