The CSR pyramid is a framework guiding how and why an organization should meet its social responsibilities. Developed by University of Georgia Professor Archie B. Carroll who adapted earlier work from the 1950s. The CSR pyramid is based on four levels: economic, legal, ethical, and philanthropic.
Corporate social responsibility first surfaced as a concept in Howard Bowen’s 1953 book Social Responsibilities of the Businessman. Bowen described the concept simply as any policy desirable to the objectives and values of society.
Some years later, University of Georgia Professor Archie B. Carroll organized various social responsibilities into a four-level model. For this reason, the framework is sometimes called Carroll’s CSR pyramid.
Carroll’s model remains relevant today because consumers expect companies to be good corporate citizens. The model is also a powerful way for a company to simplify the rather nuanced field of corporate social responsibility.
What’s more, empirical research has found that socially responsible companies experience higher profit margins, increased valuation, and lower risk. In some cases, CSR has the power to boost product differentiation and deliver a more stable return on investment during an economic downturn.
The four levels of the CSR pyramid
Carroll suggests corporate social responsibility has to be fulfilled on four different levels:
Economic – the lowest level of the pyramid since it is the responsibility that must be satisfied first. Without the ability to make a profit, the company cannot fund the other levels. In some instances, economic responsibilities will facilitate others. For example, a company transitioning to cheaper, eco-friendly packaging potentially satisfies an economic, legal, and ethical obligation at the same time.
Legal – while the economic level forms a solid foundation, the legal obligations of a company are perhaps the most important. How does a company conduct its business in the marketplace? Does it comply with employment, tax, environmental, health, and safety, or anti-competitive laws? Failing to abide by the law can result in severe financial and reputational damage.
Ethical – this layer of the pyramid can best be described as doing the right thing through fairness and harm avoidance. Unlike the first two levels, ethical practices are not something the company is obligated to incorporate. Nevertheless, demonstrated evidence of moral and ethical decisions strongly influence consumer brand perception.
Philanthropic – as we noted in a previous section, consumers expect the companies they do business with to give back to society. These efforts are vital for companies who leave a large carbon footprint, consume natural resources, or contribute to wage, cultural, or gender inequality. At the most basic level, philanthropy may constitute a company paying the correct amount of corporate tax. But it also extends to philanthropy as most people know it, with the Bill and Melinda Gates Foundation arguably the best example.
Limitations of the CSR pyramid
Despite its simplicity and effectiveness in distilling a rather nuanced topic, there do exist some limitations to Carroll’s pyramid.
These include:
No cultural component – critics argue that culture plays an important role in decision-making around corporate social responsibility. To some degree, this limits the effectiveness of the framework because a company may preach social responsibility without actively embodying it. Fast-fashion chain H&M was exposed for greenwashing in 2019 – or the act of giving a false impression of environmentally friendly products. This disconnect between environmentally friendly marketing and non-environmentally friendly production is a great example of poor and misaligned culture.
Establishment cost– some businesses will find the implementation of CSR principles prohibitively expensive. Procedures and protocols need to be adjusted and employees need to be retrained. Social development initiatives must also be developed, funded, and implemented and not impact the bottom line.
Misuse – for many companies, CSR is seen as a quick way to change public perceptions and not a way to create sustainable and measurable positive impacts. When airline Virgin Australia announced a plan to publicly acknowledge war veterans on their flights, the company failed to consult with them first. The move was also considered insensitive because the company attempted to benefit from a national day of mourning for those killed in combat.
Key takeaways:
The CSR pyramid is a framework detailing how and why an organization should meet its social responsibilities. It was developed by University of Georgia Professor Archie B. Carroll who adapted earlier work from the 1950s.
The CSR pyramid is based on four levels: economic, legal, ethical, and philanthropic.
The CSR pyramid is an effective way of simplifying nuanced corporate social responsibility. However, it does not guide company culture and may encourage short-term, opportunistic, or deceitful practices.
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Gennaro is the creator of FourWeekMBA, which reached about three million business students, executives, and aspiring entrepreneurs in 2021 alone | He is also Head of Enterprise Sales for a high-tech startup, which he helped grow at a double-digit rate since the onset | In 2012 Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
