NCERT Solutions for Class 11 Business Studies Chapter 6: Social Responsibilities of Business and Business Ethics

Chapter at a glance

Exercises – Short Answer Questions

Question SA – Q1

What do you understand by social responsibility of business? How is it different from legal responsibility?

Answer

Social responsibility of business refers to its obligation to take decisions and perform actions that are desirable in terms of the objectives and values of society, beyond earning profits — e.g. fair dealing with workers and consumers, protecting the environment, community development.

Question SA – Q2

What is environment? What is environmental pollution?

Answer

Environment means the totality of man’s surroundings — both natural (land, water, air, flora and fauna) and man-made (buildings, technology, social and economic conditions).

Environmental pollution is the injection of harmful substances into the environment, causing undesirable changes in the physical, chemical and biological characteristics of air, water and land, which harm human life, other species, living conditions and cultural assets. Business activities such as industrial production, mining and transport are major sources of pollution.

Question SA – Q3

What is business ethics? Mention the basic elements of business ethics.

Answer

Business ethics refers to the socially determined moral principles and standards that should govern business activities — such as fair prices, honest advertising, fair treatment of employees and protection of the environment.

Basic elements

1. Top management commitment
2. Publication of a ‘code’ (code of conduct)
3. Establishment of compliance mechanisms
4. Involving employees at all levels
5. Measuring results

Question SA – Q4

Briefly explain (a) Air Pollution, (b) Water pollution, and (c) Land pollution.

Answer

Question SA – Q5

What are the major areas of social responsibility of business?

Answer

1. Economic responsibility — to produce goods and services society needs and sell them at a profit.
2. Legal responsibility — to obey the laws of the land.
3. Ethical responsibility — to behave in a way society expects even if not required by law (e.g. respecting religious sentiments in advertisements).
4. Discretionary responsibility — purely voluntary actions like charity, setting up schools and hospitals, helping in disasters.

Towards specific groups: responsibility towards shareholders (fair return, information), workers (fair wages, safe conditions), consumers (quality goods at fair prices, no unfair practices), government and community (paying taxes, protecting environment, development of the community).

Question SA – Q6

State the meaning of Corporate Social Responsibility as per the Companies Act 2013.

Answer

Under Section 135 of the Companies Act, 2013, Corporate Social Responsibility means the activities undertaken by a company, as specified in Schedule VII of the Act, for the welfare of society. Every company having net worth of ₹ 500 crore or more, or turnover of ₹ 1,000 crore or more, or net profit of ₹ 5 crore or more during the immediately preceding financial year must:

1. Constitute a CSR Committee of the Board (where required);
2. Frame a CSR policy; and
3. Spend at least 2% of its average net profits of the three immediately preceding financial years on CSR activities such as eradicating hunger and poverty, promoting education, gender equality, environmental sustainability, protection of national heritage, rural development, etc.

Exercises – Long Answer Questions

Question LA – Q1

Build up arguments for and against social responsibilities.

Answer

Arguments for social responsibility

1. Justification for existence and growth — business exists to serve society; profits are a reward for service.
2. Long-term interest — a good public image brings customer loyalty and sustained profits.
3. Avoidance of government regulation — voluntary responsibility reduces the need for laws.
4. Maintenance of society — irresponsible behaviour can lead to unrest that hurts business.
5. Availability of resources — business has finance and managerial talent to solve social problems.
6. Converting problems into opportunities — e.g. waste recycling.
7. Better environment for doing business — a healthy society means better workers and customers.
8. Holding business responsible for social problems it has created, like pollution.

Arguments against

1. Violation of profit maximisation objective — business exists only to earn profit.
2. Burden on consumers — costs of social programmes are passed on through higher prices.
3. Lack of social skills — managers are not trained to solve social problems.
4. Lack of broad public support — people do not like business getting involved in social matters.
5. Dilution of business focus.

On balance, the arguments in favour are stronger and social responsibility is now widely accepted (and partly mandated through CSR).

Question LA – Q2

Discuss the forces which are responsible for increasing concern of business enterprises toward social responsibility.

Answer

1. Threat of public regulation — governments regulate businesses that ignore social interest; responsible behaviour avoids stricter laws.
2. Pressure of labour movement — organised workers demand better wages, working conditions and welfare.
3. Impact of consumer consciousness — educated consumers and consumer organisations demand quality, safety and fair prices.
4. Development of social standards — society expects businesses to follow ethical norms.
5. Development of business education — professional managers are more aware of social issues.
6. Relationship between social interest and business interest — firms realise that long-term profits depend on social goodwill.
7. Development of a professional, managerial class that balances interests of all stakeholders.
8. Legal requirements such as mandatory CSR under the Companies Act, 2013.

Question LA – Q3

‘Business is essentially a social institution and not merely a profit making activity’. Explain.

Answer

Business is part of society and depends on it for resources — land, labour, capital and customers. It therefore has obligations to society:

1. Uses society’s resources — it must use them responsibly and fairly.
2. Serves society’s needs — its basic purpose is to supply goods and services that people want, at fair prices and quality.
3. Affects many groups — owners, workers, consumers, suppliers, government and the community; it must balance their interests.
4. Profits are a reward for service — sustained profits come only when society is satisfied.
5. Creates employment and income, supports government through taxes and contributes to national development.
6. Social responsibility and CSR — businesses build schools, hospitals, protect environment and help in disasters.

Thus, while profit is necessary for survival and growth, business is fundamentally a social institution whose success depends on serving society.

Question LA – Q4

Why do the enterprises need to adopt pollution control measures?

Answer

1. Reduction of health hazards — pollution causes diseases like cancer, asthma and heart problems; controlling it protects people’s health.
2. Reduced risk of liability — firms can be held legally liable to pay compensation for damage caused by pollution.
3. Cost savings — efficient processes that cut waste also reduce production costs.
4. Improved public image — environment-friendly firms earn goodwill.
5. Other social benefits — clean environment, better visibility, preservation of natural resources and wildlife, higher productivity of workers.
6. Compliance with laws such as the Water Act, Air Act and Environment (Protection) Act.

Question LA – Q5

What steps can an enterprise take to protect the environment from the dangers of pollution?

Answer

1. A definite commitment by top management to create a culture of environmental protection.
2. Ensuring that commitment is shared throughout the enterprise by all divisions and employees.
3. Developing clear policies and programmes for purchasing good-quality raw materials, employing superior technology, using scientific techniques of disposal and treatment of wastes, and developing employee skills for pollution control.
4. Complying with laws and regulations enacted by the government for prevention of pollution.
5. Participating in government programmes relating to management of hazardous substances, clean-up of polluted rivers, tree plantation and checking deforestation.
6. Periodic assessment of pollution control programmes in terms of costs and benefits.
7. Arranging educational workshops and training to share technical information with suppliers, dealers and customers.

Question LA – Q6

Explain the various elements of business ethics.

Answer

1. Top management commitment — the CEO and senior managers must openly and strongly commit to ethical conduct and give continuous leadership.
2. Publication of a ‘code’ — a formal written code of conduct covering fundamental honesty, adherence to laws, product safety and quality, health and safety at work, conflicts of interest, employment practices, marketing practices and financial reporting.
3. Establishment of compliance mechanisms — paying attention to values and ethics in recruiting and hiring, emphasising ethics in training, auditing performance, and providing channels for reporting violations.
4. Involving employees at all levels — employees must be involved in implementing ethics programmes, e.g. through small groups discussing ethical issues.
5. Measuring results — auditing compliance with ethical standards and reviewing results so that improvements can be made.

Question LA – Q7

Discuss the guidelines enumerated by the Companies Act 2013 for Corporate Social Responsibility.

Answer

Section 135 and Schedule VII of the Companies Act, 2013 and CSR Rules provide:

1. Applicability — every company with net worth ≥ ₹ 500 crore, or turnover ≥ ₹ 1,000 crore, or net profit ≥ ₹ 5 crore in the preceding financial year.
2. CSR Committee — the Board constitutes a CSR Committee of three or more directors, with at least one independent director (not required where CSR spending is up to ₹ 50 lakh).
3. CSR Policy — the Committee formulates and recommends a CSR policy indicating activities to be undertaken; the Board approves it and discloses it on the company’s website.
4. Spending — at least 2% of average net profits of the three immediately preceding financial years.
5. Local area preference — preference to the local areas where the company operates.
6. Activities (Schedule VII) — eradicating hunger, poverty and malnutrition; promoting health care, sanitation and safe drinking water; promoting education and skills; gender equality and women empowerment; environmental sustainability; protection of national heritage, art and culture; measures for armed forces veterans; promoting sports; contribution to PM’s National Relief Fund; rural development; slum development; disaster management, etc.
7. Reporting — the Board’s report must disclose the CSR policy and amount spent; unspent amounts must be transferred to specified funds or an unspent CSR account and explained.

Topic checklist

• Concept and need of social responsibility
• Kinds of social responsibility and responsibility towards stakeholders
• Arguments for and against social responsibility
• CSR under the Companies Act, 2013
• Environment, pollution and pollution control
• Business ethics and its elements

Total questions answered: 13 of 13