The Social Responsibility of an Entrepreneur and Why It Matters

Entrepreneurs are individuals who start businesses of their own in society, for society, and by society’s resources. They assume all the risks and rewards of the venture. Highly innovative and a source of new ideas, it is the entrepreneur’s responsibility to not only aim for profit maximization but also balance it with social responsibility. A good business goes hand-in-hand with the welfare of society, and the social responsibility of an entrepreneur plays a key role in ensuring this. It can result in long-term corporate benefits and increased revenue.

Social responsibility corresponds to actions that benefit society. Commonly called corporate social responsibility (CSR) in entrepreneurship, its core principle is to strike a balance between profitability and benefitting society. The social responsibility of an entrepreneur implies that businessmen should be responsible for the functioning of an economic system that fulfills the expectations of the public.

This can be done through volunteering, philanthropy, ethical labor practices, employing local people, and environmental conservation efforts such as adopting sustainable practices to reduce carbon footprint, effective waste management, etc.

The International Organization for Standard (ISO) emphasizes that a business’s ability to maintain a balance between pursuing economic performance and adhering to societal and environmental issues is critical to operating efficiently and effectively. With changing social norms, businesses need to reflect on their core values of integrity, trust, truthfulness, and humility. Consumers like those brands that reflect their views and care about society.

The social responsibility of an entrepreneur ensures:

Enhanced reputation and brand value as it brings to the forefront how the brand is socially aware of its duties and therefore, trustworthy because consumers today are more conscious of the impact of their purchasing decisions on society.
Access to new market opportunities because being socially responsible comes with the advantage of being acceptable to the public, which opens up new opportunities.
Improved employee morale and productivity as employees feel comfortable in their workspace if they know that their company is not creating negative externalities for society, further increasing employee engagement and retention.
Strengthened stakeholder relationships because investors would only want to invest in companies that will garner profit, and being socially responsible plays a significant role in that.

There are 4 types of social responsibilities of an entrepreneur:

Environmental: Being environmentally responsible is the need of the hour. Effective waste management, adopting sustainable practices to reduce the carbon footprint, and using renewable energy resources such as solar energy are just some ways a business can contribute to environment conservation.
Ethical: It includes taking good care of customers, employees, and the community. Customers should not be made fake promises, and good-quality products should be delivered. Abiding by labor policies and providing transparency in work and fair wages are important for employees.
Charitable: Either donating a part of their fund to social causes they support or providing some of their output free of cost to orphanages or government schools are just two of the ways entrepreneurs can provide to charity.
Legal: The government places some rules and regulations for businesses to adhere to and abiding by these is the duty of every entrepreneur. Regular corporate taxes need to be paid truthfully to receive protection from the government. Doing business legally and ethically will lead to development in the country.

Responsibility of Entrepreneurs Towards Local Community

Entrepreneurs contribute to the betterment of the local community by providing employment opportunities. By putting up their offices in backward areas, they could provide opportunities to people who would have had to travel miles to participate in the otherwise rat race of employment. This way, entrepreneurs also benefit from the experiences of people from diverse backgrounds.

It is also the social responsibility of an entrepreneur to improve the standard of living as India continues to have a high proportion of people living below the poverty line.

Public utilities like public washrooms are not looked after and hence in bad condition. The improvement of such utilities is crucial for the health of people and also for the aesthetic beauty of the environment.

Infrastructural development like roads, sewage, schools, and hospitals is essential for a country like India which has the largest population in the world.

Entrepreneurs should also provide mentorship to individuals who wish to enter the business fields like themselves to allow for fair competition and honest business practices.

Therefore, by making the best use of society’s resources, they work for society’s welfare and help the weaker sections of society.

The social responsibility of an entrepreneur is a commitment to using business practices that benefit society, the environment, and the economy. Some examples include:

Organizing environmental protection drives with employees to plant trees, use eco-friendly materials, and design products with sustainability in mind.
Participating in community initiatives, sourcing materials and products ethically, and supporting fair trade practices.
An entrepreneur needs to be transparent about business practices and financial information while also adhering to good corporate governance principles, including ethical leadership and effective board oversight.

Examples of Socially Responsible Entrepreneurs in India

With its complex socio-economic challenges, India presents a unique backdrop for social responsibility initiatives. Here are some socially responsible Indian entrepreneurs:

Kiran Mazumdar-Shaw, the founder and chairperson of Biocon, a leading biotechnology company in India, is at the forefront of socially responsible efforts in the healthcare sector. Biocon Foundation, the philanthropic arm of Biocon Limited, has made significant contributions to diabetes and cancer treatments.
Anshu Gupta is the founder of Goonj, a non-profit organization that collects discarded clothes and other materials and distributes them to those in need. Under him, Goonj has helped address the clothing needs of millions of people, particularly in rural areas and disaster-affected regions.
Harish Hande co-founded SELCO India, a pioneering social enterprise that provides affordable solar energy solutions to rural communities in India. Thus, by being environmentally responsible, they have greatly reduced dependence on fossil fuels.

For every entrepreneurial act, a well-structured strategy needs to be planned to provide solutions to potential challenges. One of the challenges is the cultural and social barriers, which need to be handled carefully. Sensitivity to cultures so as not to insult them, developing a cultural understanding of the rich tapestry of cultures around the globe, and stakeholder engagement are necessary for overcoming these barriers.

It is the social responsibility of an entrepreneur to ensure adequate access to capital and resources. However, due to their focus on social impact rather than immediate financial returns, there are some limitations. Some strategies to bypass these limitations are collaborating with NGOs, leveraging technology, and seeking partnerships with influencers, corporations, etc.

It is not easy to measure and demonstrate the social impact of a venture for which entrepreneurs can develop vigorous evaluation frameworks to track progress and communicate the impact effectively.

Ensuring long-term financial sustainability can be a challenge, especially for enterprises that rely heavily on grants and donations. Scaling up becomes an issue due to the need to balance growth with impact. Diversifying revenue streams through multiple sources of income, such as partnerships with corporations, can help address this issue.

Conclusion

With their innovative thinking, entrepreneurs are capable of resolving a wide range of social concerns. As businesses should not only be profitable but also contribute to the welfare of society, the social responsibility of an entrepreneur is a requisite for creating a stable and inclusive society. By integrating social responsibility into their business models, they can positively impact society, build strong brands, and drive economic growth. Working not only for their employees and customers, international cooperation can help build peace among countries, and outsourcing workers helps lesser-developed countries. So, to create a strong and unified world, entrepreneurs need to be socially responsible while also being economically responsible.

FAQs

What are the responsibilities of a social entrepreneur?

A social entrepreneur is responsible for growing a sustainable business that aligns with the environmental, ethical, and social needs of the hour. Providing employment opportunities and developing the infrastructure are some other responsibilities of an entrepreneur.

What are the social roles of an entrepreneur?

Entrepreneurs often act as catalysts for economic growth, innovation, and social change. Their social rules include economic and community development, leadership, and inspiration, which includes mentorship for budding entrepreneurs.

Who is a socially responsible entrepreneur?

A socially responsible entrepreneur looks out for society along with their business profit. Keeping in mind his role as an individual to the environment and community, he fulfills his social duty as well as his business responsibilities.