W4/L4: Models of Corporate Social Responsibility

PART 1: CORPORATE CITIZENSHIP

What is Corporate Citizenship?

Corporate Citizenship refers to the role of businesses in governing and protecting the rights of individuals in society. Over time, corporations have taken on roles beyond just profit-making, often stepping in where governments fall short.

Why Businesses Have Taken Over Governmental Roles

1. Governments are retreating from social needs

   • Privatization of public services (e.g., healthcare, utilities).

   • Companies assume responsibility for essential services (e.g., clean water, transportation).

2. Governments are unable or unwilling to act

   • Developing countries lack resources to meet basic needs.

   • Corporations fill these gaps (e.g., providing education and healthcare).

3. Governments cannot regulate global issues effectively

   • Issues like climate change, financial markets, and the internet are global.

   • Companies set international ethical standards.

Three Perspectives on Corporate Citizenship

1. Limited View – Corporate citizenship = corporate philanthropy (donations, charity).

2. Equivalent View – Corporate citizenship = CSR (social responsibility).

3. Extended View – Corporations govern citizenship rights, affecting social, civil, and political rights.

Roles of Corporations in Citizenship Rights

Why Corporate Citizenship is Important for Business Ethics

• Companies play a political role.

• Ethical business practices affect citizenship rights.

• Globalization brings new challenges for corporate accountability.

PART 2.1: THE PYRAMID OF CSR (Carroll, 1991)

Four Layers of CSR Responsibilities

1. Economic Responsibilities – Be profitable (foundation of CSR).

2. Legal Responsibilities – Obey the law (compliance with regulations).

3. Ethical Responsibilities – Be fair, just, and do no harm.

4. Philanthropic Responsibilities – Give back to society.

Economic Responsibilities

• Maximizing earnings per share.

• Maintaining a strong competitive position.

• Efficiency and profitability define business success.

Legal Responsibilities

• Following laws and regulations at all levels.

• Ensuring products meet minimum legal standards.

• Acting as a law-abiding corporate citizen.

Ethical Responsibilities

• Exceeding legal obligations (e.g., fair wages, environmental protection).

• Recognizing and respecting societal moral norms.

• Ensuring integrity in business operations.

Philanthropic Responsibilities

• Supporting arts, education, and charities.

• Encouraging employee volunteering.

• Enhancing community well-being.

Criticism of the Pyramid Model

1. Hierarchy Misinterpretation

   • The model suggests economic goals are prioritized, but all four layers should be balanced.

2. Confusion Between Ethical & Philanthropic Levels

   • Example: Donating to charity – is it ethical (expected) or philanthropic (optional)?

3. Incomplete Categories

   • Overlap in corporate actions – where does sustainable business fit?

4. Tension Between Business & Society

   • Companies may struggle to balance profitability with ethics.

PART 2.2: THE THREE-DOMAIN MODEL OF CSR (Schwartz & Carroll, 2003)

Three Domains of CSR

Seven CSR Categories in the Venn Diagram Model

1. Purely Economic – Profit-driven (e.g., cost-cutting at employee expense).

2. Purely Legal – Only follows minimum legal requirements.

3. Purely Ethical – Acts based on ethics without economic or legal motivation.

4. Economic & Ethical – Socially responsible but also profit-driven (e.g., green marketing).

5. Economic & Legal – Follows law to maximize profit (e.g., tax loopholes).

6. Legal & Ethical – Socially and legally responsible, but not profit-motivated (e.g., pro bono work).

7. Economic, Legal & Ethical – Ideal CSR, balancing all three areas.

Criticism of the Three-Domain Model

• Not all actions fit neatly into categories.

• Ethical and legal standards vary globally.

• Rarely are activities "purely ethical" (many actions combine factors).

PART 2.3: CSR 2.0 – A New Approach to CSR (Visser, 2011)

Why CSR 1.0 Fails (Visser’s Critique)

CSR in its current form (CSR 1.0) is failing due to:

1. Incremental impact – Small-scale initiatives, not solving real problems.

2. Peripheral focus – CSR seen as a side activity, not core business.

3. Uneconomic strategies – Not aligned with long-term profitability.

CSR 2.0 – The Future Model

CSR 2.0 is based on 5 principles:

1. Creativity – Innovative solutions for sustainability.

2. Scalability – Expand successful CSR projects beyond small pilots.

3. Responsiveness – Listen to stakeholders and adapt.

4. Glocality – Think globally, act locally.

5. Circularity – Shift to closed-loop, zero-waste business models.

CSR 2.0's Four Core Values (VEGS)

1. Value Creation – Profit and positive social impact.

2. Environmental Integrity – Sustainable resource use.

3. Good Governance – Transparency and accountability.

4. Societal Contribution – Improving communities.

Criticism of CSR 2.0

• Too broad – Holds companies responsible for fixing all social issues.

• Mainly applies to large global firms.

• Focuses on negatives – Not all businesses harm society.

PART 3: CSR CRITIQUE – Institutional Mirror vs. Institutional Substitute

Two Views on CSR's Role

1. Institutional Mirror View – CSR aligns with existing social norms.

   • Example: IKEA promotes Swedish sustainability values globally.

2. Institutional Substitute View – CSR fills gaps left by weak institutions.

   • Example: Unilever in India provides hygiene programs where the government fails.

Real-World Examples

Key Takeaways

✔ Corporate Citizenship – Businesses are filling governmental roles.
✔ Carroll’s Pyramid Model – CSR includes economic, legal, ethical, and philanthropic responsibilities.
✔ Three-Domain Model – Economic, legal, and ethical factors overlap in CSR decisions.
✔ CSR 2.0 – Next-gen CSR based on innovation, sustainability, and ethics.
✔ CSR Critique – Some businesses reflect society’s values (Mirror View) while others compensate for weak institutions (Substitute View).