Origins
Modern discussion of corporate social responsibility (CSR) took off when the economist Howard Bowen (1953), in Social Responsibilities of the Businessman, defined it as businesspeople's obligation to pursue policies and decisions consistent with society's objectives and values. In the 1960s and 1970s the consumer movement, pollution and human-rights concerns raised demands that firms take responsibility in line with their influence.
Carroll's CSR pyramid
Archie Carroll (1979, 1991) described CSR as a pyramid of four responsibilities stacked from the bottom up.
- Economic: produce goods and services society wants and make a profit; the foundation for everything else.
- Legal: operate within laws and regulations; what society requires.
- Ethical: do what is right and fair and avoid harm even where the law is silent; what society expects.
- Philanthropic: contribute to the community as a good corporate citizen through giving, volunteering and support for culture and education; what society desires.
The Friedman debate and stakeholder theory
Milton Friedman (1970) argued in The New York Times Magazine that "the social responsibility of business is to increase its profits." Managers are shareholders' agents, so spending shareholders' money on social goals is a kind of taxation, and social problems belong to government and individuals (see agency theory). By contrast, Edward Freeman's (1984) stakeholder theory holds that firms survive in the long run only by considering everyone who affects or is affected by them: employees, customers, suppliers, communities and the environment, not just shareholders.
Extensions: CSV and ESG
- Creating shared value (CSV): Porter and Kramer (2011) criticized CSR as a cost separated from profit and proposed treating social problems as business opportunities that create value for both firm and society, by reconceiving products and markets, redefining productivity in the value chain and building local clusters.
- ESG: a framework for assessing non-financial performance on environmental, social and governance criteria. Since the UN Principles for Responsible Investment (PRI) in 2006 it has become an investor standard, leading to sustainability reporting and mandatory disclosure.
Effects and criticism
Many studies find that CSR improves reputation and brand trust and helps with recruiting talent and managing risk, though evidence on its causal link to financial performance is mixed. Common criticisms include greenwashing that favors publicity over action, one-off donations that mask problems in the core business, and inconsistent measurement. A related discussion in research is the social responsibility of scientists.
See also: Social Economy
References
- Bowen, H. R. (1953). Social Responsibilities of the Businessman. New York: Harper & Brothers.
- Friedman, M. (1970, September 13). The social responsibility of business is to increase its profits. The New York Times Magazine.
- Carroll, A. B. (1979). A three-dimensional conceptual model of corporate performance. Academy of Management Review, 4(4), 497–505.
- Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34(4), 39–48.
- Freeman, R. E. (1984). Strategic Management: A Stakeholder Approach. Boston: Pitman.
- Porter, M. E., & Kramer, M. R. (2011). Creating shared value. Harvard Business Review, 89(1/2), 62–77.