Social Responsibilities of Business and Business Ethics Class 11: Notes and Cases

What Social Responsibilities of Business and Business Ethics is about

Weightage: This chapter is part of Unit 6, Social Responsibility of Business and Business Ethics. The syllabus groups Unit 6 with Unit 5, Emerging Modes of Business: together they carry 10 of the 80 theory marks in the school annual exam.Source: CBSE Business Studies (054) syllabus 2026-27, Class XI course structure, Unit 6 Social Responsibility of Business and Business Ethics

Key concepts

Concept and need for social responsibility

NCERT section 6.2 and 6.3

Social responsibility of business is its obligation to take decisions and perform actions that are desirable in terms of the objectives and values of society. It is wider than legal responsibility (simply obeying the law): it includes voluntary actions for the welfare of society.

Case (arguments) for social responsibility:
1. Justification for existence and growth: business exists to serve society; its prosperity depends on doing so.
2. Long-term interest of the firm: a good public image brings loyal customers, willing workers and goodwill.
3. Avoidance of government regulation: voluntary responsible behaviour reduces the need for strict laws.
4. Maintenance of society: unhappy, exploited groups may turn to unrest, which harms business too.
5. Availability of resources with business: business has finance, managerial talent and technology to help solve social problems.
6. Converting problems into opportunities: social problems (pollution, waste) can lead to profitable solutions (recycling, clean energy).
7. Better environment for doing business: a healthy, educated society gives a better workforce and market.
8. Holding business responsible for social problems: business has caused some problems (pollution, unsafe workplaces) and should help solve them.

Case against:
1. Violation of the profit maximisation objective: business exists to earn profit; social aims dilute it.
2. Burden on consumers: the cost of social programmes may be passed on through higher prices.
3. Lack of social skills: managers are trained for business, not to solve social problems.
4. Lack of broad public support: the public does not like business getting into social programmes; people are wary of its motives.

Worked example

Suppose a cement company, under pressure from protests about dust, installs filters and plants trees around its plant. Which argument for social responsibility does this support?

Try it first, then show the solutionSolution

1. Acting voluntarily before stricter laws are imposed
2. Responding to a problem the business itself helped create

Answer: Avoidance of government regulation (and holding business responsible for social problems).

Kinds of social responsibility

NCERT section 6.4

1. Economic responsibility: to produce goods and services society wants and sell them at a profit. This is the basic responsibility.
2. Legal responsibility: to obey the laws of the land (taxes, labour laws, consumer protection, environment laws). A law-abiding business is socially responsible to that extent.
3. Ethical responsibility: to behave in ways society expects even when the law does not require it (respecting religious sentiments in advertising, honest labelling). It involves the right behaviour in moral terms.
4. Discretionary responsibility: purely voluntary obligations such as charitable contributions, supporting education, health camps, disaster relief. The business chooses them.

Worked example

Classify: (a) a firm pays all its taxes on time; (b) a firm sponsors a free eye camp in a village; (c) a firm avoids an advertisement that might hurt a community's sentiments though it is legal.

Try it first, then show the solutionSolution

1. (a) Obeying the law: legal
2. (b) Voluntary charity: discretionary
3. (c) Expected moral behaviour beyond law: ethical

Answer: (a) Legal; (b) discretionary; (c) ethical.

Social responsibility towards different interest groups

NCERT section 6.5

Group	Responsibilities of business
Shareholders/owners	Fair and regular return on investment; safety of capital; accurate, regular information about the firm's performance
Workers (employees)	Opportunities for meaningful work; fair wages; good and safe working conditions; welfare amenities; respect for their right to form unions; a democratic, fair workplace
Consumers	Right quality and quantity of goods at reasonable prices; no adulteration, poor quality or misleading advertising; after-sales service; handling grievances; full information about products
Government and community	Obey the laws and pay taxes honestly; act as a good citizen; respect social values; protect the natural environment; help weaker sections and contribute to the community's development

Investors (lenders) also expect timely interest and repayment.

CSR under the Companies Act, 2013 (section 135): a company with a net worth of ₹500 crore or more, or turnover of ₹1,000 crore or more, or net profit of ₹5 crore or more in a year must spend at least 2% of its average net profit of the preceding three financial years on CSR activities (education, health, environment, rural development and others listed in the Act). For example, with net profits of ₹42, ₹50, ₹58 crore in the last three years, the average is ₹50 crore and the minimum CSR spend is ₹1 crore.

Worked example

Suppose a juice company finds that a batch of its juice was contaminated. What responsibilities towards consumers should it fulfil?

Try it first, then show the solutionSolution

1. Withdraw the batch immediately and inform buyers
2. Compensate affected consumers and handle complaints
3. Improve quality checks to prevent a repeat

Answer: Ensure safe, quality products, give full information and address grievances.

Business and environmental protection

NCERT section 6.6

Environment means the total surroundings: natural resources (air, water, land, flora and fauna) and human-made things. Pollution is the injection of harmful substances into the environment.

Causes / kinds of pollution by business:

• Air pollution: smoke from factories and vehicles (carbon monoxide), leading to smog, global warming and health problems.
• Water pollution: discharge of chemicals and waste into rivers and lakes, killing aquatic life and spreading disease.
• Land pollution: dumping toxic industrial waste, damaging soil quality.
• Noise pollution: noise from factories and vehicles causing stress, hearing loss and other problems.

Need for pollution control:
1. Reduction of health hazards (cancer, heart and lung diseases).
2. Reduced risk of liability: firms can be made to pay damages for harm caused.
3. Cost savings: efficient processes use less fuel and produce less waste.
4. Improved public image: customers prefer environment-friendly firms.
5. Other social benefits: clearer visibility, cleaner buildings, better quality of life.

Role of business: a definite commitment by top management; ensuring that the whole organisation is committed to environmental protection; clear policies on purchasing, waste disposal, production processes; participation in government programmes (hazardous waste management, river cleaning, afforestation); periodic assessment of pollution control; educating dealers, suppliers and consumers about pollution control.

Worked example

Suppose a textile dyeing unit starts treating its waste water before release and reusing it, and its water bill falls. Which needs for pollution control does this show?

Try it first, then show the solutionSolution

1. Less contaminated discharge: reduction of health hazards and other social benefits
2. Lower water bill: cost savings
3. Possibly better reputation: improved public image

Answer: Health protection, cost savings and better public image.

Business ethics: concept and elements

NCERT section 6.7

Ethics concerns what is socially desirable or right and wrong. Business ethics are the socially determined moral principles that should govern business activities: not charging unfair prices, not adulterating goods, giving fair wages, honest advertising, fair dealing with competitors.

Ethics goes beyond law: something may be legal but unethical. Ethical behaviour builds trust with customers, workers and society.

Elements of business ethics (how to make a firm ethical):
1. Top management commitment: the CEO and senior managers must openly and strongly commit to ethical conduct and lead by example.
2. Publication of a code: a written code of conduct covering fundamental honesty, adherence to law, product safety and quality, workplace health and safety, conflicts of interest, employment practices, fair marketing, and financial reporting.
3. Establishment of compliance mechanisms: ways to ensure decisions follow the code: paying attention to values when recruiting, communication systems, and channels for employees to report unethical behaviour.
4. Involving employees at all levels: employees make ethics a reality; small groups and discussions on ethics.
5. Measuring results: auditing compliance with ethical standards and taking corrective action.

Worked example

Suppose a firm writes a code of conduct but its directors are seen accepting gifts from suppliers. Which element of business ethics is missing, and why does it matter?

Try it first, then show the solutionSolution

1. Top management commitment is missing
2. Employees follow what leaders do, not what is written

Answer: Top management commitment; without it the code is not taken seriously.

Social Responsibilities of Business and Business Ethics in real life

Each concept, met in an everyday situation. Read the situation, answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Topics in this chapter

• Business and the Environment: Pollution, Its Control and Business Ethics (CBSE 11)
• Kinds of Social Responsibility, Responsibility to Interest Groups and CSR (CBSE 11)

Social Responsibilities of Business and Business Ethics: key facts

Case for SR (8)

Existence and growth, Long-term interest, Avoid regulation, Maintain society, Resources available, Problems into opportunities, Better business environment, Responsibility for problems

Case against SR (4)

Violates profit motive, Burden on consumers, Lack of social skills, Lack of public support

Kinds of SR

Economic, Legal, Ethical, Discretionary

From compulsory to voluntary.

Interest groups

Shareholders/owners, Workers, Consumers, Government and community

Pollution

Air, Water, Land, Noise

Need for pollution control

Health, Liability, Cost savings, Public image, Social benefits

Elements of business ethics

Top management commitment, Code, Compliance mechanisms, Involve employees, Measure results

CSR (Companies Act, 2013, s.135)

Minimum CSR spend = 2% of average net profit of preceding 3 years

For companies with net worth ≥ ₹500 cr, turnover ≥ ₹1,000 cr, or net profit ≥ ₹5 cr.

How the school exam asks Social Responsibilities of Business and Business Ethics

The question patterns to expect, and the method that works for each.

Tricks to remember Social Responsibilities of Business and Business Ethics

Short memory aids. Say each one aloud once, then use it on a question the same day.

• Kinds of SR: "ELED"

  Economic, Legal, Ethical, Discretionary.

  Use it when: Kinds.

• Ethics elements: "Top Code Comply, Involve, Measure"

  Top management commitment, Code, Compliance, Involve employees, Measure results.

  Use it when: Elements of business ethics.

• Against SR: "PBSP"

  Profit, Burden, Skills, Public support.

  Use it when: Case against.

Social Responsibilities of Business and Business Ethics: exam-level solved questions

Ordered from exam level to HOTS. Cover the solution, write your own, then compare step by step.

Case-study practice (Section E style)

Read the situation, then answer every part. In a school exam set on the board pattern this is a 4-mark question split into 1 + 1 + 2 marks.

Where the marks are

How a typical answer is split into step marks. Show every step: a right final answer alone rarely earns full marks.

Where students lose marks in Social Responsibilities of Business and Business Ethics

The slips examiners see most often, and what to write instead.

• ✗Mistake: Treating social responsibility as the same as legal responsibility

  Students think obeying the law is enough.

  ✓Do this: Social responsibility is wider: it includes ethical and voluntary actions.

  Usually costs: 1-2 marks.

• ✗Mistake: Mixing ethical and discretionary responsibility

  Both are beyond law.

  ✓Do this: Ethical: expected by society; discretionary: purely voluntary (charity).

  Usually costs: 1 mark.

• ✗Mistake: Listing elements of ethics without explanation

  One-word answers.

  ✓Do this: Explain each element in a line and connect it to the case.

  Usually costs: Half marks.

• ✗Mistake: Stating CSR as "2% of profit" without details

  Remembering the headline only.

  ✓Do this: It is 2% of the average net profit of the preceding three years, for companies above the thresholds.

  Usually costs: 1 mark if asked.

NCERT exercise guide: Social Responsibilities of Business and Business Ethics

What each exercise in the NCERT chapter tests, how to approach it, and a question of the same kind solved step by step. Questions here are written in our own words.

Practice questions on Social Responsibilities of Business and Business Ethics

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

1. Q1 · 1 mark · MCQExam level

   Which kind of social responsibility involves obeying the law?
   (a) Economic
   (b) Legal
   (c) Ethical
   (d) Discretionary

   Hint

   Law.

   Answer

   (b) Legal

2. Q2 · 1 mark · MCQExam level

   Which is an argument against social responsibility?
   (a) Long-term interest of the firm
   (b) Avoidance of regulation
   (c) Lack of social skills
   (d) Better environment for business

   Hint

   Managers' training.

   Answer

   (c) Lack of social skills

3. Q3 · 1 mark · Very short answerExam level

   What are business ethics?

   Hint

   Moral principles.

   Answer

   Socially determined moral principles that should govern business activities.

4. Q4 · 3 marks · Short answerExam level

   State three responsibilities of business towards consumers.

   Hint

   Quality, price, information.

   Answer

   Safe, quality products at reasonable prices; honest information and no misleading advertising; after-sales service and redress of grievances.

5. Q5 · 3 marks · Short answerHarder exam level

   Explain any three arguments for social responsibility.

   Hint

   Existence, long-term, regulation.

   Answer

   Justification for existence and growth; long-term interest (public image); avoidance of government regulation (also maintenance of society, resources with business, problems into opportunities).

6. Q6 · 4 marks · Long answerHarder exam level

   Explain the four kinds of social responsibility.

   Hint

   Economic to discretionary.

   Answer

   Economic: produce goods society wants at a profit. Legal: obey laws. Ethical: behave as society expects beyond law. Discretionary: voluntary acts like charity and community projects.

7. Q7 · 4 marks · Long answerHarder exam level

   Explain the role of business in environmental protection.

   Hint

   Commitment, policies, programmes.

   Answer

   Top management commitment; organisation-wide commitment; clear policies on purchasing, waste disposal and processes; participation in government programmes (waste management, river cleaning, afforestation); periodic assessment; educating dealers, suppliers and consumers.

8. Q8 · 3 marks · Short answerHarder exam level

   Give two responsibilities each towards shareholders and the government.

   Hint

   Return, information; laws, taxes.

   Answer

   Shareholders: fair and regular return; accurate and regular information (also safety of capital). Government: obey laws; pay taxes honestly (also act as a good citizen).

9. Q9 · 4 marks · Long answerHarder exam level

   Explain any four arguments against social responsibility.

   Hint

   NCERT's four.

   Answer

   Violation of profit maximisation; burden on consumers through higher prices; lack of social skills among managers; lack of broad public support.

10. Q10 · 3 marks · Short answerHarder exam level

    Distinguish between legal and ethical responsibility with examples.

    Hint

    Law vs expectation.

    Answer

    Legal: required by law, enforced by penalties (paying minimum wages). Ethical: expected by society though not required by law (not advertising a product in a way that hurts religious sentiments). A business can be legal yet unethical.

11. Q11 · 4 marks · Long answerHarder exam level

    How do the elements of business ethics help create an ethical organisation?

    Hint

    Five elements.

    Answer

    Leaders' commitment sets the tone; a published code clarifies expected behaviour; compliance mechanisms (hiring, reporting channels) enforce it; involving employees makes ethics part of daily work; measuring results through audits finds and corrects lapses.

12. Q12 · 4 marks · Long answerHOTS / competency

    Suppose a company argues, "We follow every law, so we have done our duty to society." Evaluate this view.

    Hint

    Legal is only one kind.

    Answer

    Legal responsibility is only one of four kinds. Society also expects ethical behaviour (honest marketing, fair dealing) and values discretionary contributions. Laws lag behind new problems (pollution, data misuse); a firm that only meets the law may still harm stakeholders and lose trust. So the view is incomplete.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1. 1.Name the four kinds of social responsibility.Show answer

   Economic, legal, ethical and discretionary.

2. 2.Name four kinds of pollution.Show answer

   Air, water, land and noise.

3. 3.Give one responsibility towards the community.Show answer

   Protecting the natural environment (also helping weaker sections).

4. 4.What is the first element of business ethics?Show answer

   Top management commitment.

5. 5.What is the CSR spending rule?Show answer

   At least 2% of the average net profit of the preceding three years for covered companies.

Quick revision checklist

The night before the exam: can you do each of these without looking?

• ☐Can you define social responsibility?
• ☐Can you give five arguments for and four against?
• ☐Can you classify actions into the four kinds of responsibility?
• ☐Can you list duties towards shareholders, workers, consumers and community?
• ☐Can you explain five reasons for pollution control?
• ☐Can you explain the role of business in environmental protection?
• ☐Can you list and explain the five elements of business ethics?

Social Responsibilities of Business and Business Ethics: frequently asked questions