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 $1 billion 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.
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