Exercise Solutions Available
Step-by-step answers for all textbook questions in this chapter
Chapter Overview
Social Responsibility of Business and Business Ethics is Chapter 6 of CBSE Class 11 Business Studies (Part 2). It discusses why businesses should go beyond profit and care about society, the arguments for and against this idea, the responsibilities towards different stakeholders, and the role of ethics in business decisions. This chapter is frequently tested in long-answer and case-study formats.
Key Definitions
| Term | Definition |
|---|---|
| Social Responsibility | The obligation of a business to protect the interests of society while pursuing its own objectives. |
| Business Ethics | Moral principles and standards that guide business behaviour — what is right and wrong in business. |
| CSR | Corporate Social Responsibility — a company's commitment to contribute to sustainable economic development and societal well-being. |
| Stakeholders | All groups that are directly or indirectly affected by a business — shareholders, employees, consumers, government, community. |
| Legal Responsibility | Obligations imposed by law that a business must fulfil. |
| Ethical Responsibility | Obligations that go beyond the law — guided by moral principles. |
| Environmental Protection | The duty of business to prevent pollution, conserve resources, and adopt sustainable practices. |
Detailed Concepts
1. Arguments FOR Social Responsibility
1. Justification for existence — business survives because society allows it to; it must give back. 2. Long-term self-interest — socially responsible businesses earn public trust and goodwill. 3. Moral obligation — business has resources and power; it should use them for societal benefit. 4. Better public image — responsible businesses attract customers, investors, and good employees. 5. Government intervention avoidance — if businesses act responsibly, the government need not regulate them heavily. 6. Societal resources — business uses society's resources (land, water, labour); it owes a duty in return. 7. Problem-solving capability — business has the managerial skills and financial resources to address social problems.
2. Arguments AGAINST Social Responsibility
1. Profit is the only motive — business exists to earn profit; social welfare is the government's job. 2. Lack of social expertise — business people are trained in business, not social work. 3. Increased costs — spending on social activities raises the cost of products. 4. Dilution of goals — focus on social objectives may reduce focus on profit and efficiency. 5. Lack of accountability — businesses are not elected by society and are not accountable to it. 6. Reduced international competitiveness — additional costs may make products more expensive than foreign goods. 7. Shareholders' money — social spending uses money that belongs to shareholders.
3. Social Responsibility Towards Different Interest Groups
| Interest Group | Responsibilities |
|---|---|
| Shareholders | Fair return on investment, regular and accurate information, safety of investment, fair dividend policy |
| Employees | Fair wages, safe working conditions, training and development, job security, participation in management, welfare facilities |
| Consumers | Quality goods at reasonable prices, no adulteration, no false advertising, after-sales service, redressal of complaints, fair trade practices |
| Government | Payment of taxes honestly, compliance with laws, contributing to government programmes, not indulging in corruption |
| Community/Society | Employment generation, environmental protection, development of backward areas, contribution to community programmes (schools, hospitals), conservation of natural resources |
4. Business Ethics
Meaning: Moral principles that guide business behaviour — distinguishing right from wrong, fair from unfair.
Elements of Business Ethics: 1. Top management commitment — ethical tone is set from the top. 2. Publication of a code — written ethical standards for the organisation. 3. Establishment of compliance mechanisms — systems to monitor adherence. 4. Actual compliance — ethics must be practised, not just preached. 5. Employee involvement — employees at all levels must participate in ethical decision-making.
Common Unethical Practices in Business:
- Adulteration of goods.
- False advertising.
- Hoarding and black marketing.
- Tax evasion.
- Exploitation of workers (low wages, long hours).
- Environmental pollution.
- Bribery and corruption.
- Insider trading.
- Unfair trade practices.
5. Business and Environmental Protection
Why environmental protection is a business responsibility:
- Business is a major source of pollution (air, water, noise, land).
- Resources are finite — overuse harms future generations.
- Legal requirements — environmental laws impose penalties.
- Public pressure — consumers prefer eco-friendly businesses.
- Long-term sustainability — a degraded environment hurts business too.
Types of Pollution from Business:
| Type | Sources | Effects |
|---|---|---|
| Air Pollution | Factory emissions, vehicle exhaust | Respiratory diseases, global warming |
| Water Pollution | Industrial waste discharged into rivers | Contaminated drinking water, harm to aquatic life |
| Land Pollution | Solid waste, chemical dumping, deforestation | Soil degradation, loss of fertility |
| Noise Pollution | Machinery, construction, transport | Hearing loss, stress, reduced productivity |
Steps Businesses Can Take: 1. Install pollution control equipment. 2. Use eco-friendly technology and processes. 3. Recycle and reuse waste. 4. Comply with environmental laws (Water Act 1974, Air Act 1981, Environment Protection Act 1986). 5. Develop green products and packaging. 6. Conduct environmental audits. 7. Educate employees on environmental responsibility.
6. CSR in India — Legal Framework
- Companies Act, 2013 (Section 135): Companies with net worth Rs 500 crore+, turnover Rs 1000 crore+, or net profit Rs 5 crore+ must spend 2% of average net profits (last 3 years) on CSR activities.
- CSR Committee: Such companies must form a CSR committee of 3+ directors (1 independent).
- CSR activities: Education, health, rural development, environmental sustainability, slum area development, etc.
- Reporting: CSR spending must be disclosed in the annual report.
Important Points for Exams
1. Social responsibility is a voluntary obligation — it goes beyond legal compliance. 2. The "arguments for and against" question is one of the most frequently asked — prepare both sides. 3. Business ethics is about what is morally right, not just what is legally allowed. 4. Environmental protection is a responsibility that businesses owe to both present and future generations. 5. CSR under the Companies Act, 2013 makes it mandatory for qualifying companies to spend 2% of profits. 6. Responsibility towards each stakeholder group should be listed with at least 3-4 points.
Common Mistakes
1. Listing only arguments for or only against — exam questions often say "discuss both sides"; always present both. 2. Confusing legal responsibility with ethical responsibility — legal is the minimum; ethical goes beyond. 3. Forgetting the government as a stakeholder — many students list shareholders, employees, and consumers but omit government and community. 4. Not giving examples of unethical practices — always cite specific examples (adulteration, hoarding, false ads). 5. Confusing CSR with charity — CSR is strategic and systematic; charity is voluntary and ad hoc. 6. Missing the 2% CSR rule — this is a key fact under the Companies Act, 2013.
Exam Tips
- For "arguments for and against social responsibility," give 4-5 points on each side with brief explanations.
- For "responsibility towards different groups," use a table format for clarity.
- Always define social responsibility and business ethics before expanding.
- For case studies, identify the stakeholder group and the specific responsibility violated.
- Mention Section 135 of the Companies Act, 2013 for CSR questions.
Detailed Case-Study Practice
Case 1: A chemical factory discharges waste into a nearby river
Analysis:
- The factory violates its environmental responsibility towards the community.
- It violates the Water Act, 1974 and the Environment Protection Act, 1986.
- The factory must install effluent treatment plants before discharge.
- The community and government can take legal action.
- The company's social and ethical responsibility extends to protecting water resources for future generations.
Case 2: A food company uses false claims in advertising
Analysis:
- The company violates its responsibility towards consumers.
- It breaches the principle of honesty in business ethics.
- It may face action under the Consumer Protection Act, 2019.
- The top management must enforce the ethical code to prevent such practices.
- Consumer trust, once lost, takes years to rebuild.
Case 3: A company uses child labour to reduce costs
Analysis:
- This violates human rights, child labour laws, and the company's social responsibility towards employees.
- The company must comply with the Child Labour (Prohibition and Regulation) Act.
- The ethical responsibility goes beyond law — no child should be exploited for profit.
- The company should invest in adult skill training and fair wages instead.
- CSR funds should be directed towards education of children in the area.
NCERT Key Concepts to Practise
1. Stakeholder responsibility table — memorise 3-4 responsibilities towards each group (shareholders, employees, consumers, government, community). 2. Arguments for vs against — prepare both sides with 4-5 points each and one-line explanations. 3. Business ethics elements — Top commitment → Code publication → Compliance mechanism → Actual compliance → Employee involvement. 4. Pollution types table — Air (factory emissions → respiratory diseases), Water (industrial waste → contaminated water), Land (chemical dumping → soil degradation), Noise (machinery → hearing loss, stress).
Important NCERT Intext Questions
Q: Is it ethical for a business to use child labour if it reduces product costs?
Q: Can a company be socially responsible and profitable at the same time?
Key Terms Glossary
| Term | Meaning |
|---|---|
| Carbon footprint | Total greenhouse gases produced directly and indirectly by a business |
| E-waste | Discarded electronic equipment; business must ensure responsible disposal |
| Green manufacturing | Production processes that minimise environmental impact |
| Sustainability | Meeting present needs without compromising future generations' ability to meet theirs |
| Triple bottom line | Measuring business performance on profit, people, and planet |
| Whistle-blower | An employee who reports unethical or illegal practices within the organisation |
CSR in India — Key Thresholds
| Criterion | Threshold |
|---|---|
| Net worth | Rs 500 crore or more |
| Turnover | Rs 1,000 crore or more |
| Net profit | Rs 5 crore or more (any of the last 3 financial years) |
| CSR spend | 2% of average net profit of last 3 years |
| CSR committee | 3+ directors (1 must be independent) |
| Reporting | Must disclose in annual report; unspent amount must be transferred to CSR fund |
CSR-eligible activities (Schedule VII, Companies Act): 1. Eradicating hunger, poverty, and malnutrition. 2. Promoting education and skill development. 3. Promoting gender equality and women's empowerment. 4. Ensuring environmental sustainability. 5. Protection of national heritage, art, and culture. 6. Measures for the benefit of armed forces veterans. 7. Training to promote rural sports. 8. Contribution to the Prime Minister's Relief Fund. 9. Rural development and slum area development.
Exam-Focused Practice Questions
1. "Business and ethics go hand in hand." Do you agree? Give reasons. (6 marks) 2. "Social responsibility is a voluntary obligation." Critically examine this statement. (6 marks) 3. Explain the legal framework of CSR in India under the Companies Act, 2013. (5 marks) 4. How can business contribute to environmental protection? Suggest five practical measures. (5 marks) 5. Distinguish between legal responsibility and ethical responsibility with examples. (4 marks) 6. "Business ethics is good for business." Justify this statement. (5 marks) 7. Explain the CSR framework under the Companies Act, 2013. What are the penalties for non-compliance? (6 marks)
Environmental Laws Every Business Must Know
| Law | Year | What It Covers |
|---|---|---|
| Water Act | 1974 | Prevention and control of water pollution |
| Air Act | 1981 | Prevention and control of air pollution |
| Environment Protection Act | 1986 | Overall environmental protection and hazard management |
| Forest Conservation Act | 1980 | Conservation of forests and wildlife |
| Wildlife Protection Act | 1972 | Protection of wild animals, birds, and plants |
| Hazardous Waste Management Rules | 2016 | Handling, treatment, and disposal of hazardous waste |
| Plastic Waste Management Rules | 2016 | Regulation of plastic use, recycling, and disposal |
Arguments For vs Against — Quick Comparison Table
| For | Against |
|---|---|
| Business exists because society allows it | Business exists only for profit |
| Long-term self-interest is served | Increases costs of products |
| Moral obligation to give back | Business lacks social expertise |
| Better public image and trust | Dilutes focus on efficiency |
| Avoids government regulation | No accountability to society |
| Uses societal resources | Uses shareholders' money |
| Has problem-solving capability | Reduces international competitiveness |
Quick Revision Notes
- Social responsibility: Obligation beyond profit and law — towards shareholders, employees, consumers, government, community.
- Arguments for: Justification for existence, long-term interest, moral obligation, public image, avoids government intervention.
- Arguments against: Profit only motive, lack of expertise, increased costs, dilution of goals, lack of accountability.
- Business ethics: Moral principles guiding behaviour; elements: top commitment, code, compliance, involvement.
- Unethical practices: Adulteration, false ads, hoarding, tax evasion, exploitation, pollution, bribery.
- Environment: Air, water, land, noise pollution; business must install controls, use eco-tech, recycle, comply with laws.
- CSR (India): Companies Act 2013 Section 135 — 2% of avg net profit for qualifying companies.
- Stakeholder groups: Shareholders, Employees, Consumers, Government, Community — memorise 3-4 responsibilities each.
Further Reading
- [Chapter 5 Guide — Emerging Modes of Business](/school/cbse/class/11/business-studies/cbse-emerging-modes-of-business)
- [Chapter 7 Guide — Formation of a Company](/school/cbse/class/11/business-studies/cbse-formation-of-a-company)
- [Class 11 Business Studies Subject Guide](/school/cbse/class/11/business-studies)