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The idea of corporate social responsibility (CSR) was first introduced in the 1950s. However, it wasn’t until the early 1990s that CSR became universally accepted and approved. Most of what is considered to be modern CSR is rooted in a concept known as the Pyramid of Corporate Social Responsibility.
What is the Pyramid of Corporate Social Responsibility?
In his 1991 article The Pyramid of Corporate Social Responsibility, Dr. Archie B. Carroll, a business management author and professor at the University of Georgia, outlined the four areas he believed were essential in a company’s corporate social responsibility. These elements were organized in order of importance and presented visually in what is now known as the Pyramid of Corporate Social Responsibility.
The pyramid is a simple framework that helps organizations argue how and why they could and should meet their social responsibilities. It attempts to balance the self-interests of businesses (profit) with its wider, more virtuous goal of being socially responsible.
Elements of the Pyramid of Corporate Social Responsibility
While there have been several variations and reproductions of the pyramidal model, the main elements remain the same. Carroll highlights four main responsibilities of an organization’s CSR program: Economic, Legal, Ethical, and Philanthropic.
- Economic: The first and most vital level of the pyramid is a company’s economic responsibilities. As a fundamental condition for its existence, a company must be profitable. If this requirement is not met, the business cannot survive, and as a result, the company will not be able to move on to the other levels of the pyramid.
- Legal: After satisfying its economic responsibilities, companies must ensure that their business operations are within the confines of the law. At this level, organizations must fulfill their legal requirements. Like the economic requirements, if legal requirements are not met the company’s survival may be at stake, preventing them from moving on to other levels of the pyramid. These legal requirements include, but are not limited to, employment, competition, and health and safety laws.
- Ethical: The next level of the pyramid is the company’s ethical responsibilities. In this stage, the company goes beyond legal requirements by acting morally and ethically. In other words, the company makes a conscious decision to “do the right thing.” For example, in an attempt to reduce waste, some coffee shops have started offering discounts to customers who bring their own reusable cups.
- Philanthropic: Once the economic, legal, and ethical foundations of the pyramid have been built, the company can move on to the final level of the pyramid — philanthropic responsibilities. At this level, the company goes beyond its ethic responsibilities by actively giving back and making a positive impact on society. For example, financial giant Wells Fargo donates 1.5% of their revenue to various housing, disaster relief, and military-focused charities.
After almost three decades since its introduction, the Pyramid of Corporate Social Responsibility remains highly relevant. It continues to be cited, debated, modified, and criticized by academics, professionals, and politicians. The pyramid’s importance and longevity are attributed mainly to its simplistic yet fundamental framework which can be adopted by almost any company.
Other CSR Articles
- Examples of Corporate Social Responsibility in the Industrial Space
- A Brief History of Corporate Social Responsibility (CSR)
- Looking Past Profit: How Corporate Social Responsibility Can Boost Your Brand
Image Credit: NDAB Creativity / Shutterstock.com
More from Business & Industry
By , on 5 January 2022
Corporate social responsibility has become a hot topic in business over recent years. These days, most consumers expect brands to be good corporate citizens, and this has forced companies to move away from a purely profit-based approach to business and marketing.
One way for companies to adapt their focus and evolve into more ethical entities is by using a framework for quantifying and measuring CSR metrics, such as Carroll's Corporate Social Responsibility Pyramid. This can help companies ensure they are creating a positive impact on internal and external stakeholders.
Corporate social responsibility, also known as CSR, is a form of internal regulation designed to help companies become more socially accountable to themselves, to their stakeholders, and to society in general. It’s all about enhancing the positive impact of your business operations through the implementation of policies and procedures focused on all aspects of society. Key CSR issues include environmental management, responsible sourcing, stakeholder engagement, working conditions, employee and community relations, gender equality, human rights, good governance, and anti-corruption measures.
Aside from the positive impact on society, a properly implemented CSR business model can create a number of competitive advantages for businesses. It can help raise brand awareness and reputation, it can develop trust with stakeholders and shareholders and it can raise customer loyalty and boost engagement. It can also result in increased sales and profits, operational savings, and improved productivity.
Although the concept of CSR has been around for some time now, its true significance and impact only became popular after it was defined by Archie Carroll’s Corporate Social Responsibility Pyramid in 1991, so let’s take a look at Carroll’s CSR pyramid in a bit more detail.
Carroll's Corporate Social Responsibility Pyramid
Carroll’s CSR pyramid is a framework that explains how and why organisations should take social responsibility. It was developed by Archie Carroll in 1991 and has since become one of the most accepted corporate theories of CSR due to its simplicity and timeless structure.
Carroll's pyramid of CSR was designed to help companies adapt their business behavior so that all activities are economically profitable, ethical, legally compliant and socially supportive. According to the theory, in order to achieve this, companies must fulfil their responsibilities at four levels: Economic, Legal, Ethical, and Philanthropic.
Economic Responsibility
The foundation of Carroll's Corporate Social Responsibility Pyramid is economic responsibility. This is because the only way for a business to survive and support society in the long term is by being profitable. Without profit, companies cannot pay their workers, give shareholders a return on their investments, or produce quality products and services.
Economic responsibility focuses on practices that facilitate the long-term growth of the business, while also meeting the standards set for legal, ethical, and philanthropic practices.
Legal Responsibility
The next level up on Carroll's Corporate Social Responsibility Pyramid is legal responsibility. This refers to a company’s legal obligation to adhere to all relevant laws and regulations. This includes compliance with employment laws, tax regulations, employee health and safety obligations, and laws regulating anti-competitive conduct. It’s all about operating in a way that promotes fair business practices on a national, regional, and local level.
Ethical Responsibility
The next layer of the pyramid is ethical responsibility. This is all about doing the right thing, being fair and avoiding harm. Unlike the first two layers of Carroll’s CSR pyramid which are all about legal and shareholder obligations, this layer is more concerned with morals and ethics. Examples of ethical responsibility include being environmentally friendly, treating employees and suppliers in line with an ethical code of conduct, and embracing activities and standards that go beyond legal compliance.
Ethical responsibility is all about recognizing and respecting evolving moral standards and performing in a way that meets society’s expectations. Ultimately, it’s about consistently demonstrating your business integrity and conducting your operations in an ethical way.
Philanthropic Responsibility
At the top of the pyramid is philanthropic responsibility. This level is all about giving back to the community, exceeding the expectations of shareholders and stakeholders, and going the extra mile to make the world a better place. It goes beyond doing what’s right; it’s about standing by your values and principles as a company and giving back something of value to society. This might be in the form of donations, volunteer work, or community development, among other philanthropic initiatives.
How to Apply Carroll's CSR Pyramid to Your Business
The main aim of Carroll's Corporate Social Responsibility Pyramid is to help businesses have a more positive impact on stakeholders and surrounding communities. By taking ownership of corporate decisions and striving to improve operations, companies can improve their reputations and increase profits in a sustainable and ethical way.
Here are a few tips to help you implement Carroll’s CSR pyramid in your business and get the most from your CSR policies.
Engage All Four Levels
Make sure you focus on engaging with all four layers of the pyramid. The pyramid should be seen as a whole, not a series of parts. For example, you cannot be philanthropically responsible if you are not profitable as a business or legally compliant. Work on improving all four key areas.
Consider All Stakeholders
The next thing to keep in mind when you implement Carroll's Corporate Social Responsibility Pyramid is to make sure you consider all stakeholders and each level of the supply chain. For example, your ethical initiatives should focus on the fair treatment of employees and suppliers (paying fair wages, providing safe working conditions, sourcing things ethical, etc), not just on treating your customers fairly by offering quality products/services for reasonable prices.
Effective CSR Management
The best way to ensure you make a truly positive impact with Carroll's Corporate Social Responsibility Pyramid is to manage it in the right way. You might consider creating a dedicated CSR position or department in your company to make sure all your CSR initiatives are implemented in a sustainable and responsible way. You might also consider using integrated software to manage all your CSR activities and measure your KPIs at each level of the pyramid.