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Small Business»
2. Business Models & Organizational Structure»
3. Corporations»
Five Dimensions of Corporate Social Responsibility
by M. Scilly

Related Articles
 1Four Types of Corporate Social Responsibility
 2What Is Corporate Social Responsibility?
 3Pros & Cons of Corporate Social Responsibility
 4Examples of Social Responsibility Strategies

Traditionally, companies have had one responsibility: to make a profit. But the concept of corporate social
responsibility holds that companies should be responsible to more than just their owners. Corporate social
responsibility holds that there are multiple dimensions that should affect a company's actions. Understand
these dimensions when planning your own company's corporate social responsibility efforts.

The environmental dimension of corporate social responsibility refers to your business's impact on the
environment. The goal, as a socially responsible company, is to engage in business practices that benefit the
environment. For example, you might choose to use recycled materials in your packaging or ad renewable
energy sources like solar power to your factory.


The social dimension of corporate responsibility involves the relationship between your business and society
as a whole. When addressing the social dimension, you should aim to use your business to benefit society as a
whole. This could involve sourcing fair trade products, for example, or agreeing to pay your employees a
livable wage. It could also involve taking on endeavors that benefit society, for instance using your resources
to organize charitable fundraisers.

The economic dimension refers to the effect that corporate social responsibility has on the finances of your
company. In an ideal world, where corporate social responsibility had no costs, there would be no reason to
limit it. But in the real world it is important to recognize the financial impact that these actions have and to
balance being a good corporate citizen with making a profit.


The stakeholders are all of the people affected by your company's actions. These include employees, suppliers
and members of the public. When considering the stakeholder dimension of corporate social responsibility,
consider how your business decisions affect these groups. For example, you might be able to increase your
output by having employees work more, but you should consider the impact it will have on them, not just your
bottom line.


Actions that fall into the voluntariness dimension are those that you are not required to do. These actions are
based in what your company believes is the correct thing to do. They may be based in specific ethical values
that your company holds. For example, you may believe that using organic products is the right thing to do
even if you are not required to do so.

The Impact of Corporate Social Responsibility on

Organizational Stability
by Brian Hill

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 1The Impact of Corporate Social Responsibility on the Performance of an Enterprise
 2Pros & Cons of Corporate Social Responsibility
 3What Is Corporate Social Responsibility?
 4Four Types of Corporate Social Responsibility
Corporate social responsibility is the concept that a business needs to be concerned with more than just profit.
Protecting the environment is one aspect of social responsibility; another is making an effort to address social
problems such as poverty and hunger. A business’ social responsibility also is expressed through its ethical
standards -- how it treats its various stakeholders, including vendors, employees and customers.
Importance of Stability

A small business owner initially may not view organizational stability as an important goal. He strives for
growth, to create a dynamic, rapidly evolving organization that becomes a recognized force in its industry.
Stability may sound like a company that is standing still. Nevertheless, his long-term goals of revenue growth
and increased profits can be served by maintaining stability with certain aspects of his company.

Customer Retention

Consumers may choose to not do business with companies that have a reputation for being socially
irresponsible. Conversely, businesses that show a commitment to the community and the environment can
attract customers who share these values. The good the company does is part of the perceived value of its
products and services and can result in higher customer satisfaction. These satisfied customers are likely to
continue to do business with the company. Thus, a stable, loyal customer base is a valuable asset.

Access to Funding

Capital often is needed to launch a company, and several capital infusions may be needed later on to fund
expansion plans. Capital can be viewed as a mechanism to ensure organizational stability in the sense that it
helps the business owner make continued progress toward achieving his long-range growth objectives.
Investors look at the ethical and social standards exhibited by a business when deciding whether to commit
capital to the company. Some investors focus exclusively on companies that have a demonstrable track record
of social responsibility.

Employee Recruitment

A small company must create a stable workforce by retaining its top talent and not losing these individuals to
competitors. The company also must compete to acquire the best talent. Younger members of the workforce in
particular have grown up in an era of heightened awareness of environmental protection, and a company’s
commitment to the environment and to society can be a significant, even determining, factor in whether they
elect to join an organization.

Positive Image

Companies that have ethical lapses such as ignoring environmental regulations or standards for how employees
should be treated can suffer damage to their reputation when these lapses come to light in traditional or social
media. A company’s image affects its relationship with all of its stakeholders, and remaking a company’s
troubled image into one of stability -- sometimes referred to as damage control -- can take time and draw
managerial resources from the important tasks of building the company. Customers who leave because they do
not approve of the company’s image can be difficult to win back.

Stable Cash Flow

Fines and penalties assessed by the government for lack of regulatory compliance and lawsuits from customers
due to product defects or from employees due to unsafe working conditions can be costly to a small business.
Cash flow is the lifeblood of a company, allowing it to meet its obligations such as payroll and to fund
marketing and business development programs. Ethical, socially responsible companies can avoid the cost of
litigation and other problems that could have a negative effect on the company’s cash position. Maintaining a
stable cash flow keeps the company on its growth track.

Examples of Social Responsibility Strategies

by Susan S. Davis

Related Articles
 1Four Types of Corporate Social Responsibility
 2Pros & Cons of Corporate Social Responsibility
 3The Impact of Corporate Social Responsibility on Organizational Stability
 4What Is Corporate Social Responsibility?

Social responsibility is a form of self-regulation that businesses adopt as a part of their corporate conscience
and citizenship. Often referred to as corporate social responsibility or CSR, this policy spurs businesses to
develop means to monitor the public’s social perception of them as a responsible business. The business goal
of social responsibility is to encourage the company’s actions toward the positive impact of consumer,
community and employee responsibility.
Voluntary Hazard Elimination
Companies involved with social responsibility often take action to voluntarily eliminate production practices
that could cause harm for the public, regardless of whether they are required by law. For example, a business
could institute a hazard control program that includes steps to protect the public from exposure to hazardous
substances through education and awareness. A plant that uses chemicals could implement a safety inspection
checklist to guide staff in best practices when handling potentially dangerous substances and materials. A
business that makes excessive noise and vibration could analyze the effects its work has on the environment by
surveying local residents. The information received could be used to adjust activities and develop
soundproofing to lessen public exposure to noise pollution.

Community Development

Companies, businesses and corporations concerned with social responsibility align with appropriate
institutions to create a better environment to live and work. For example, a corporation or business may set up
a foundation to assist in learning or education for the public. This action will be viewed as an asset to all of the
communities that it serves, while developing a positive public profile.


Businesses involved in philanthropy make monetary contributions that provide aid to local charitable,
educational and health-related organizations to assist under-served or impoverished communities. This action
can assist people in acquiring marketable skills to reduce poverty, provide education and help the environment.
For example, the Bill and Melinda Gates Foundation focuses on global initiatives for education, agriculture
and health issues, donating computers to schools and funding work on vaccines to prevent polio and

Creating Shared Value

Corporate responsibility interests are often referred to as creating shared value or CSV, which is based upon
the connection between corporate success and social well-being. Since a business needs a productive
workforce to function, health and education are key components to that equation. Profitable and successful
businesses must thrive so that society may develop and survive. An example of how CSV works could be a
company-sponsored contest involving a project to improve the management and access of water used by a
farming community, to foster public health.

Social Education and Awareness

Companies that engage in socially responsible investing use positioning to exert pressure on businesses to
adopt socially responsible behavior themselves. To do this, they use media and Internet distribution to expose
the potentially harmful activities of organizations. This creates an educational dialogue for the public by
developing social community awareness. This kind of collective activism can be affective in reaching social
education and awareness goals. Integrating a social awareness strategy into the business model can also aid
companies in monitoring active compliance with ethical business standards and applicable laws.
1. Small Business»
2. Business Models & Organizational Structure»
3. Types of Corporations»
Four Types of Corporate Social Responsibility
by M. Scilly

Related Articles
 1Five Dimensions of Corporate Social Responsibility
 2What Is Corporate Social Responsibility?
 3Examples of Social Responsibility Strategies
 4Pros & Cons of Corporate Social Responsibility

The idea behind corporate social responsibility is that companies have multiple responsibilities to maintain.
These responsibilities can be arranged in a pyramid, with basic responsibilities closer to the bottom. As a
business meets lower-level responsibilities that obligate it to shareholders and the law, it can move on to the
higher level responsibilities that benefit society.
Economic Responsibilities

A company's first responsibility is its economic responsibility -- that is to say, a company needs to be primarily
concerned with turning a profit. This is for the simple fact that if a company does not make money, it won't
last, employees will lose jobs and the company won't even be able to think about taking care of its social
responsibilities. Before a company thinks about being a good corporate citizen, it first needs to make sure that
it can be profitable.

Legal Responsibilities

A company's legal responsibilities are the requirements that are placed on it by the law. Next to ensuring that
company is profitable, ensuring that it obeys all laws is the most important responsibility, according to the
theory of corporate social responsibility. Legal responsibilities can range from securities regulations to labor
law, environmental law and even criminal law.

Ethical Responsibilities

Economic and legal responsibilities are the two big obligations of a company. After a company has met these
basic requirements, a company can concern itself with ethical responsibilities. Ethical responsibilities are
responsibilities that a company puts on itself because its owners believe it's the right thing to do -- not because
they have an obligation to do so. Ethical responsibilities could include being environmentally friendly, paying
fair wages or refusing to do business with oppressive countries, for example.

Philanthropic Responsibilities

If a company is able to meet all of its other responsibilities, it can begin meeting philanthropic responsibilities.
Philanthropic responsibilities are responsibilities that go above and beyond what is simply required or what the
company believes is right. They involve making an effort to benefit society -- for example, by donating
services to community organizations, engaging in projects to aid the environment or donating money to
charitable causes.

What Is Corporate Social Responsibility?

by Regina Anaejionu

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 1Four Types of Corporate Social Responsibility
 2The Impact of Corporate Social Responsibility on Organizational Stability
 3Five Dimensions of Corporate Social Responsibility
 4Examples of Social Responsibility Strategies

Corporate social responsibility, or CSR, is a corporation's obligation to its stakeholders, which are any
groups/people that have a stake or interest in a company's success and products. This includes customers,
employees, suppliers, investors and the communities surrounding the business. Stakeholders have varying
needs to be met. Whereas a customer's greatest concern may be the safety of a company's products, an
employee's need might be for a fair wage and safe working conditions. An investor may be concerned with
profits and the bottom line, while the community may care about a business limiting the pollution it causes.
Thus, corporate social responsibility means maximizing the good and minimizing the bad effects your
company has on these stakeholders' diverse interests.
Facets of CSR

In his 1991 article "The Pyramid of Corporate Social Responsibility," Dr. Archie B. Carroll, a business
management author and professor, identifies four areas that make up a corporate social responsibility pyramid:
legal, economic, ethical and philanthropic. This pyramid has become widely used and is meant to explain the
main areas that a business's duties to its stakeholders fall under.


Corporations must ensure that their business practices are legal. Obeying regulations helps protect consumers,
who rely on a business to be truthful about the products it sells, and investors, who stand to lose profits if a
company is penalized or shut down because of illegal practices.


According to the 2011 book "Business Ethics," a company's economic responsibilities include being profitable
in order to provide a return on investment to owners and shareholders, to create jobs in their communities and
to contribute useful products and services to society. Part of being economically responsible means
streamlining processes to find the most efficient ways to run your business and innovating your product
offerings and marketing to increase revenue.


Beyond abiding by the letter of the law, an organization's ethical responsibilities include managing waste,
recycling and consumption. These areas are sometimes regulated by city, state or federal governments, but
often a company can go further than what the law requests and institute policies that help sustain the
environment for future generations. Other ethical responsibilities come in the form of advertising, as in not
stretching the truth to a customer just to get them to make a purchase, and treatment of employees. A company
can provide more than minimum wage and minimum safety precautions for employees; it can provide
excellent benefits, insurance and invest resources in building a clean and safe workplace where employees will
be happy to come each day.

The authors of the 2011 "Business Ethics" also suggest that part of the philanthropic responsibility
corporations face is to promote the welfare of humans and to spread goodwill. An example of this is The
Xerox Foundation's "Xerox Employee Matching Gifts Program" in which Xerox matches its employees'
contributions to higher education institutions up to $1,000. Similarly, the PepsiCo Foundation has committed
over $2 million to World Food Program USA, which helps fight hunger in "vulnerable communities around the

Pros & Cons of Corporate Social Responsibility

by Maria Kielmas

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The concept of "corporate social responsibility" has become pervasive enough that it has earned its own
acronym in business circles: CSR. The term means that a corporation should be accountable to a community,
as well as to shareholders, for its actions and operations. When a corporation adopts a CSR policy, it aims to
demonstrate a goal of upholding ethical values, as well as respecting people, communities and the
environment. The corporation undertakes to monitor its compliance with its stated CSR policy and report this
with the same frequency that it reports its financial results.
Profitability and Value

A CSR policy improves company profitability and value. The introduction of energy efficiencies and waste
recycling cuts operational costs and benefits the environment. CSR also increases company accountability and
its transparency with investment analysts and the media, shareholders and local communities. This in turn
enhances its reputation among investors such as mutual funds that integrate CSR into their stock selection. The
result is a virtuous circle where the company's stock value increases and its access to investment capital is

Customer Relations

A majority of consumers -- 77 percent -- of consumers think that companies should be socially responsible,
according to a survey by branding company Landor Associates cited by the University of Pennsylvania's
Wharton School. Consumers are drawn to those companies that have a reputation of being a good corporate
citizen. Research at Tilburg University in the Netherlands showed that consumers are prepared to pay a 10
percent higher price for products they deem to be socially responsible.


The main disadvantage of CSR is that its costs fall disproportionally on small businesses. Major corporations
can afford to allocate a budget to CSR reporting, but this is not always open to smaller businesses with
between 10 and 200 employees. A small business can use social media to communicate its CSR policy to
customers and the local community. But it takes time to monitor exchanges and could involve hiring extra
personnel that the business may not be able to afford.


Some critics believe that corporate social responsibility can be an exercise in futility. A company's
management has a fiduciary duty to its shareholders, and CSR directly opposes this, argues Aneel Karnani,
Professor at the University of Michigan in a Wall Street Journal article. The responsibility of executives to
shareholders is to maximize profits. A manager who forsakes profits in favor of some benefits to society may
expect to lose his job and be replaced by someone for whom profits are a priority. That is why some companies
talk about CSR but do nothing about it. This is called greenwashing, Karnani says.

Corporate strategy with indian examples
orporate Social
Responsibility and the Triple
Bottom Line
The two theories that we have looked at each seek to moderate and direct the
corporation by examining the conditions in which a business exists. They each move
from these conditions to a requirement either to consider primarily their stockholders or
their stakeholders. The next two theories are somewhat different. They see the
corporation as an entity with moral obligations that are not connected to the economic
obligations that Friedman emphasizes.

Corporate Social Responsibility (CSR)1

The aptly named CSR view is that corporations are members of the moral community.
Instead of separating them from society as Friedman would, they are viewed as citizens
in the world.They have responsibilities that are analogous to those of other members of
the moral community, and these responsibilities fall into four groups:

1. Economic Responsibility
2. Legal Responsibility
3. Ethical Responsibility
4. Philanthropic Responsibility

The Economic Responsibility is the responsibility of a business to make money.

"Required by simple economics, this obligation is the business version of the human
survival instinct. Companies that don’t make profits are—in a modern market
economy—doomed to perish. "2 So, as long as we believe that the business ought to
exist, it must be allowed to try and make a profit. Otherwise, we are condemning it to

the Legal Responsibility is the responsibility to obey the letter and the spirit of the law.
This is not just the obligation to follow the law as it is written, but "this obligation must be
understood as a proactive duty. That is, laws aren’t boundaries that enterprises skirt
and cross over if the penalty is low; instead, responsible organizations accept the rules
as a social good and make good faith efforts to obey not just the letter but also the spirit
of the limits."3

This responsibility is a heavier one than it may seem. Many corporations have broken
the rules when the profits that they stand to gain are much higher than the penalties that
they might have to pay for breaking the rules. According to this responsibility, they must
not do so, because they are required to view obeying the law as something that creates
the best results for everyone.

The Ethical Responsibility is the responsibility to do the right thing even when neither
the spirit nor the letter of the law apply to the situation. This is a key obligation, and it
requires the firm to act as any other citizen must. We might make allusions to the Good
Samaritan or to handing our change to someone who asks for it on the street, but the
core of the responsibility is that firms ought to act like persons who live in a civil
community. This requires that we view firms (and that they view themselves) as
responsible members in a community.

The last category, the Philanthropic Responsibility, is a responsibility "to contribute to

society's projects even when they're independent of the particular business." 4 This
responsibility requires the business person to do some things which stem from
generosity towards the community that they exist in. This is likely to be a controversial
requirement, but it speaks to the connections between the community and the firm.
"[T]hese public acts of generosity represent a view that businesses, like everyone in the
world, have some obligation to support the general welfare in ways determined by the
needs of the surrounding community." It might require that an affluent business person
stop and buy a lemonade or a hotdog from a stand that contributes to a neighborhood
project or to buy some cookies from the local Girl Scout troop. It might require that they
open their business to local youth who want to learn about how it works and get inspired
to become entrepreneurs. Whichever form it takes, it requires that businesses do
something that benefits the community without having anything to gain, directly.

These four principles are ordered from the most pressing to the least. This means that
businesses must attend to the Economic, Legal, Ethical, and Philanthropic
responsibilities in that order. This does not mean that the economic responsibility to
maintain a profitable business always trump the other three. It means that a business
which is profitable must also act within the bounds of the law, and that they must act
within the bounds of ethics. At the bottom of the list, a business might be required to
behave philanthropically. This only applies to a business that has already met the other
three responsibilities, however. A struggling business lacks any meaningful
responsibility for community outreach. When they consider a possible course of action
they must weigh the benefits and burdens according to these weighted responsibilities.
If an action would keep the firm profitable, but it bends a law in a way that is not
ethically objectionable, they might be allowed to do it.

Think of laws on the highway. There are good reasons for following the speed limit. It
keeps us from getting speeding tickets (economic), shows respect for the law and the
common rules we all share (legal), and it helps to prevent traffic accidents through safe
driving (ethical). I might be allowed to break the law (and thereby risk a ticket), however,
if there are really strong ethical reasons to drive quickly. Perhaps there is someone in
the car that requires medical help. In such a case, the strength of that #3 responsibility
might force me to override the other two above it.
It might also be the case that I could make a huge amount of money by doing
something that is illegal and very harmful. Perhaps my firm could save a great deal of
money by dumping a toxic substance (like PCB) along the roads in a rural area of North
Carolina. It would save the company a huge amount of money and time, while
contaminating the soil in some 14 counties. In that case, the business would have been
prohibited from taking the action that they did by the illegality of it and the huge
environmental harms imposed on nearby residents and upon the state.

There is an important difference between this theory of corporate responsibility and the
Stakeholder theory of social responsibility. According the to CSR, the corporation has
an obligation to the society that it lives in. According to Stakeholder theory, the
corporation must consider the interests of many groups of people. The difference here
is that these groups of people might have preferences for, or demand things, which are
counterproductive to the wellbeing of the overall society. In this way, the Stakeholder
theory might be much more permissive than the CSR view. If the creation of some
chemical by-products would be of overall benefit to many of the stakeholders involved,
then it might be permissible on one view while prohibited on the other.

Triple Bottom Line5

Another theory of corporate social responsibility is the Triple Bottom Line. Like the CSR
theory we just discussed, Triple Bottom Line works on the assumption that the
corporation is a member of the moral community, and this gives it social responsibilities.
This theory focuses on sustainability, and requires that any company weigh its actions
on three independent scales: economic sustainability, social sustainability,
and environmental sustainability.

These three tabulations are all aimed at long-term

sustainability. Economic sustainability must focus on the long term because this is the
nature of a persistent company. A decision which creates an economic boon in the
short-term (like the Ford Pinto), but causes long-term harm, would likely reduce this
bottom line to such a degree that the action would be untenable.

Social sustainability gives precedence on the balance of economic power in the society.
Competition in the business arena is common, and encouraged, behavior, but
maximizing the bottom line in social terms requires that a business foster an
environment in which all can succeed. This might seem counterintuitive, but in the big-
picture it is better for a whole society to thrive than for one single corporation to thrive
alone. This will allow the company to continue to exist, and it will foster good-will
between the company and the society that it exists in. The PCB dumping alluded to in
above created an environment in which that company could not exist, and it is no longer
present in NC.
The requirement of environmental sustainability stems from the recognition that
resources are not infinite, and leads to the reasoning that too much degradation will
worsen the lives of ourselves, our children and so on. Members of the moral community
ought not cause undue harm to the people around them and the people who will come
later, and so this bottom line values some protection of the environment. The word
"some" in the previous statement introduces vagueness in the calculation, but it might
be necessary because there is some risk of environmental degradation in many
necessary business activities. The question of how much environmental degradation is
acceptable is one that must be answered, but it need not be answered in this module.
Suffice it to say that this calculation must be made even if it is a rough calculation.
Business cannot operate in a world which is poisoned or "used up." Efforts should be
made to renew some of the environments that have been harmed in the past, and these
environmental harms and gains belong on this bottom line.

The reasoning behind this tripartite theory is that if businesses calculate their gains and
losses in this way they will be more likely to take actions which are to the benefit of both
the business and the community. It is easy, when the numbers are large enough, to
ignore the social and environmental dimensions of a business decision. This is because
the average business decision is made by comparing the expected costs and benefits in
terms of dollars and, only then, considering the other dimensions of that decision. In
order to combat this order of operations, the Triple Bottom Line requires that a business
decision be composed of all of these elements from the beginning. When the data
shows each of these dimensions along the same line, and measured with the same
metric, it will be much easier to see the impact of a decision and to judge the fittingness
of that decision.

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