Four Components of Corporate Social Responsibility

by Randi Hicks Rowe ; Updated September 26, 2017

Corporate social responsibility, defined by the United Nations Industrial Development Organization as the integration of social and environmental interests with business operations, is a prerequisite for companies seeking to lead in their industry or local community. In fact, astute companies are allocating more and more internal resources toward CSR causes that feature clear objectives with measurable outcomes, according to Paul Klein, a Forbes guest columnist. Although the term is "corporate" social responsibility, all companies -- sole proprietorships, LLPs and LLCs, as well as corporations -- can be socially responsible.

Economic

Corporate social responsibility is comprised of four components -- the first is economic. Economist Milton Friedman wrote that the social responsibility of business is to increase its profits. A profitable business creates jobs as well as goods and services that improve the quality of life for those who buy them. Profitable businesses also buy goods and services from other businesses and provide income to their owners or shareholders. All of these actions improve society.

Legal

Businesses, to be socially responsible, must compete within the rules society has established through its laws and regulations. This includes producing goods that meet safety standards in workplaces that also are safe and free from discrimination based on gender, race or religion. It means living up to contractual obligations.

Ethical

Society also has uncodified expectations of moral behavior. Ethical considerations often go beyond legal ones. For example, a bank might legally foreclose on a home but may choose to negotiate a payment plan or a public company might go beyond financial reporting regulations to be even more transparent. Another example is going beyond the requirements of the Americans for Disabilities Act to accommodate a worker or customer because of a sense of social justice.

Discretionary or Philanthropic

This final component extends even beyond ethical expectations to actively engage in programs that help society. As Archie Carroll states in "The Pyramid of Corporate Social Responsibility:" "Philanthropy is more discretionary or voluntary on the part of businesses even though there is always the societal expectation that businesses provide it." Examples of this would be lending an executive to help with United Way fundraising or helping African girls stay in school as Procter and Gamble's Protecting Futures program does.

About the Author

Randi Hicks Rowe is a former journalist, public relations professional and executive in a Fortune 500 company, and currently a formation minister in the Episcopal Church. She has been published in Security Management, American Indian Report and Tech Republic.She has a bachelor's in communications, a master of arts in Christian education and a master of business administration.