Since the 1950s, the concept of corporate social responsibility (CSR) has been discussed. However, it was not until much later that people began to comprehend its significance, meaning, and influence. CSR as we know it now gained popularity when Archie Carroll’s “Pyramid of Corporate Social Responsibility” was published in 1991.
Carroll’s pyramid states that businesses have four levels of responsibility: economic, legal, ethical, and philanthropic.
Economic Responsibility
The base of the pyramid represents the primary obligation of an organization, which is to be profitable. Without earnings, the firm would be unable to pay its employees, and employees would lose their employment even before CSR efforts began. Profitability is the only way for a business to thrive in the long run and serve society. Furthermore, it is a company’s responsibility to create goods and services that are needed/wanted by customers at a reasonable cost.
Legal Responsibility
The legal responsibility of the business to follow the law is the second level of the pyramid. This is the most significant of the four responsibilities since it demonstrates how businesses behave themselves in the marketplace. Employment rules, competition with other businesses, tax restrictions, and employee health and safety are just a few of the legal obligations that a corporation must follow. Failure to be legally accountable may be disastrous for a company.
Ethical Responsibility
Doing the right thing, being fair in all situations, and avoiding damage is all part of the ethical layer of the pyramid. A firm should not only follow the law but also ethically conduct itself. Unlike the first two tiers, this is not something that a business must accomplish. However, a corporation should be ethical since it not only demonstrates to its stakeholders that it is moral and equitable, but also makes customers feel more comfortable purchasing goods and services from it. Being morally responsible might include things like being environmentally conscious and treating suppliers and employees fairly.
Philanthropic Responsibility
Philanthropy is at the peak of the pyramid, taking up the lowest amount of space. Businesses have long been criticized for their carbon footprints, pollution, and use of natural resources, among other things. To compensate for these drawbacks, they should “give back” to the community from which they benefit. Even though this is the greatest degree of CSR, it should not be overlooked because many consumers prefer to do business with firms that give back to the community. Philanthropic responsibility is more than simply doing the right thing; it also entails giving back to society following the company’s ideals.
A responsible company, according to Carroll’s pyramid, qualifies all levels of responsibilities before engaging in charity. A business cannot survive if the other obligations are not met.
