Social contract

Definition

A social contract is an implicit agreement among members of a society to cooperate for social benefits, such as collective protection and mutual well-being. In business, it often refers to the expectations and responsibilities between a company and its stakeholders regarding ethical behavior and sustainability.

5 Must Know Facts For Your Next Test

1. The social contract in business emphasizes transparency, accountability, and sustainability.
2. Stakeholders include employees, customers, suppliers, communities, and investors.
3. Meeting social contract expectations can enhance a company's reputation and competitive advantage.
4. Failure to adhere to the social contract can result in loss of trust and legal repercussions.
5. Sustainability reporting is a tool used by companies to communicate their adherence to the social contract.

Review Questions

• What are the key elements of a social contract within a business context?
• How does adhering to the social contract benefit a company?
• Who are considered stakeholders in a company's social contract?

Related terms

Corporate Social Responsibility (CSR): CSR involves practices that promote positive societal impact through ethical behavior, environmental stewardship, and community engagement.

Stakeholder Theory: This theory posits that companies should consider the interests of all stakeholders in their decision-making processes.

Sustainability Reporting: A practice where companies disclose information on their economic, environmental, and social impacts to stakeholders.