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Definition of Corporate Social Responsibility
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Definition of Corporate Social Responsibility
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Definition of Corporate Social Responsibility
Introduction
Corporate social responsibility (CSR) is a very important concept in the business world
and in society. In essence, CSR is the relationship between companies, their shareholders,
stakeholders, and the rest of society. Through the influence and power of different people and
groups, businesses attempt to self-regulate themselves in order to do more than to make a profit
or to meet the bottom line. Even though the main responsibilities of a company are to make a
profit, to provide a good or service that people want, and to follow the law, a free market
incentive to be socially responsible exists. For example, one of three oil companies could be
socially responsible by investing money into more “green” energy like solar and wind power.
Due to the popularity of “green” energy, that particular oil company could receive more business
than its competitors, which in then could make the other two companies become socially
responsible as well. This definition of CSR can be compared to different CSR models, including
the CSR Pyramid and the 3C-SR Model.
The Pyramid of Corporate Social Responsibility
Archie B. Carroll argues that corporate social responsibility (CSR) should encompass a
number of responsibilities or components that each business person should accept. These
responsibilities have existed in some form throughout history. The components are put together
on a pyramid. The four social responsibilities of CSR are economic, legal, ethical, and
philanthropic (1991).
Businesses have economic responsibilities. Companies, which provide goods and
services to various consumers, are economic entities in society. Entrepreneurship is ultimately
possible mainly because there is a profit motive for entrepreneurs to strive for. That is why
organizations try to maximize their profits. As a result, businesses provide goods and services
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Definition of Corporate Social Responsibility
while making a profit. The consumer receives a good or service that he or she wants while the
entrepreneur or manager makes money for providing that good or service. Carroll argues that if a
corporation cannot meet its economic responsibilities, it cannot meet the other responsibilities as
well. For example, how can a company meet its philanthropic responsibilities if it has no money
or funds to give away or spend? He also lists five economic components of CSR. They are to
maximize profits, maximize earnings per share, be competitive, be efficient as possible, and to
consistently earn profits (1991).
Another component of CSR is legal responsibilities. In addition to firms making and
maximizing profits, they have to follow all of the laws and regulations issued by the government.
These rules tend to create a level playing field for all companies to do business under.
Organizations are expected to follow the ‘social contract,’ which is the relationship between
businesses and society, under which they attempt to meet their economic responsibilities. “Legal
responsibilities reflect a view of ‘codified ethics’” under which businesses practice fairly. Carroll
states that even though economic and legal responsibilities coexist as maxims of the free market,
legal responsibilities are the next layer on the CSR pyramid. He lists five important legal
responsibilities that firms need to do in order to be socially responsible. These components are to
behave consistently with the law, comply with the law, “be a law-abiding corporate citizen” (pg.
2), fulfill all legal obligations, and meet all legal requirements when providing goods and
services (1991).
The third component is ethical responsibilities. Even though they might not be a part of
the law, ethical responsibilities can be determined by society whether or not certain actions are
appropriate or acceptable. These components reflect what each individual’s norms, values, and
morals are and also what society deems to be fair. Ethics can be the driving force behind certain
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Definition of Corporate Social Responsibility
laws. It is difficult for certain businesses to follow ethical practices because these responsibilities
are often times poorly defined or continuously under scrutiny. Ethical responsibilities often go
hand to hand with legal responsibilities even though the ethical components are the next layer on
the CSR pyramid. Carroll states five important ethical responsibilities for businesses to follow.
They are to behave consistently with ethical norms, respect ethical societal norms, be ethical
while accomplishing organizational goals, recognize “that good corporate citizenship be defined
as doing what is expected morally or ethically” (pg. 3), and understand that being ethical is more
than simply following the law (1991).
The fourth and final component of CSR is philanthropic responsibilities. These
responsibilities are those that society expects that businesses exercise in order for them to be
good corporate citizens. Businesses respond to pressure from individuals, society, and interest
groups in order to do things that promote goodwill and human welfare. Companies often give
away or spend their money, resources, labor, and/or time to worthy causes such as charity,
education, the arts, and other community based initiatives. Being philanthropic is voluntary
because even though it considered socially responsible for firms to give back to the community,
members of society do not generally think that it is unethical if they are not philanthropic.
Carroll argues that the philanthropic component of the CSR is at the top of the pyramid because
it is considered less important than the other three responsibilities even though it is highly
desired and prized. He states five important philanthropic responsibilities. These components are
to consistently meet society’s standards for charitable philanthropy, “assist the fine and
performing arts” (pg. 3), be charitable toward the community, fund educational institutions, and
contribute to projects that promote the general welfare of the community (1991).
The 3C-SR Model
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Definition of Corporate Social Responsibility
John Meehan, Karon Meehan, and Adam Richards (2006) say that many business
scholars say that corporate responsibility (CR) either opposes or is an auxiliary to the profit
motive. They state that CR is “a means to, rather than [a] drain on, business success” (pg. 6).
They came up with a model which incorporates the term ‘social resources’ which “are made up
of three inter-related components whose simultaneous presence underwrites the credibility of a
product/service offer targeted at the ‘ethical consumer’” (pg. 6-7). These three components are
ethical and social commitments, “corrections with partners in the value network,” and
“consistency of [behavior] over time to build trust” (pg. 7).
The ethical and social commitments “represent the values element of social resources”
(pg. 7). These commitments can be codified or written into company policies, the company’s
mission, organizational culture, objectives, and programs. They can also be compared to the
Carroll’s CSR Pyramid’s economic, legal, ethical layers of the pyramid. When organizations
have an inadequate commitment to ethical standards, their legitimacy is low because they focus
consistently on short-term profits. As a result, these companies will more than likely lose some
customer support and other businesses in that industry will reaffirm their focus on finding ways
to meet the bottom line while maintaining their ethical and social commitments. An example of
this phenomenon is when Mattel and Hasbro resisted to adopt certain standards that focused on
workplace safety, wages and salaries, health, and training. As a result, they were both criticized
for not adopting these standards, which were seen as a way to maintain corporate legitimacy in
regards to ethical and social commitments (J. Meehan et al., 2006).
The second component of the 3C-SR Model is connections with partners in the values
network. J. Meehan et al. (2006) cite Normann and Ramirez who state that values are created in a
business network when “different economic actors…work together to co-produce value” (pg. 8).
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Definition of Corporate Social Responsibility
The goal is to rearrange the roles and relationships among the different economic actors in order
to create the optimal amount of value. Socially responsible firms should have a system that
creates value for the company as well those around them. Credibility is built when firms chooses
to establish relationships with other businesses.
The third and final component of the 3C-SR Model is the consistency of behavior. This
“refers to the [behavioral] element of social resources” throughout the organization. Businesses
that do not follow their ethical and social commitments are not seen as being credible at all. This
lack of credibility can be shown as a deficit in corporate social performance. Many people in
society criticize firms that are not viewed as being consistent in adhering to their ethical and
social commitments. Usually, organizations that do not follow their commitments are seen to be
exploiting economic conditions in order to meet the bottom line (J. Meehan et al., 2006).
Conclusion
Corporate social responsibility (CSR) can be defined or interpreted differently by many
people. The CSR Pyramid and the 3C-SR Model are two different interpretations of CSR. The
CSR Pyramid is depicted as having four components that are layered on top of each other:
economic, legal, ethical, and philanthropic. The 3C-SR Model has three components which
represent social resources: ethical and social commitments, connections with partners in the
value network, and consistency of behavior. The definition given in the introduction can be best
compared to the CSR Pyramid, which is similar to an ice cream sundae. The economic
component refers to the ice cream, legal reflects the whipped cream, ethical represents the
chocolate syrup, and the philanthropic component is like the cherry on top. It is not an ice cream
sundae without the ice cream like a business cannot meet its legal, ethical, and philanthropic
responsibilities without performing the firm’s economic obligations. As long as a firm focuses on
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Definition of Corporate Social Responsibility
making a profit, follows the law, and acts ethically, then it is socially responsible. Being
philanthropic should be desired, but remain optional.
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References
Carroll, A. B. (1991). The Pyramid of Corporate Social Responsibility: Toward the Moral
Management of Organizational Stakeholders. Business Horizons, 34(4), 39-48.
Meehan, J., Meehan, K., & Richards, A. (2006). Corporate Social Responsibility: The 3C-SR
Model. International Journal of Social Economics, 33(5/6), 1-13.