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Social Responsibilities of Business and Business Ethics – Class 11 Business Studies Chapter 6 Notes & NCERT PDF

Class 11Business StudiesChapter 6NCERT book: Business Studies - Class 11

Notes and a simple summary of Chapter 6 of the NCERT Class 11 Business Studies book, with the official chapter PDF, flashcards, an MCQ quiz and an AI tutor for your doubts.

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Chapter 6: Social Responsibilities of Business and Business Ethics

Introduction

Mani, a young reporter, has been writing about business malpractices — misleading ads, adulterated products, poor working conditions, pollution, bribery. He starts believing business people will do anything to mint money. Then he interviews Mr. Raman Jhunjhunwala, chairman of a truck company known for fair dealing, and realises a business can be socially responsible, ethically upright and highly profitable at the same time.

Socially undesirable practices (adulteration, deceptive ads, tax evasion, pollution, exploiting workers) may raise profits but harm society. Socially desirable practices (good quality, healthy working conditions, honest taxes, pollution control, attending to complaints) build image and durable success.

Key Concepts

6.2 Concept of Social Responsibility

Social responsibility of business refers to its obligation to take those decisions and perform those actions which are desirable in terms of the objectives and values of our society.
  • It is broader than legal responsibility: legal responsibility is met by mere compliance with law, while social responsibility adds voluntary action for the benefit of society.

    • Corporate Social Responsibility (CSR) box

  • European Commission: CSR is "the responsibility of enterprises for their impacts on society".
  • World Business Council for Sustainable Development: "continuing commitment by business to contribute to economic development while improving the quality of life of the workforce… and society at large".
  • In India, CSR is governed by Clause 135 of the Companies Act, 2013 (Presidential assent 23 August 2013).
  • Applies to companies with turnover ₹1,000 crore or more, or net worth ₹500 crore or more, or net profit ₹5 crore or more.
  • Applicable from fiscal year 2014-15; a CSR committee of board members with at least one independent director.
  • Companies are encouraged to spend 2% of average net profit of the previous three years.
  • Activities are listed in Schedule VII; only activities in India count; activities meant exclusively for employees and their families do not qualify.

    • 6.3.1 Arguments for Social Responsibility

  • Justification for existence and growth
  • Long-term interest of the firm (image)
  • Avoidance of government regulation
  • Maintenance of society
  • Availability of resources with business
  • Converting problems into opportunities
  • Better environment for doing business
  • Holding business responsible for social problems

    • 6.3.2 Arguments against Social Responsibility

  • Violation of profit maximisation objective
  • Burden on consumers (costs shifted via higher prices)
  • Lack of social skills
  • Lack of broad public support

    • 6.3.3 Reality — forces that made business care

  • Threat of public regulation
  • Pressure of labour movement
  • Impact of consumer consciousness (caveat emptor replaced by 'customer is king')
  • Development of social standards for business
  • Development of business education
  • Relationship between social interest and business interest (complementary, not contradictory)
  • Development of a professional, managerial class

    • 6.4 Kinds of Social Responsibility

  • Economic — produce goods society wants and sell at a profit
  • Legal — operate within the laws of the land
  • Ethical — behaviour expected by society but not codified in law (e.g., respecting religious sentiments in ads)
  • Discretionary — purely voluntary (e.g., charity to schools, help in floods)

    • 6.5 Responsibility towards Interest Groups

  • Shareholders/owners — fair return, safety of investment, regular accurate information
  • Workers — meaningful work, right working conditions, right to form unions, fair wage
  • Consumers — right quality and quantity at reasonable prices; no adulteration or misleading ads; right to information
  • Government and community — obey laws, pay taxes honestly, protect the natural environment, build a proper image

    • 6.6 Business and Environmental Protection

    Environment = the totality of man's surroundings — natural and man-made. Pollution = injection of harmful substances into the environment, largely from industrial production.

    UN's eight environmental problems: ozone depletion, global warming, solid and hazardous wastes, water pollution, freshwater quality and quantity, deforestation, land degradation, danger to biological diversity.

    6.6.1 Causes/types of pollution

  • Air — carbon monoxide from automobiles, factory smoke; hole in the ozone layer
  • Water — chemical and waste dumping into rivers and lakes
  • Land — dumping toxic waste makes land unfit for agriculture
  • Noise — from factories and vehicles; hearing loss, heart malfunction, mental disorder

    • 6.6.2 Need for pollution control: reduction of health hazards, reduced risk of liability, cost savings, improved public image, other social benefits.

    6.6.3 Role of business — top management commitment; shared commitment across the enterprise; clear policies for good raw materials, superior technology and waste treatment; complying with laws; joining government programmes (clean rivers, tree plantation); periodic cost-benefit assessment; educational workshops for suppliers, dealers and customers.

    Government steps (box):

  • Laws: Wildlife Protection Act 1972; Water (Prevention and Control of Pollution) Act 1974; Air (Prevention and Control of Pollution) Act; Environment (Protection) Act 1986; Forests (Conservation) Act 1980; Hazardous Wastes Act 1989
  • A separate Department of Environment was created in 1980
  • Bodies such as the National Afforestation and Eco-development Board and National Wastelands Development Board
  • Courts ordered shifting of manufacturing units out of Delhi, removal of foundries from Agra and shifting of factories from Kanpur
  • Environment education programmes and an Environment Action Plan (EAP)

    • 6.7 Business Ethics

    Ethics (from the Greek word for character) is concerned with what is right and wrong in human behaviour judged by society's standards. Business ethics are the socially determined moral principles that should govern business activities — e.g., fair prices, fair weights, fair treatment of workers, reasonable profits. Ethical business is good business.

    6.7.2 Elements of business ethics

  • Top management commitment
  • Publication of a 'code'
  • Establishment of compliance mechanisms
  • Involving employees at all levels
  • Measuring results

    • Ground rules of ethics: be trustworthy, respect others, own responsibility, be fair, be caring, be a good citizen.

    Key-Facts Sheet

  • CSR: Clause 135, Companies Act 2013; spend 2% of 3-year average net profit
  • Thresholds: ₹1,000 cr turnover / ₹500 cr net worth / ₹5 cr net profit
  • 8 arguments for, 4 against, 7 forces of reality
  • 4 kinds: economic, legal, ethical, discretionary
  • 5 elements of business ethics

    • Exam Focus

  • Social vs legal responsibility
  • Arguments for and against social responsibility
  • Why enterprises need pollution control; steps to protect the environment
  • CSR guidelines of the Companies Act 2013
  • "Business is essentially a social institution and not merely a profit-making activity" — explain

    • Key Terms

  • Social responsibility (सामाजिक उत्तरदायित्व)
  • Legal responsibility (कानूनी उत्तरदायित्व)
  • Business ethics (व्यावसायिक नैतिकता)
  • Code of ethics (आचार संहिता)
  • Environment (पर्यावरण)
  • Pollution (प्रदूषण)
  • Air pollution (वायु प्रदूषण)
  • Water pollution (जल प्रदूषण)
  • Land pollution (भूमि प्रदूषण)
  • Noise pollution (ध्वनि प्रदूषण)
  • Discretionary responsibility (विवेकाधीन उत्तरदायित्व)
  • Caveat emptor (क्रेता सावधान)
  • Corporate Social Responsibility (कॉर्पोरेट सामाजिक उत्तरदायित्व)

    • Common Mistakes

  • Saying social responsibility is the same as legal responsibility.
  • Mixing up the 'arguments for' list with the 'forces of reality' list.
  • Writing that CSR spending is 2% of turnover — it is 2% of average net profit of the previous three years.
  • Counting employee-only welfare as CSR — the Act excludes it.

    • 💡 Key Learning Points

    • ✓Social responsibility is broader than legal responsibility because it adds voluntary action for society's benefit
    • ✓There are eight arguments for and four against social responsibility, and seven forces that made business accept it in reality
    • ✓Business has specific responsibilities to shareholders, workers, consumers, and government and community
    • ✓Pollution (air, water, land, noise) is largely caused by industry, and business must lead in controlling it
    • ✓Business ethics rest on five elements: top management commitment, a code, compliance mechanisms, employee involvement and measuring results

    👨‍🏫 Teaching Tips

    • →Start with Mani's story and ask: can a business be ethical and still highly profitable?
    • →Hold a structured debate using the book's eight 'for' and four 'against' arguments
    • →Have groups draw a 'stakeholder wheel' showing responsibilities to shareholders, workers, consumers and community
    • →Use a local pollution news item to classify the type of pollution and suggest the book's business steps to control it
    • →Let students draft a classroom code of ethics (the book's own project) to experience 'publication of a code'
    • →Make a quick card on CSR rules: Clause 135, thresholds, 2% of 3-year average net profit, CSR committee

    📋 Assessment Questions

    1. Can the student define social responsibility and contrast it with legal responsibility?
    2. Can they list and explain the arguments for and against social responsibility?
    3. Can they state the CSR provisions of the Companies Act 2013 accurately?
    4. Can they explain the need for pollution control and steps business can take?
    5. Can they explain the elements of business ethics?

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    Keep learning

    All chapters in Business Studies - Class 11

    1. 1. Business, Trade and Commerce
    2. 2. Forms of Business Organisation
    3. 3. Private, Public and Global Enterprises
    4. 4. Business Services
    5. 5. Emerging Modes of Business
    6. 6. Social Responsibilities of Business and Business Ethics
    7. 7. Formation of a Company
    8. 8. Sources of Business Finance
    9. 9. MSME and Business Entrepreneurship
    10. 10. Internal Trade
    11. 11. International Business