The Corporate Social Responsibility (CSR) Pyramid
Archie Carroll’s pyramid of corporate social responsibility (CSR) is a model increasingly used to define business social responsibility.
The success of the CSR pyramid boils down to the model’s simplicity. This model gives the structure organizations need to meet the economic, legal, ethical, and philanthropic demands of Business.
Carroll’s model brings consistency to a field that lacks a clear, set definition. Yet, as this model was developed back in 1991, it’s no longer up to speed in today’s business environment. To meet the demands of the modern, ethical economy, Carroll’s CSR pyramid needs updating.
With this in mind, in this Green Business Bureau article, we’ll define what Carroll’s CSR pyramid is, before looking at how this pyramid can be adapted to meet today’s social demands.
What is CSR
CSR stands for corporate social responsibility, which is a business strategy that considers the impact a company has on society, employees, and other stakeholders. CSR is implemented to minimize harm, practice fair business, be responsible across a global supply chain, exercise philanthropy and create a self-oriented human resource management system.
Social activist groups (plus others) throughout the 1950s and 60s advocated social responsibility in Business. Yet it wasn’t until the 1970s that the message to be socially and environmentally responsible became indelibly clear. This was due to ongoing scientific research and publications such as Silent Spring, plus the creation of bodies such as the Environmental Protection Agency (EPA), the Equal Employment Opportunity Commissions (EEOC), the Occupational Safety and Health Administration (OSHA), and the Consumer Product Safety Commission (CPSC).
Yet, CSR lacked (and still does lack) a clear and consistent definition. Exemplifying this, one 2006 study identified and analyzed 37 different CSR interpretations.
To bring some consensus, Professor of Management at the University of Georgia, Archie Carroll, created a graphic definition of CSR in his 1991 publication, the Pyramid of Corporate Social Responsibility. Carroll was able to take this nuanced topic and simplify the CSR concept using a single pyramid diagram, promoting CSR into the mainstream.
Carroll chose a pyramid as this design is simple, and illustrates the building-block nature of socially responsible business practices.
The CSR pyramid: Economic, legal, ethical, and philanthropic responsibility
The basis of what we consider the modern definition of CSR is rooted in Carroll’s pyramid of corporate social responsibility. In Carroll’s pyramid, a business has four types of responsibilities, which are as follows:
- To be economically profitable,
- To obey the law,
- To be ethically responsible,
- To give to philanthropic causes.
Carroll’s revision of the CSR concept has endured and continues to grow in importance and impact. For instance, in Google Images there are over 100 variations of this pyramid, and 5200 citations of the original article. After 25 years, Carroll’s original publication remains the most frequently downloaded article from Elsevier Journals.
Before Carroll, definitions of CSR varied. Some were vague, stating companies should simply consider their impact on society. Others were more targeted and explicit about a company’s legal and ethical stance.
Carroll’s pyramid imposes a four-part definition of CSR, which is: To be socially responsible a business must meet economic, legal, ethical, and philanthropic expectations given by society at a given point in time.
Carroll’s pyramid rates the importance of each CSR dimension. According to Carroll, economic responsibilities are most vital for a business. Next comes legal and ethical responsibilities. Philanthropic responsibilities are considered to be the least important.
Business Economic Responsibilities: Be Profitable
Businesses have an economic responsibility to society, that is, they need to be profitable to be sustained. Business creates goods and services that society needs or wants. To continue operations while meeting other responsibilities – legal, ethical, and philanthropic – a company must be financially stable. This means being attentive to revenues, cost-effective, investing appropriately, and running effective marketing campaigns.
Business Legal Responsibilities: Obey the Law
Legal systems are society’s codified ethics of operation. They’re fundamental moral principles written as rules. Law is born from society wanting to operate with a rudimental moral grounding. For a business, these ground rules include laws, regulations, and fair business practices. These rules are established by lawmakers at federal, state, and local levels.
Businesses not meeting the minimal legal requirements will face costly lawsuits and a tarnished brand image.
Business Ethical Responsibilities: Do What’s Right
The ethical responsibilities of a business are important because the normative expectations society holds in law are not always sufficient. Sometimes the law does not provide guidance or dictate a business course of action. This is when ethical principles of practice are needed to protect a stakeholder’s moral rights.
It takes time for the law to catch up to rapidly changing society. Law often lags behind technology and can reflect a dominant class rather than the public good. This is why meeting ethical responsibility in business is vital.
Business Philanthropic Responsibilities: Be A Good Corporate Citizen
Philanthropy in business embraces activities that are voluntary and discretionary. These activities go above and beyond a society’s expectations of what’s required. Society will label a business as unethical if it does not meet philanthropic responsibilities.
Yet, these actions – which seem purely altruistic on the surface – work to enhance a company’s reputation. Hence, philanthropy isn’t necessarily done for noble or self-sacrificing reasons.
The Benefits of Corporate Social Responsibility Policies
It must be noted that Carroll’s pyramid of corporate social responsibility has endured opposition over the years. A pivotal article published in the Harvard Business Review (1958) argued “The Dangers of Social Responsibility. This article was written by economist and professor Theodore Levitt, and designates that business has only two responsibilities:
- To engage in face-to-face civilities such as honesty and good faith.
- To seek material gain.
According to Levitt, the long-run objective of business is profit maximization.
Building on Levitt’s arguments, Milton Friedman also argued that social issues aren’t the concern of business, and social problems will be solved by an unfettered working of the free market.
Such opposition has led to the presentation of CSR using a business case, that is, how does CSR benefit business?
To answer this question, research has shown time and time again that the long-term prosperity of a business depends on a healthy and functioning society (and environment). Hence it’s in a company’s best interest to protect the systems on which it depends. More specifically, the business benefits of CSR are noted. CSR…
- Reduces business cost and risk,
- Gives brands a competitive advantage,
- Improves company legitimacy and reputation,
- Differentiates brands from competitors,
- Improves employee and customer engagement,
- Leads to a higher profit margin,
- Boosts business valuation.
The Business Case For CSR
Yet, it stands to reason why a business case for CSR needs to be presented. If a business cannot be profitable operating in a legal and ethical capacity, does that business deserve to be a business at all?
The business case for CSR is used to reduce conflicts between the different levels of Caroll’s pyramid. However, this focus has led to companies cherry-picking CSR activities based on how these activities positively impact a business’s bottom line. Carroll’s pyramid seems to advocate such practices, as the economic aspect of CSR is fundamental to the pyramid’s structure.
If CSR was truly moral, then its relationship to economic prosperity should be moot. Because, just as a business depends on society, society is also dependent on Business. The book titled Social Responsibilities of the Businessman (1953), supports this idea. In this book, American economist Howard R. Bowen revealed that large-scale US corporations were vital power and decision-making centers. The actions of these firms impacted the societies within which they operated and depend.
These moral tensions are one of the reasons why revisions to the CSR pyramid have been made. We’ll explore how business CSR strategy can be refined by critically analyzing Caroll’s CSR pyramid.
CSR Strategy: A Balancing Act Of Responsibilities
According to Carroll’s pyramid, a company’s economic responsibilities are most important. Yet, to apply this view in all contexts, and at all points in time, gives a rigid framework that’s out of date.
For one, globalization brings challenges that Caroll perhaps didn’t envision (e.g. foreign direct investment as a percentage of GDP has increased fourfold since Carroll’s original proposal). As such, many companies operate across borders, and within different legal systems. Developing countries and some nation-states are reluctant to impose more stringent regulations on business. This means multinational businesses can meet the legal requirements for one location. Yet, these legal requirements might fall short of the morals and legalities of another country/state within which the business operates.
With this in mind, maybe the rules for righteousness need to come from human empathy and ethics, rather than diverse and unequal legal systems.
If a business cannot be ethically profitable, should the business be operational at all?
Social responsibility needs to rely on a strong moral code to keep CSR strategies grounded and fairly consistent across nations. This implies that ethics should be the most important business responsibility (above legal and economic responsibilities), altering the structure of the CSR pyramid.
Supporting this view, one study gathered data from 400 respondents and asked them to rate business responsibilities in order of importance. The individuals asked were from both business and non-business backgrounds. The majority concluded the following:
“For a business to have the license to operate, and to be trusted with the production and allocation of scarce natural resources, and inherently valuable human resources, it needs to first and foremost accept its ethical responsibility to do no harm and conform to society’s ethical norms and expectations.” – Baden, D. A reconstruction of Carroll’s pyramid of corporate social responsibility for the 21st century
Yet, we should not view any CSR model as a hard-set structure. What’s considered to be important business responsibilities will change over time. Once more, cultural differences will rank each CSR pyramid block differently. For example, philanthropy is ranked highly in Asian countries and in developing nations that lack a welfare state.
Ethics are fundamental for an effective CSR strategy
Further food for thought is to think about ethical responsibility, not as a category in Carroll’s pyramid, but as permeating through the entire pyramid. That is, to be socially responsible, a business needs to meet economic, legal, and philanthropic expectations while following ethical norms and expectations.
Applying this view gives a different take on Carroll’s CSR pyramid and its constituent building blocks.
- Economic: Capitalism and the free market are built on an ethical premise, that is, owners and shareholders merit a return on their investments.
- Legal: Most laws and regulations were created based on some ethical reasoning, such as equal rights, consumer and employee safety, and national living wages. Over time, these ethical reasonings have become codified ethics for society.
- Philanthropic: Philanthropy represents complete altruistic and ethical behavior (when motivations are not driven by the need to appear like a good corporate citizen).
The ethical economy demands socially and environmentally responsible business
Carroll’s take on CSR is a model that brings ethics into business. Business is a human construct, and so it makes sense that the ethical principles that create healthy functioning societies should also apply to Business.
Carroll’s pyramid placed CSR center-stage, but the model’s rigidity makes it difficult to apply the concept universally. A revision of the pyramid is needed on a case-by-case basis, with the knowledge that ethical practice is vital and permeates every business responsibility.
Once more, social responsibility needs to be acknowledged alongside a business’s environmental responsibility, as the two are interlinked. You can use the GBB certification platform to measure your company’s environmental performance and identify areas for improvement.
About the Author
With a Biology degree from Imperial College London and further studies at Imperial College’s Business School, Jane Courtnell has an enthusiasm for science communication and how biology can be used to solve business issues, such as employee wellbeing, culture, and business sustainability.