This article provides a practical explanation of Carroll’s CSR pyramid. After reading, you’ll understand the basics of this powerful strategy tool.
Carroll’s CSR pyramid explained
Carroll’s CSR pyramid is a framework that explains how and why organisations should take social responsibility. The pyramid was developed by Archie Carroll and highlights the four most important types of responsibility of organisations. These are:
- Economic responsibility
- Legal responsibility
- Ethical responsibility
- Philanthropic responsibility
The pyramid’s base is profit. This foundation is necessary for a company to meet all laws and regulations, as well as the demands of shareholders. Before a company can and should then take its philanthropic responsibility or discretionary responsibility, it must also meet its ethical responsibilities.
Corporate Social Responsibility (CSR) as defined by Carroll
Corporate Social Responsibility (CSR) has been a popular phrase since the 1950s. The importance of the term and its execution didn’t become clear until much later, however. The basis of the modern definition of CSR is rooted in the work that led to Archie Carroll’s pyramid. This four-part definition was originally published by Carroll in 1979:
CSR refers to a business’s behaviour, that it’s economically profitable, complies with the law, is ethical, and is socially supportive. Profitability and compliance with the law are the most important conditions for corporate social responsibility and when discussing the company’s ethics, and the level to which it supports the society it’s part of with money, time, and talent.
In 1991, he expanded on this definition using a pyramid. The goal of the pyramid was to illustrate the building-block character of the four-part framework. This geometric shape was chosen because it’s both simple and timeless. The economic responsibility was placed at the pyramid’s foundation, since it’s a fundamental requirement to survive in business. As with a building’s foundation that keeps the entire structure up, durable profitability helps to support the expectations of society, shareholders, and other stakeholders.
The relevance of Carroll’s pyramid
Almost 30 years after the pyramid was developed, it’s as important as ever. The design is still regularly quoted, changed, discussed, and criticised by business leaders, politicians, scholars, and social pundits.
In order to understand the real relevance of Carroll’s CSR pyramid, we have to go beyond the debate and focus more on the practical application of corporate social responsibility. The importance of the pyramid will continue to exist because the methods explained in it are understood by all organisations and can be used to reach the top of the pyramid.
What are the four components of Carroll’s CSR pyramid?
The four different types of responsibilities organisations must take as shown in the pyramid are:
Economic responsibility in Carroll’s CSR pyramid
The economic responsibility of companies is about producing goods and services that society needs and to make a profit on them. Companies have shareholders who expect and demand a reasonable return on their investments, they have employees who want to do their jobs safely and fairly, and have customers that want quality products for fair prices. That’s the foundation of the pyramid upon which all the other layers rest.
Economic responsibility in CSR is:
- The responsibility to be profitable
- The only way for a business to survive and support society in the long term
Legal responsibility in Carroll’s CSR pyramid
The legal responsibility of companies is about complying with the minimum rules that have been set. Organisations are expected to operate and function within those rules. The basic rules consist of laws and regulations that represent society’s views of codified ethics. They determine how organisations can conduct their business practices in a fair manner, as defined by legislators on national, regional, and local level.
Legal responsibility in CSR is:
- Operating in a consistent way in accordance with government requirements and the law
- Complying with different national and local regulations
- Behaving as loyal state and company citizens
- Meeting legal obligations
- Supplying goods and services that meet the minimum legal requirements
Ethical responsibility in Carroll’s CSR pyramid
The ethical responsibility of businesses goes beyond society’s normative expectations – laws and regulations. In addition, society expects organisations to conduct and manage their business in an ethical manner. Taking ethical responsibility means that organisations embrace activities, standards, and practices that haven’t necessarily been written down, but are still expected.
The difference between legal and ethical expectations can be difficult to determine. Obviously, laws are based on ethical premises, but ethics goes beyond that.
Ethical responsibility in CSR includes:
- Performing in a way that’s consistent with society’s expectations
- Recognising and respecting new or evolving ethical and moral standards that have been adopted by society
- Preventing ethical standards from being infringed upon to achieve objectives
- Being proper business citizens by doing what’s ethically or morally expected
- Acknowledging that business integrity and ethical behaviour go beyond compliance with laws and regulations
Philanthropic responsibility or discretionary responsibility in Carroll’s CSR pyramid
The philanthropic responsibility of businesses includes the voluntary or discretionary activities and practices of businesses. Philanthropy isn’t a literal responsibility, but nowadays business are expected by society to take part in such activities. The nature and quantity of these activities are voluntary and are guided by companies’ desire to take part in social activities that are generally not expected from organisations in an ethical sense. Businesses developing philanthropic or discretionary activities give the public the impression that the company wants to give something back to the community.
In order to do so, businesses adopt different types of philanthropy, such as gifts, donations, volunteer work, community development, and all other discretionary contributions to the community or groups of stakeholders that make up that community.
Example of Archie Carroll’s CSR pyramid
Successful businesses often have plenty of ways in which they can take responsibility. They don’t always do so, however. Here are a few examples of businesses that either have or have not.
Example of economic responsibility
Companies’ economic responsibilities are aimed at methods that enable the business in the long term, while at the same time meeting the standards for ethics, philanthropy, and legal practices. Companies that adapt manufacturing processes to be able to use recycled products and lower material costs are examples of economically responsible companies. This benefits society in several ways; increased profitability, reduced ecological footprint.
Example of legal responsibility
The second layer of Carroll’s CSR pyramid is the legal obligation of companies to comply with laws and regulations. That also includes not looking the other way when grey areas of the law are being ignored or circumvented. This endangers the company. Fines can be steep when these laws aren’t being complied with. An example is meeting regulations set by the food standards agency. If someone becomes ill due to an organisation’s action, this could result in expensive legal proceedings which might even destroy the company. This would then lead to job losses and financial setbacks for suppliers.
Example of ethical responsibility
The organisational focus on ethics is often about offering fair working conditions for employees, both of the business itself as well as its suppliers. Honest business practices include equal pay for equal work and compensation initiatives. An example of ethical business practices is the use of products which have fair-trade certification. Ben & Jerry’s, for instance, only uses fair-trade certified ingredients, such sugar, coffee, bananas, and vanilla.
Example of philanthropic/discretionary responsibility
Philanthropic initiatives include donations in the form of time, money, or resources to regional, national, or international charities. The co-founder of Microsoft, Bill Gates, is a good example of that. Together with his wife Melinda Gates, they founded the Bill and Melinda Gates Foundation, to which he has donated billions. The Bill and Melinda Gates Foundation focuses on developing education, eradicating malaria, and agricultural development, among other things. In 2014, Bill Gates was the most generous philanthropist in the world, donating 1.5 billion to the Bill and Melinda Foundation.
Carroll’s CSR pyramid criticism
Archie Carroll’s CSR model was the first one to emphasise how important it is that organisations take social responsibility beyond maximising profits. However, he did underline the importance that organisations have to make a profit. This is a strength compared to other CSR theories.
However, the model also has its limitations. One being that it’s based on American (Western) experiences. Researchers Crane and Maten, for example, claim that the model doesn’t address conflicting obligations, nor how both the national and corporate culture manifest themselves. They came to this conclusion when applying it to European companies and noticing how different layers of the pyramid had different meanings in different European countries. According to them, that was the result of the highly diverse historical and religious traditions and norms.
Other points of criticism
- In part due to the criticism mentioned above, the model is considered by many to be overly simplistic
- Others claim that the ethical responsibility should be given a more prominent position within the pyramid
- Organisations don’t always do what they say when it comes to CSR
Carroll’s CSR pyramid summary
In short, the four-part definition of corporate social responsibility (CSR) and Carroll’s CSR pyramid offer a conceptual framework for organisations that consists of the economic, legal, ethical, and philanthropic or discretionary responsibility. Businesses’ economic responsibility to make a profit is expected of them by their shareholders. The ethical responsibility of businesses is expected by society. The philanthropic or discretionary responsibility of organisations is expected and desired by society. Over time, the definitions for each of these four categories can change or evolve.
Now it’s your turn
What do you think? Do you recognise the explanation about Carroll’s CSR pyramid? What other responsibilities do you think businesses have? What role do companies play in solving major or even global issues? Do you have any tips or additional comments?
Share your experience and knowledge in the comments box below.
- Carroll, A. B., & Näsi, J. (1997). Understanding stakeholder thinking: Themes from a Finnish conference. Business Ethics: A European Review, 6(1), 46-51.
- Carroll, A. B. (1999). Corporate social responsibility: Evolution of a definitional construct. Business & society, 38(3), 268-295.
- Carroll, A. B. (2016). Carroll’s pyramid of CSR: taking another look. International journal of corporate social responsibility, 1(1), 3.
- Jamali, D., & Carroll, A. (2017). Capturing advances in CSR: Developed versus developing country perspectives. Business Ethics: A European Review, 26(4), 321-325.
- Pinkston, T. S., & Carroll, A. B. (1996). A retrospective examination of CSR orientations: have they changed?. Journal of Business Ethics, 15(2), 199-206.
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