Three Models Of Corporate Social Responsibility 5bo4g

Three Models of Corporate Social Responsibility: (Interrelationships between Theory, Research, and Practice)

THE PYRAMID OF CSR A leading model of CSR is Carroll's four‐part pyramid. The CSR pyramid was framed to embrace the entire spectrum of society's expectations of business responsibilities and define them in of categories. According to the model, four kinds of social responsibilities constitute total CSR: economic (“make profit”), legal (“obey the law”), ethical (“be ethical”), and philanthropic (“be a good corporate citizen”). According to Carroll, the use of a pyramid to depict the conceptual model of CSR is intended “to portray that the total CSR of business comprises distinct components that, taken together, constitute the whole.” The model categorizes the different responsibilities hierarchically in order of decreasing importance. The most fundamental is economic responsibility, “all other business responsibilities are predicated upon the economic responsibility of the firm, because without it the others become moot considerations.” Businesses are expected to operate within the framework of law, thus legal responsibility is depicted as the next layer of the pyramid. Following is ethical responsibility defined in of “those activities or practices that are expected or prohibited by society even though they are not codified into law.” Last in importance, at the top of the pyramid, is philanthropic responsibility, which is discretionary in nature. In the main, the pyramid purports to describe a necessary and sufficient set of obligations that socially responsible businesses should simultaneously fulfill, taking into consideration their decreasing importance. Nature of CSR Taking a managerial approach, the four‐part pyramid defines CSR in of social expectations that responsible corporations should strive to meet. Prevailing social norms and expectations provide external criteria against which corporate performance can be measured; thus, the notion of responsibility in the pyramid model is reduced to normative restraints of responsiveness. In other words, CSR in the pyramid formulation is basically accommodative. Suggesting that businesses should treat CSR not as a goal to be maximized but as a constraint, the pyramid does in effect promote satisficing behavior rather than striving for excellence. Scope of responsibilities Understanding CSR as an array of separate domains naturally leads to narrow definitions of the different responsibilities. Thus, the economic role of the corporation is reduced in the pyramid model to the narrow emphasis on profit making of neoclassical economics. Likewise, legal responsibility is restricted to the “letter” of the law, while the “spirit” of law is reserved for the ethical domain. The ethical domain is further separated from the legal domain using a negative definition: ethical responsibility relates to those social expectations and norms not yet codified into law. In the same vein, philanthropic responsibility designates those areas of voluntary social involvement not specifically prohibited or demanded of companies because of their economic, legal, and ethical responsibilities. Total CSR The pyramid is a conjunction of separate domains of responsibility. In contrast to the ordinary view, the so‐called separation thesis, that businesses can focus either on profits or social concerns but not on both, the CSR pyramid “sought to argue that businesses can not only be profitable and ethical, but they should fulfill these obligations simultaneously.”

Order of importance If the four responsibilities taken together constitute a whole, what is the meaning of the decreasing order of importance? A number of explanations have been offered to answer this question: (1) the pyramid suggests a ranking of CSR priorities based on the level of essentiality—the most fundamental is economic responsibility, of smallest importance is the philanthropic category, which is a sort of “icing on the cake”; (2) the pyramid characterizes the social pressures imposed on the business sector in decreasing order of their strength—whereas economic and legal responsibilities are required of business and ethical practices are expected, philanthropic contributions, albeit desired, are voluntary; (3) the hierarchy of importance “simply suggest[s] the relative magnitude of each responsibility”; and lastly, (4) the four categories “are ordered in the figure only to suggest what might be termed their fundamental role in the evolution of importance. . . .The history of business suggests an early emphasis on the economic and then legal aspects and a later concern for the ethical and discretionary aspects.”

THE INTERSECTING CIRCLES MODEL OF CSR The intersecting circles (IC) model of CSR contrasts with the pyramid model in two main aspects: (1) it recognizes the possibility of interrelationships among CSR domains; and (2) rejects the hierarchical order of importance. General Description A pyramid framework cannot fully capture the interpenetrating nature of the CSR domains, nor does it denote all possible tension points among them. Such mutuality has been recognized as an integral characteristic of CSR and of such fundamental importance that Schwartz and Carroll saw it necessary to propose an alternative approach to CSR, one that includes the major domains of responsibility and clearly depicts their interrelationships. The IC model refutes the notion that CSR is nothing but a collection of contingent, externally related topics; it holds rather that the different responsibilities are in dynamic interplay with each other, and it is the overall corporate responsibility to advance harmony and resolve conflicts between them. As Schwartz and Carroll claim, the primary idea behind the IC model is that none of the CSR domains is prima facie more important or significant relative to the others. In particular, the economic responsibility is not necessarily the most fundamental. According to Davis's Iron Law of Responsibility, it is true that corporations are designed for business, but before anything else they are social creations whose very existence depends on the willingness of society to endure and them. In this view, the social responsibilities of the firm are not necessarily less important than its economic undertakings. Nature of CSR The IC model seems to be primarily intended as a descriptive model of CSR, not a normative model. A major feature of Schwartz and Carroll's version of the model is the depiction of the main domains of responsibility in a Venn diagram, which highlights the overlapping nature of the domains and the resultant creation of a set of CSR categories in which corporations and their activities may be described, classified, and analyzed. As a descriptive model, it permits CSR to be seen not as something that is implicitly good in itself, but as a construct that must be used in conjunction with explicit values

about appropriate business–society relationship. Put differently, the categories of CSR should not be thought of as normative standards, but as analytical forms to be filled with the content of explicit values preferences that exist within a given cultural and organizational context.

The creation of pure and mixed classes of responsibilities in the framework of the intersecting circles raises concerns about the definition of the boundaries of CSR. CSR scholars gave different answers to this question. According to Schwartz and Carroll, CSR is composed of all seven inner sections, suggesting that each one of them represents instances of CSR. However, considering that Venn diagrams chart a logical space of mutually exclusive classes in a universe of all instances, it is difficult to make much sense of what particulars would fall into each of these classes. Order of importance Being committed to multiple objectives at one and the same time, how are the different corporate responsibilities to be reconciled in cases of conflict? The CSR pyramid resolves this fundamental difficulty by specifying the order of priority among the various responsibilities; the concentric‐circle model offers a normative core of integration as another solution. The IC model, in

contrast, fails to provide any clear normative guidance for managerial decision making. It leaves managers faced with competing responsibilities with no way to make principled or purposeful decisions. As Jensen has pointed out, “multiple objectives is no objective.”

THE CONCENTRIC‐CIRCLE MODEL OF CSR The concentric‐circle (CON) model is similar to the pyramid in that it views the economic role of business as its core social responsibility, and similar to the IC model in that it emphasizes the interrelationships among the different corporate social responsibilities. But underlying these similarities are essential differences in the very definitions of the corporate responsibilities. Thus, the pyramid defines the corporate economic role in of narrow self‐interest (“be profitable”), whereas the CON model defines this same role in of CSR, namely, enhancing the good of society (“be constructively profitable”). In contrast to the pyramid, which scales down the importance of the noneconomic social responsibilities (i.e., legal, ethical and philanthropic), and in contrast to the IC model which, along with interrelationships, also allows for no relations among the different domains of responsibility, the CON model outlines the noneconomic social responsibilities as embracing and permeating the core economic responsibilities. General Description In this statement, CED advocated the notion that social contracts for business firms are not only feasible but morally necessary, and urged business to adopt a broader and more humane view of its function in society. The original CED model consists of three concentric circles. The inner circle represents the core responsibility of business in of CSR. It includes the basic responsibilities for the efficient execution of the economic function—products, jobs, and economic growth. The intermediate circle, which can be viewed as the ethical circle, encomes responsibility to exercise the economic function with a sensitive awareness of basic ethical norms as well as changing social values and priorities. The outer circle, equivalent to the philanthropic circle, outlines newly emerging and still amorphous responsibilities that business should assume in order to become more broadly involved in actively improving the social environment. Legal responsibilities are not explicitly presented in the original CED framework, but rather subsumed under other corporate responsibilities. Thus, for example, the economic function of business includes “cooperating with the government in developing more effective measures to control inflation and achieve high levels of employment” or “ing fiscal and monetary policies for steady economic growth.” The CON version presented here differs from the original model in that, for clarity and to create a common basis for comparison between the three CSR models, it places the corporate legal responsibilities in a particular circle, between the economic and the ethical.

In a system of concentric circles, every member of the inner circle is also a member of the wider, more inclusive outer circle, but not vice versa. Thus, from a CSR perspective as expressed in the CON model, all economic responsibilities also have legal and ethical aspects.

Scope of responsibilities Understanding CSR as a framework of integrated responsibilities with a common core requires that each of the different responsibilities be defined in reference to this unifying meaning or purpose. The narrow definitions that characterized the separation of the CSR domains in the pyramid framework and in the seven‐category IC model are replaced here with broad definitions that for their common essence. A brief examination of these broad definitions may be useful in clarifying the critical differences between the contrasting CSR models.

Total CSR The CON model regards CSR as a global concept whose parts are bound together by means of a shared intrinsic content, which can be defined as a commitment to operate in a way that promotes the good of society.91 One can argue that the notion of the “good of society” is too abstract to serve as a benchmark for assessing CSR. However, despite, and perhaps owing to, the many meanings of this notion, nearly all today's large corporations have their mission codes stated in of commitment to the good of society, and in most cases this general commitment is further translated into a list of more practical goals. Order of importance A basic feature of the concentric circles is the existence of a common core. In of CSR this means that all different corporate social responsibilities share a common essence. The CON model recognizes that the vital function of business is economic; even so, business decisions consist of continuous, interrelated economic and moral components. Indeed, the inclusion structure of the responsibility circles might blur the distinction between the different responsibilities. However, this structure helps the manager to see that the different types of obligations are in constant and dynamic interrelationships. At the same time, it does not prevent the manager from considering each responsibility in itself in the process of decision making. https://onlinelibrary.wiley.com/doi/full/10.1111/j.1467-8594.2008.00311.x

TRIPLE BOTTOM LINE So Profit, People and Planet aims to measure the financial, social and environmental performance of a business over a period of time.

"It captures the essence of sustainability by measuring the impact of an organization's activities on the world ... including both its profitability and shareholder values and its social, human and environmental capital. It aims to measure the financial, social and environmental performance of the corporation over a period of time. Behind it lies the same fundamental principle: what you measure is what you get, because what you measure is what you are likely to pay attention to. Only when companies measure their social and environmental impact will we have socially and environmentally responsible organizations. By using the Triple Bottom Line method, your business can expand how it understands its position in the current economy and its ability to survive in the future. Profit (Financial/Economic) - measured in of how much of an impact your business has on its economic environment.  Familiar to managers  Identified from income statement (profit and loss )  Audited = reliable figure Planet (Environment) - indicates that an organization tries to reduce its ecological footprint as much as possible.  Measures the impact of business activity on the environment  More tangible – e.g. emissions, use of sustainable inputs People (Social) - considers employees, the labor involved in a corporation’s work, and the wider community where a corporation does business.  Measures extent to which business is socially responsible  Harder to calculate & report reliably & consistently Benefits of Measuring the Triple Bottom Line The potential benefits of measuring a broader scope of business performance based on Profit, Planet & People include:  Encourages businesses to think beyond narrow measure of performance (profit)  Encourages CSR reporting  s measurement of environmental impact & extent of sustainability

Criticisms of the Triple Bottom Line Amongst the criticisms that have been made of Elkington’s model are:   

Not very useful as an overall measure of business performance Hard to reliably and consistently measure People & Planet bottom-lines No legal requirement to report it – so take-up has been poor

People “People” considers employees, the labor involved in a corporation’s work, and the wider community where a corporation does business. Another way to look at “people” is, how much does a company benefit society? A triple bottom line company pays fair wages and takes steps to ensure humane working conditions at supplier factories. Triple bottom line companies make an effort to “give back” to the community. For example, 3M partners with United Way to fund STEM education across the world. This initiative is an example of “enlightened self-interest”—acting to further the interests of others, ultimately, to serve one’s own selfinterest. The community benefits, and 3M provides itself a well-educated source of scientists and innovators for generations to come. Planet Public opinion has dictated that enterprises that harm the environment should also bear the cost, and you can bet businesses are taking notice. The “planet” piece of the triple bottom line indicates that an organization tries to reduce its ecological footprint as much as possible. These efforts can include reducing waste, investing in renewable energy, managing natural resources more efficiently, and improving logistics. For example, Apple has invested heavily in environmental sustainability. Its massive U.S. data centers are LEED certified. In 2016, the company announced that 93 percent of its energy comes from renewables. These actions have nudged other tech giants like Facebook and Google toward using more renewable energy sources to power facilities. Profit While every business pursues financial profitability, triple bottom line businesses see it as one part of a business plan. Sustainable organizations also recognize that “profit” isn’t diametrically opposed to “people” or “planet.” Swedish furniture giant IKEA reported sales of $37.6 billion in 2016. The same year, the company turned a profit by recycling waste into some of its best-selling products. Before, this waste had cost the company more than $1 million per year. And the company is well on its way to “zero waste to landfill” worldwide. According to Joanna Yarrow, IKEA’s head of sustainability for the UK, “We don’t do this because we’re tree huggers, we do this because it’s very cost effective.” The business that strengthens the economy it is part of is one that will continue to succeed in the future, since it contributes to the overall economic health of its networks and community. The idea is that profits will help empower and sustain the community as a whole, and not just flow to the CEO and shareholders.