Few terms have been defined in as many different ways as social responsibility—profit maximization, going beyond profit making, voluntary activities, and concern for the broader social system are but a few.13 These descriptions fall into two camps. On one side is the classical—or purely economic—view that management’s only social responsibility is to maximize profits.14 On the other side is the socioeconomic position, which holds that management’s responsibility goes beyond making profits to include protecting and improving society’s welfare.15

When we talk about social responsibility (also known as corporate social responsibility, or CSR), we mean a business firm’s intention, beyond its legal and economic obligations, to do the right things and act in ways that are good for society. Note that this definition assumes that a business 1 obeys the law and 2 pursues economic interests. But also note that this definition 3 views a business as a moral agent. In its effort to do good for society, it must differentiate between right and wrong.

We can understand social responsibility better if we compare it to two similar concepts. Social obligations are those activities a business firm engages in to meet certain economic and legal responsibilities. It does the minimum that the law requires and only pursues social goals to the extent that they contribute to its economic goals. Social responsiveness is characteristic of the business firm that engages in social actions in response to some popular social need. Managers in these companies are guided by social norms and values and make practical, market-oriented decisions about their actions.16 A U.S. business that meets federal pollution standards or safe packaging regulations is meeting its social obligation because laws mandate these actions. However, when it provides on-site child-care facilities for employees or packages products using recycled paper, it’s being socially responsive to working parents and environmentalists who have voiced these social concerns and demanded such actions. For many businesses, their social actions are probably better viewed as being socially responsive rather than socially responsible, at least according to our definitions. Although such actions are still good for society, social responsibility adds an ethical imperative to do those things that make society better and to not do those that could make it worse.