Corporate social responsibility
Corporate social responsibility asks what businesses owe society beyond making profits for their owners.
What CSR is
Corporate social responsibility (CSR) is the idea that businesses should consider their impact on society and the environment, not just their profits. It can include fair treatment of workers, ethical sourcing, environmental protection, community investment, and philanthropy.
Competing views
Economist Milton Friedman argued in 1970 that a business's social responsibility is to increase its profits within the rules of the game, leaving social goals to individuals and governments. Others argue that businesses have broader duties to stakeholders and that responsible behaviour supports long-term success.
The pyramid of CSR
Archie Carroll's pyramid describes four levels of responsibility: economic (be profitable), legal (obey the law), ethical (do what is right and fair), and philanthropic (contribute to the community). The base supports the rest: a business that is not viable cannot do much good.
The triple bottom line
The triple bottom line, a term popularised by John Elkington, measures performance by 'people, planet, and profit': social, environmental, and financial results. Some companies publish sustainability reports alongside financial reports.
ESG
Investors increasingly assess companies on environmental, social, and governance (ESG) factors, such as carbon emissions, labour practices, board diversity, and executive pay. ESG investing grew rapidly in the 2010s, though it has become politically contested in some places, and critics question how consistently ESG ratings measure real impact.
Responsibility to employees and consumers
Responsibilities to employees include safe workplaces, fair pay, non-discrimination, and respecting rights to organise. Responsibilities to consumers include safe products, honest information, fair pricing, and protecting privacy. Consumer protection laws and agencies enforce many of these duties.
Environmental responsibility and greenwashing
Businesses face pressure to reduce pollution, waste, and greenhouse gas emissions. Some set net-zero targets. Greenwashing, making misleading claims about environmental benefits, damages trust; regulators in the US, EU, and UK have increased scrutiny of green claims.
Worked example
Patagonia, an outdoor clothing company, offers repairs for its products, encourages customers to buy less, and in 2022 transferred ownership to a trust and nonprofit so that profits not reinvested in the business fund environmental causes. Supporters see a model of purpose-driven business; sceptics note it works partly because premium customers value the brand's values.
Key takeaways
CSR considers businesses' impact on society and the environment. Friedman argued the main social responsibility is profit within the rules; stakeholder views argue for broader duties. Carroll's pyramid has economic, legal, ethical, and philanthropic levels. The triple bottom line measures people, planet, and profit. ESG investing assesses environmental, social, and governance factors but is debated. Businesses owe safety and honesty to employees and consumers. Greenwashing undermines trust.
Flashcard
Businesses considering social and environmental impact
Check your understanding
A company advertises a product as 'eco-friendly' without evidence of real environmental benefit. This is called: