Business Practices

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Theoretical framework of socially responsible business

Socially responsible business is nowadays regarded as an integral part of the business of a large number of companies. In this way, the business of many companies is adapted to address problems that are detrimental to the entire society, strives to help the community and contribute to the overall development of the area in which the company operates, and beyond. The way in which the company operates in terms of its ethical behavior and identifies its position in the whole society determines the relationship with the community that the shareholders of the company are in.

Also, to some extent this relationship is determined by the culture of the company. Companies must first consider their own position in society and the values ​​on which they are founded in order to meet the different demands of the community and stakeholders. Socially responsible business should be based on the principles that are based on the principles of sustainable development. Sustainable development includes ecological, economic, technological and sociocultural sustainability. Ecological sustainability implies the development of a company that is in line with the preservation and maintenance of ecological processes, biodiversity and biogeographical resources. Sociocultural sustainability implies the development of enterprises in preserving the culture and system of the values ​​of the people it is affected by and maintaining the identity of the local community permanently. In order to ensure the development and survival of an enterprise, it is important to be in line with the principle of economic sustainability. Technological sustainability implies the development and application of modern technology in production, which, with economic effects, certainly contributes to the preservation and protection of the environment. All enterprises, regardless of their size or market share, must be guided by the stated principles of sustainable development in order to gain the company’s affinity and survive on the market.

Definition and significance of socially responsible business
Socially responsible business represents an organizational activity to establish a balance of the many interests of stakeholders. Organizations are entities that are responsible for their activities. How organizations manage managers, social responsibility is closely related to managerial responsibility. So it could simply be said that social responsibility begins where the legislation ends. Organizations are not socially responsible if they (only) do business in accordance with legal regulations. The significance of socially responsible business also applies to investing in the environment, employees, and to shareholder relationships. Investing in environmentally friendly technologies can greatly contribute to the competitiveness of the company. The global financial and economic crisis has led to the encouragement of the development of sustainable controlling that assumes a part of the responsibility for the set goals and successes of the company. According to Peach, there are three levels of the impact of socially responsible business operations on the enterprise:
1. Basic level – the company adheres to all social rules and regulations in which companies significantly contribute to the improvement of the society in which they are active
2. Organizational level – an example is responsible environmental practices that can only be at the basic level of responsibility, that is, within the legal framework, and may be more than legal frameworks, as a result of a voluntary organization practice
3. Social level – responsibility towards the community in which the company operates and as such is most visible outside of the organization.
The last level implies the activity of an enterprise in addressing key community problems, for example: violent behavior of young people, informational illiteracy, unemployment and the like. Then projects are selected which, in accordance with the business strategy of the company, are long-term useful for the company, not only for the community, but also trying to solve the current problems.


Importance of company stakeholder
In 1984, Freeman made the first attempt at a new theoretical model of corporate social responsibility, which he called the shareholder theory. The importance of this theory is that it is considered to be the forerunner of the scientific revolution because it calls into question the key classical economic point of view by which each enterprise has only one duty which is directed only in one direction; preserving and increasing the value of assets and profits of shareholders, shareholders. This satisfied the needs and demands of investors, workers, creditors and consumers. In contrast, Freeman argued that companies also have obligations to other stakeholders such as government bodies, political groups, trade unions, communities, companies with which they cooperate, potential employees and consumers, and the public as a whole. The stakeholders as an interest group with the company create an intangible relationship that would mean: future customer loyalty, employee loyalty, state regulation, co-operation with other companies, and more. For an enterprise, this relationship presents certain risks because it is the means by which socially responsible business operates between the company and its environment. In order to minimize possible risks, companies must strive for as best possible socially responsible practices as possible. This would reduce any possible entrepreneurial or business risk and raise the present and future value of the company. The best socially responsible practices lead to a better, more profitable, less risky and more sustainable relationship with stakeholders. The definition of stakeholders according to today’s understanding of this notion is that they are

individuals and groups that participate, intentionally or consequently, in the process of creating wealth of the company. Participants are involved in creating wealth, giving inputs, taking care of expenses and troubleshooting. Therefore, they are risking something in the process – there is a risk that the benefits will be less, or the costs and damages will be greater than those that are foreseen or appropriate

Trends of social responsibility
In the past, many business leaders dismissed the idea that their corporations should have additional social responsibility in addition to securing jobs, making profits for paying investors and financing development, paying taxes, and voluntary co-financing of non-profit health, social and educational institutions. This kind of thinking has not yet been completely eradicated. CSR can contribute to improving the image and reputation of the company. According to Tench, the importance of good reputation can lead to the following: it helps to strengthen the link of the information structure of the company with the company and in that way leads to the improvement of resources in all areas; others will be more willing to consider things from the point of view of the company; facilitates the company’s motivation and finding new employees, as well as raising the morale of employees; it will serve as support and added value to the company’s products and services. Nowadays, under the influence of material culture, it is necessary to ask whether it is consumed too much and curiously, which leads to the impoverishment of natural resources, the creation of large environmental damage and the destruction of the Earth. Appeals for consumers’ ethical reflection in all segments of social responsibility – the environment, working conditions, global trade practices, and so on – have resulted in ethical spending that is increasing and advocating. The ecologically conscious, green or sustainable consumption has certainly become a trend in recent years, and consumers have become more preoccupied with the ethical elements of what they are buying. Trend follows the trend, and it can be said that by fostering a lifestyle that promotes health and sustainability, today, where the whole world is fragmented literally with one click, encourages a discussion of environmental awareness in a wider public space.

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