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Do Businesses Have a Social Responsibility to Their Communities?

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Business is a large part of every community. Without commerce, trade, and the sustainable flow of goods and services within the area, virtually any city would cease to exist.

But, what does that mean for each business’s responsibility to that community?

While every city, township, and county is dependent on the health of its local businesses for life and livelihood, every business is just as dependent on the community for revenue, support, and customer loyalty. The relationship is unavoidably symbiotic.

Logically, then, don’t businesses have a vested interest in supporting and encouraging the health, happiness, and growth of their communities?

“Business owners are a vital part of every growing, successful community,” says Linda Borek, CEO of NTCTexas. “As part of that community, we have a moral obligation to help it thrive.”

Simply put: Business philanthropy is an important component for both large and small companies, and making socially responsible decisions should play a huge role in every business’s standard operating procedures.

Even more, while it could be argued that adopting a strong stance on social responsibility is simply the right thing to do, it’s equally true that businesses benefit from being in touch with and supportive of their local communities. It’s really a win-win, if you think about it.

“We’re not just business owners or entrepreneurs,” says Borek. “We’re also homeowners, renters, citizens, consumers, and leaders. As such, we have both personal and professional investments in our local communities, and if we have the power to make a difference, we should.”

Now, to clarify, social responsibility doesn’t only refer to volunteer programs or fundraisers to support charitable causes. Those are important in business philanthropy, but they’re not the core of what social responsibility is truly about.

To understand the core of social responsibility, a history lesson may be in order, as the obligation of businesses to the welfare of more than just their shareholders has been a topic of contention for more than a century.

According to a recent article by John Hood, the President of the John Locke Foundation, the concept of social responsibility has been the subject of several court cases, starting in 1919 with Dodge v. Ford. In this influential case, Henry Ford, the controlling shareholder of Ford Motor Company, was sued by John and Horace Dodge, who owned 10 percent of the company’s shares, for choosing to pay out only regular dividends to shareholders instead of the previous regular and special dividends. The Dodge brothers argued that Ford was intending to use company profits to pursue his own philanthropic goals, which, given Ford’s statement as to his intentions, may not have been entirely untrue. Ford stated his plan was as follows: “to employ still more men, to spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their homes.”

At the time, the Michigan Supreme Court sided with the Dodge brothers, indicating that a business exists to protect the interests of its stockholders and that only expenditures pursuant to that goal could be condoned or legally supported.

Less than two decades later, however, as the Great Depression and several other economic and social tragedies ravaged the American public, the general consensus began to change, especially with regard to larger corporations. A 1953 case, A.P. Smith Manufacturing Co. v. Barlow, reinterpreted the concept of social responsibility with regard to corporations that “had grown so large and amassed so much power over society that previous formulations of their social responsibilities had become outdated,” as Hood succinctly stated.

Since then, the environmentalism of the 1980s and 1990s as well as the most recent market crash in 2008 have brought the relationship between businesses and their communities into glaring focus. While general business philanthropy is mostly alive and well, since there are several benefits to the business for supporting certain charitable works and foundations, there is also a crucial shift taking place in the minds of public consumers.

Social media, constant internet traffic and chatter, and an infinitely more informed public are all making it harder and harder for businesses to turn a blind eye to the importance of social responsibility, because the public is no longer turning a blind eye to the day-to-day operations and decisions of its local businesses. Consumers are much more aware of what’s going on in their world, if occasionally misled, and they want to know that businesses care about more than their own bottom line.

Let face facts: Social responsibility has become inextricably tied with public image—meaning that it’s not only the right thing to do, it’s also become the smart thing to do. If your organization hasn’t given serious consideration to its responsibility to the surrounding community, it might be time to take a long, hard look at your goals and long-term plan for success.

Becoming a socially responsible business may be as simple as making more environmentally conscious choices about waste disposal, or it could be as complicated as raising wages on a tight budget. Either way, you might find the benefits far outweigh the immediate financial costs. As every business owner knows, sometimes you have to make long-term investments if you want to see your business thrive in the future.  And isn’t your community worth investing in?

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Ashley.jpgAbout the Author – Ashley Choate is a native of Jacksonville, FL where she lives with her son, dog, and three cats. She graduated Magna Cum Laude from Jacksonville University with a BA in English and holds an MAED in Adult Education and Training. She lives for reading and writing, learning and teaching, and figuring out the day-to-day traumas and joys of mommyhood. .

 Top Photo Courtesy of Pexels