Carroll’s Pyramid of CSR

Building Both Profits and Reputation

Carroll's Pyramid of CSR - Building Both Profits and Reputation

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Apply all four levels of the pyramid, but in a shade that's true to you.

"I'm here to show the world what respect and inclusion are all about," says Dustin Plunkett. He's an athlete and coach with intellectual disabilities, and now, with the support of Bank of America®, a TV sports analyst. He's speaking about the bank's partnership with the Special Olympics™.

Why would a financial business bother to invest time, money and effort in promoting diversity and inclusion in the community? Is it just trying to look good? How do we know the project is worthwhile? And isn't it something that only large corporates can afford?

In this article, we'll look at what corporate social responsibility (CSR) is and explore one key model for implementing it in any size of organization or team.

Understanding 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 among its employees, community and market, will vary enormously. CSR is all about being aware of this wider context and thinking about the company's moral obligations towards it.

CSR has been talked about since the 1960s. But its history can be traced back much further than that. For example, the 19th century English industrialist Titus Salt made a fortune from the wool trade. But he is celebrated for building a village to house his employees and their families. Salt was engaging in CSR, even if he wouldn't have used the term.

Organizations have quickly realized that "doing the right thing" can bring them benefits too. Salt's mill workers enjoyed much healthier living conditions than their peers, which made them more reliable at work. And nowadays, a business that invests in new technology to stop polluting its environment could make big savings in fuel costs.

And there's one more benefit to CSR: being seen to go "above and beyond" what's expected can improve a company's reputation both internally and externally, leading to employees and customers alike becoming more engaged.

Carroll's Pyramid

Professor Archie Carroll published his Pyramid of CSR in 1991, and it has become a widely used tool. He asserted that CSR "can only become a reality if managers become moral instead of amoral or immoral." Let's see what he meant.

 

Carroll’s Pyramid

Carroll's Pyramid of Corporate Social Responsibility, reproduced by permission from Carroll, A.B. (1991), "The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders."

The pyramid describes a hierarchy of responsibilities that, together, make up CSR:

Economic. Forming the base of the pyramid, this is simply about being profitable. It is your responsibility to keep your costs to a minimum, maximize income, invest in developing the business, and provide a return to your owners and/or shareholders. Being economically responsible also means you can create and sustain jobs in the community, and contribute useful, non-harmful products or services to society.

Everyone in an organization, from the chief accountant to the lowliest operative, can help deliver this responsibility by excelling at his or her job, and adopting an innovative, open and problem-solving approach.

Legal. This is also straightforward, and a minimum requirement for a business: to obey the law. In many countries, this means being truthful about the products or services you sell, keeping your employees and customers safe, not destroying your environment, and paying your taxes. At the very least, it's about protecting your organization from prosecution or penalty, which would impact your profits and reputation, and could even lead to being shut down.

As a manager, you can model this responsibility by, for example, ensuring that your team members have the right equipment, clothing and training to meet health and safety rules. And they can protect the company and its customers by keeping data accurate, up to date, and secure.

Ethical. 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 not structuring your company so that it pays little or no taxes, even if that would be allowed by the letter of the law. Or, on a smaller scale, supporting flexible working for your team members so that they can juggle caregiving responsibilities with their job.

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?

Philanthropic. This is the highest-level responsibility and goes beyond any expectations. It's about being a "good corporate citizen," actively improving the world around you. Examples would be enabling team members to take part in volunteering programs during work time, sponsoring community initiatives, offering mentoring expertise to non-profits – or, in the case of Unilever®, tackling global poverty!

Benefits

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

Clearly, meeting your economic responsibilities while overlooking your legal responsibilities, or vice versa, will mean your organization runs into difficulties sooner or later. The ethical and philanthropic responsibilities look more optional, but embedding them as well can:

  • Build reputation. Showing you're ethical or philanthropic can imply you're committed to operating in a responsible way generally, and so can build trust in your product too. It can differentiate you from your competitors, emphasizing your brand and improving profits. At team level, you can be seen to work ethically by making fair judgments about customer complaints or, with your finance department's support, treating debtors humanely if they're having problems paying.
  • Increase sustainability. Being "green" can have direct financial benefits, through cutting your energy and material costs, improving production and supply chain efficiency, reducing any carbon taxes, and growing your "triple bottom line." As a manager, you can set an expectation that your team members will look actively for continuous improvements here, as an integral part of their jobs rather than an optional add-on. And you can develop and support them so that they remain productive and thrive in their roles.
  • Attract and retain 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 maybe enjoy interesting opportunities beyond their formal roles, and talk positively about you to family and friends. That means you'll always have the pick of the best candidates for vacancies! Your influence is strong in this area, as team members often feel they are working for their manager at least as much as for the wider company.

Challenges

Carroll's requirement that you simultaneously address all four responsibilities is also his biggest challenge.

For example, will a promising new contract or investment opportunity conflict with your ethical stance? On the other hand, investing in CSR can take up resources, and even shift your focus away from your core activities. A major corporation may be able to allocate a budget, and even a dedicated team, to its CSR activities but a smaller organization won't have that luxury.

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Worse still, if you cynically promote your CSR credentials but don't deliver, or if you're found to be neglecting the basics, you'll be accused of "greenwash." This means hiding a dirty reality under a clean, but shallow, facade and, if you're found guilty of it, your reputation will be wrecked. For example, your certified organic cotton fabric won't matter one bit if your employees are making clothes from it in sweat-shop conditions. Similarly, an employee volunteer program can't be a substitute for decent wages or working conditions.

Making the Pyramid Work for You

Every team and organization is different but there will be something you can do to meet or even surpass Carroll's four responsibilities.

Economic. As a leader, manager or team member, you'll no doubt be focused on this every day! However, are you profitable and legal? Are you profitable and legal but also acting ethically? Then, at the pinnacle of the pyramid, are you also encouraging, supporting or carrying out far-reaching beneficial programs, beyond the call of duty?

Legal. Perhaps the simplest way to demonstrate that you are meeting your legal responsibilities is to have transparent reporting. Safety and ISO process accreditation, and membership of best practice organizations, are all options. Publishing staff and wage statistics alongside the obligatory accounts shows openness and confidence, too. You can reinforce this at a team level, too, by distributing important information about the company, making sure your team know how vital compliance is, and welcoming questions about performance, however tough.

Ethical. Increasingly, customers, suppliers and the media won't wait to receive your reports. Instead, they'll actively scrutinize and test your ethics. In the worst cases, this means some truly shaming exposés of bad practice. But at best, you might appear on an ethical index, such as the one run by the Ethisphere Institute.

Sometimes, "ethical" stories aren't as simple as they seem. For example, Dan Price, chief executive of Gravity Payments™, introduced a minimum annual wage of $70,000 for his employees in early 2015, far ahead of what the law demanded. For a while, he was something of a folk hero, especially as he cut his own wage by 90 percent! But then there was a "backlash" from some of his more experienced people. They objected to everyone getting this level of pay, even new recruits.

So, be sure to think through all the implications of what might at first seem to be a positive initiative, and ensure you get buy-in from everyone who's involved or affected.

Philanthropic. As another part of its commitment to CSR, Bank of America's employees gave two million hours to volunteer projects in 2014. You might only be able to support a handful of hours a week or month, in order to protect your economic responsibilities. So, take time to examine the potential impact on your team's work, and whether you'd be more effective if you supported a single organization or event, or a rolling program. Choose a cause that makes sense to your team members, that they feel enthusiastic about, and that they can use their skills, knowledge and experience to help.

CSR is such a widely used term that people can mean different things by it. But, however you approach your CSR, be sure to put corporate values, transparency and personal accountability at the heart of your activities. That way, your projects will deliver and won't disappoint.

Key Points

Corporate Social Responsibility (CSR) assumes that an organization has a moral responsibility to the communities, countries and markets in which it operates.

Carroll's Pyramid of CSR provides a framework for organizations and teams to use, based around four interdependent areas: economic, legal, ethical, and philanthropic.

Effective CSR can help an organization improve its reputation, boost its profits, and engage its employees. But be careful to ensure your actions match your rhetoric, and that your organization doesn't end up being damaged by accusations of hypocrisy or "greenwash."

Adopting Carroll's Pyramid will help you focus on practical steps towards CSR, but remember that you'll need accountable governance and clear values and ethics to underpin the whole process.

Apply This to Your Life

It's time to audit Carroll's four areas of responsibility in your team and to take the appropriate action.

  • Is your product or service reliable and how does it compare with your competitors' offerings? You'll need to look at your sales figures, read customer feedback, and consult your team members for their opinions. Then be brutally honest with yourself: have you got the basics of your business right?
  • Are you legal – really? And do you have the evidence to prove it? Perhaps it's been a while since you checked, but talk to both your business advisors and workers. It's far better that you find out any guilty secrets in private and deal with them, than for them to be publicly exposed.
  • What could you be doing as a company or team above and beyond these basic requirements? Is there any area of your work that you'd be embarrassed to reveal? Again, your employees and customers will have opinions and preferences, but which of them would fit with your business values – and are they clear?
  • Lastly, can you identify any visible, useful and affordable ways of giving something extra to your employers, community or market? It need only be small to start with but let your imagine run wild. You could be a pioneer!