Carroll’s Pyramid of Corporate Social Responsibility (CSR)

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Corporate Social Responsibility (CSR) is a “must have” for most organizations these days. Not only because of the benefits it can bring to the environment and local communities, but also because of the benefits it can bring to the organization – increased profits and valuation, greater employee engagement and retention, and lower risk. [1] But, when you come to plan your CSR strategy, where should you start?

Planning your CSR strategy can often be quite tricky work, involving gathering metrics from across the organization, analyzing supply chains, and gaining input from a whole host of internal and external stakeholders. Not to mention choosing between conflicting priorities and investment opportunities.

In this article, we’ll look at a model, known as Carroll’s Pyramid of CSR, that can help to simplify this process, and explore how to design and implement an effective CSR strategy in your organization.

What Is Carroll’s Pyramid of CSR?

To survive, every business must at least make a profit and meet its legal responsibilities. But what it does with those profits, and what higher values it demonstrates to its employees, customers, community and market, will vary enormously.

According to Professor Archie Carroll, CSR “… can only become a reality if managers become moral instead of amoral or immoral.”

It’s not enough to simply focus on one area of the business. CSR must encompass all organizational activities, processes and goals. To help organizations to clarify their responsibilities, Carroll designed a model known as the Pyramid of CSR (see figure 1, below), which demonstrates on organization’s hierarchy of responsibilities. He asserted that only by carrying out all of these responsibilities together would effective CSR be achieved. [2]

Figure 1. Carroll’s Pyramid of CSR

Carroll’s Pyramid of Corporate Social Responsibility, reproduced with permission from Carroll, A.B. (1991). “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders.” [2]

How to Use Carroll’s Pyramid of CSR

Carroll’s Pyramid breaks down an organization’s responsibilities into four key areas. The organization must be accountable for all of these in order to ensure successful CSR.

Let’s take a look at each of these four key areas in more detail and explain how you can make them work for you.

Economic Responsibilities

Forming the base of the pyramid are your economic responsibilities. Simply put, this is about ensuring that your organization remains profitable and financially transparent. Responsibilities in this slice of the pyramid should include:

  • Keeping your costs to a minimum.
  • Maximizing income.
  • Investing in developing and growing the business in the long term.
  • Ensuring financial risks are managed correctly.
  • Providing a return to your owners and/or shareholders.

Being economically responsible enables you to create and sustain jobs in the community, and contribute useful, non-harmful products and services to society.

Everyone in an organization, from the top down, can help to deliver this responsibility by ensuring that finances are managed in an ethical and fair way. This means asking yourself – are you profitable and legal? Are you profitable and legal, but also acting ethically? For example, a company may keep costs down by using low-cost supply chains, but this may mean using suppliers who utilize low-cost, cheap labor and poor working practices.

To excel in this area, think about the pinnacle of the pyramid! Are you also encouraging, supporting or carrying out far-reaching beneficial programs, beyond the basic legislative requirements?

For instance, Hewlett-Packard, which is currently ranked first on the KnowtheChain ICT benchmark for forced labor, and sector leader on the Dow Jones Sustainability World Index, has invested $1.9 billion researching and developing next-generation technologies. These have included things like new silicon designs, photonics (technology and science of light generation, which is often used in consumer electronics), and Memory-Driven Computing, all of which will massively improve computer processing but also reduce energy usage. [3]

Legal Responsibilities

This is also straightforward and a minimum requirement for all businesses: to obey the law.

Responsibilities covered by this area of the pyramid entail:

  • Being truthful and transparent about the safety and security of the products or services you sell.
  • Keeping your employees and customers safe.
  • Ensuring that you meet environmental, health and safety requirements.
  • Paying your taxes.

At the very least, it’s about protecting your organization from prosecution or penalties, which would impact its profits and reputation, and could even lead to it being shut down. The best way to meet these responsibilities is to report on your performance and activities in an open and transparent way.

One of the best examples to demonstrate responsibility in this area is environmental regulation. Organizations are often required by law to meet certain environmental standards relating to pollution and emissions. But many go over and above these legal requirements.

For instance, Johnson & Johnson has set an organizational goal of “net-zero carbon” across its value chain by 2045. The company already has a number of environmental projects underway to support this goal, including acquiring Colbeck Corner’s wind farm in Texas which supplies 60 percent of the company’s renewable energy. It is also expanding its geothermal energy operations and solar panel infrastructure, and has continued to invest in Leadership and Energy & Environmental Design (LEED) certification across several of its office sites. [4]

Ethical Responsibilities

This extends your obligations to doing what is right and fair, even if it’s not required by law. To attend to this responsibility, you’ll need the “moral” outlook that Carroll refers to.

An example would be avoiding structuring your company so that it pays little or no taxes, even if that is allowed by the letter of the law. Or, on a smaller scale, support flexible working for your team members so that they can juggle caregiving responsibilities with their jobs.

Some ethical issues are harder to tease out. For example, you could be making your product safely and efficiently, selling it at a fair price, and treating your people well. But what if that product is a food item that has a lot of sugar in it – should you change the recipe?

Coca-Cola, for instance, has invested significantly in reducing the sugar content of its drinks, and removed nearly 125,000 tons of added sugar through recipe changes in 2020. This has enabled it to reduce sugar content by up to 30 percent in some of its leading brands, including Coca-Cola, Fanta, Sprite, and Fuze Tea. [5]

However, while Coca-Cola has done well in this area, it has still come under heavy criticism for the amount of plastic waste it’s responsible for. The company is working hard to address this issue, too, announcing in 2021 that it’s collaborating with tech partners to produce bottles that are made from 100 percent renewable plant-based materials. [6]

Philanthropic Responsibilities

This is the highest level of responsibility and goes beyond any legal or regulatory expectations. It’s about being a “good corporate citizen,” actively improving the world around you.

Examples of philanthropic CSR would be:

  • Enabling team members to take part in volunteering programs during work time.
  • Sponsoring community initiatives.
  • Offering mentoring expertise to nonprofits.
  • Entering into community or charitable partnerships.
  • Donating to charity, and offering employee donation-match schemes.
  • Tackling wider global issues, such as poverty, climate change, racism, or gender inequality.

Some organizations even establish their own philanthropic or charitable foundations, such as the Ford Foundation, the Bill and Melinda Gates Foundation, and the Conrad N. Hilton Foundation.

Biopharmaceutical company Gilead Sciences is consistently one of the top corporate givers in the world, donating $388 million to good causes in 2020, equating to 2.9 percent of its pre-tax profit. [7] And it announced a further investment of $200 million in its charitable arm, the Gilead Foundation, in 2021, with the money going toward supporting health justice, community giving, and its employee donation-match scheme. [8]

The Benefits of Carroll’s Pyramid of CSR

Carroll’s pyramid builds responsibility upon responsibility, and is intended to be applied as a whole. This means that succeeding in one or two areas is not enough.

Clearly, meeting your economic responsibilities while overlooking your legal responsibilities, or vice versa, will mean that your organization runs into difficulties sooner or later. This may mean that ethical and philanthropic responsibilities are seen as optional. But fulfilling them can provide a number of benefits, too, such as:

  • Building and Improving Your Reputation. Demonstrating that you’re an ethical and philanthropic organization can imply that you’re committed to operating in a responsible way, which can help to build trust in your product, too. It can also give you a competitive edge, and enable you to attract consumers who are also ethically minded.
  • Increasing sustainability. Being “green” can have direct financial benefits. Cutting your carbon emissions and using energy from renewable sources can save costs, as can improve production and supply-chain efficiency, and reducing your carbon taxes. Investing in your “triple bottom line” is a good way to deliver these benefits and set organizational goals that are built around profit, people and the planet.
  • Attracting and retaining talent. Embracing CSR can position you as an “employer of choice.” People will aspire to work for you and, once they join, they’ll feel proud and purposeful, and will want to stay. They’ll also be able to enjoy interesting opportunities beyond their formal roles (for example, through volunteering initiatives or company charity drives) and talk positively about you to family and friends. That means you’ll always have the pick of the best candidates for vacancies!