Introduction:

Communication is becoming more widespread and reaching even further. Telephony, the
Internet and e-mail, and satellites that transmit TV broadcasts all over the world are all helping
to facilitate contact between people and provide instantaneous information from absolutely
anywhere in the world. Inventions and medical breakthroughs which enhance the quality of life
and lengthen the lives of many people are also becoming more widespread, more quickly than
ever before.

Globalisation has been hotly debated in the last 10-15 years. Critics point to what they see as the
negative effects of free trade, increased foreign investment and the movement of capital. Debate
has begun to focus ever more on development objectives, sustainable development and the fight
against poverty. More and more people, United Nations bodies included, have come to
recognise and understand the part business has to play in reaching these goals. At the same time,
many people are questioning the roles of individual companies. What should their involvement
be? What are their responsibilities? This leads to understand the roll of business in society.

Role of business in society

It is done by three ways.

They are

1. Good profitability,

2. environmental accountability

3. social responsibility

If profitability is ignored, it will be difficult in the long term to finance environmental
improvements and responsibilities towards the community.

If the environment is ignored, companies risk their reputation, customers and business
options, all affecting profitability.

If companies ignore their social responsibilities – regarding human resources issues, for
example – they may lose skills, which would also affect profitability.

1. Profitability of the business:

• Profit generally is the making of gain in business activity for the benefit of the owners of the
business.

• The word comes from Latin meaning "to make progress", and is defined in two different ways,
one for economics and one for accounting.
 o Profit (accounting)

o Profit (economics)

BUSINESS BENEFITS SOCIETY

The basic objective of business is to develop, produce and supply goods and services to
customers. This has to be done in such a way as to allow companies to make a profit, which in
turn demands far more than just skills in companies’ own fields and processes.

Companies improve their resources by developing materials and ideas. The goods and services
produced must meet demands made by customers, other companies or public institutions if
companies are to survive. Profitability results when customers are prepared to pay more for
goods and services than it costs to produce them.

The ability to produce this kind of added value – profit – is the basic prerequisite for business,
but it is also a foundation for prosperity in society. Only profitable companies are sustainable in
the long term and capable of creating goods, services, processes, return on capital, work
opportunities and a tax base. This is what business does better than any other sector. Hence,
companies’ basic commercial operations are the primary benefit they bring to society.

Companies benefit society by:

 Supplying goods and services that customer cannot, or do not want to, produce themselves.
 Creating jobs for customers, suppliers, distributors and co workers. These people make
money to support themselves and their families, pay taxes and use their wages to buy goods
and services
 Continually developing new goods, services and processes.
 Investing in new technologies and in the skills of employees.
 Building up and spreading international standards, e.g. for environmental practices.
 Spreading “good practice” in different areas, such as the environment and workplace safety

GOOD RELATIONS LEAD TO PROFITABILITY

The long-term survival of companies is partly dependent on maintaining relationships of trust.

Deterioration of such relationships will jeopardise the ongoing development of the company.
Experience shows that companies with an international outlook, which are open and adopt the
long-term approach, are often best at maintaining relationships and hence at developing their
operations.

The ability to constantly go on improving products and processes is a basic prerequisite.

Companies that want to keep developing have to be receptive to signals from and opinions
expressed by the market, staff and the general public. Now that more and more customers – and
stakeholders as well – are making demands of companies’ ethical, social and environmental
awareness, it is also natural for companies to be receptive to these issues and actively use them
in their operations.

Society’s values and current levels of knowledge are reflected in companies’ activities, and
companies are judged according to current standards. Companies have always had to interpret
society’s moods or else go out of business. Companies have always had to adapt to fit in with
values and norms. Then on top of these are the formal regulations that all companies, be they
private and public, have to observe.
It is very much in the interests of any company to be ‘a good corporate citizen’. Companies that
have a clear identity and clear business concepts often find it easier to handle and integrate
ethical and social values and to take the environment into account. Having clear business
objectives makes it easier to formulate and implement goals based on values and norms both
within the company and among the general public.

2.ENVIRONMENTAL FACTORS ACCOUNTABILITY

Internal environment

i. Value system

ii. Mission and objectives

iii. Management and structure

iv. Internal power relationship

v. Human resources

External environment

Any institution or institutions and forces individually or collectively influence the company is
called external environment.

1 Micro environment

Factors having direct effect on the performance of the company.

o Suppliers

o Customers

o Competitors

o Publics

2 Macro environment
 It refers to those economic and non-economic factors to influence the business activity and
determine opportunities to promote business.

o Exchange rate of currency

o Supply shocks

o WTO

o Global economic condition

3.The social responsibilities of business

DEFINING CORPORATE SOCIAL RESPONSIBILITY

There is no set, internationally determined definition of CSR. CSR is often described as a

voluntary responsibility above and beyond the demands of national legislation and which
encompasses issues such as human rights, environmental responsibility and civic freedoms.
One way of defining CSR – which is close to the everyday existence of companies – takes
sustainable development as its starting point; that is to say, efforts to unify economic, social and
environmental development. These efforts involve every section of society: CSR is the way in
which businesses work towards sustainable development.

CSR=the corporate contribution to sustainable development

 Economic growth
 Social development
 Environmental consideration

Within company responsibility:

 Companies must be responsible for not opposing the implementation of rights and freedoms
 Companies must be responsible for respecting rights and freedoms directly related to the
company’s normal operations
 Companies must to a certain extent be responsible for influencing other actors close to the
company to act according to the previous point.
Outside company responsibility:
  Many believe that companies should be responsible for influencing all actors in society to respect
all international rights and freedoms. We hold that it is often doubtful whether companies can or
should get involved in the political process in this way.
 Many also believe that companies should take a general responsibility to see to it that all rights
and freedoms reach home. We believe this is outside the competence of businesses. Companies
cannot bear responsibility for what most of the world’s states cannot live up to. Important issues
when analysing stakeholders
 What does your company stand for, which is your basic business idea?
 Who are your stakeholders?
 Which are their interests and needs, today and in the future?
 Which of these stakeholders, both in the short and longer perspective, are the most important?
 How does these stakeholders view your company?

Responsibilities to the Stakeholders:

- Shareholders – companies must generate profit so that shareholders see returns on invested capital.
- Neighbours and the immediate community – do not want disruptive activities close by.
- Suppliers – want to be paid on time and do not want to be associated with shady clients. Suppliers in
direct contact with their customers obviously have closer relationships than subcontractors.
- National authorities – expect companies to obey laws and regulations and pay their taxes on time.
- Local authorities (municipalities and county councils) – expect companies to respect the environment
and operate according to applicable rules and permits. Expect companies to obey valid legislation
regarding employment and the workplace.
- Customers – expect deliveries of the right quality at the right time and price. Expect goods and services
to live up to agreed and legal standards as regards the environment, health and safety.
- The surrounding environment – companies are expected to respect the need to protect the
nvironment, public health and safety. Companies are expected to contribute to sustainable development.
- Banks – make credit assessments. Companies are expected to pay their interest and reduce loans
regularly.
- Insurance companies – carry out risk assessments to determine the size of premiums.
- Financial analysts – demand reliable and relevant information concerning company operations,
structure, financial situation and bottom line.
- Media – expect companies to transparently divulge information on products, services and
developments.
- Investors – expect company operations to generate profit in order to give investors returns on invested
capital.
- NGOs (or ‘volunteer organisations’ is the generic term for a number of organisations with Widely
varying interests) – these organisations expect openness from companies. These are often ‘single-issue’
rganisations monitoring issues such as human rights, the environment and employee rights. Many
volunteer groups have associations with similar groups in other countries and share information via the
Internet.
- Owners – companies have to keep their owners well informed about operations, profitability and
strategy.
- Employees – it is important for companies to keep their good name, comply with labour legislation,
maintain good human relations policies (on gender equality, non-discrimination and so on) and good
working environments and work to improve conditions for employees.
- Future employees – often check out companies’ human resources policy, working environment and
employment conditions.
- Competitors – expect to compete on equal terms (no bribery, no cartels, etc.).
- Consumers – expect companies to act in accordance with good commercial, marketing and advertising
principles and make every reasonable effort to ensure quality and safety as regards the goods and services
supplied. Consumers are increasingly insisting that companies or their suppliers respect human rights,
refuse to use child labour, and so on.
- Auditors – check that companies are obeying legislation on accounting and other important financial
standards.
- Politicians – expect companies to contribute to social progress.
- Trade unions – expect companies to comply with labour legislation, maintain good human resources
policies and good working environments and work to improve conditions for their employees.
CONCLUSION:

The role of business towards society is done by good profitability, environmental accountability
and social responsibility. So business should concentrate on all of the three aspects. The business
which follow these aspects able to sustain in the market.

REFERENCE:

 Paper presented to the 14th Nordic Conference on Small Business Research,May 11-13,
2006, Stockholm, Sweden

 www.wikipedia.com
 BUSINESS ETHICS AND
ENVIRONMENT

ROLE OF BUSINESS IN SOCIETY

ANTONY DAVID I
09MBAA06
I MBA ‘A’