The idea of corporate social responsibility (CSR) began to be discussed with the 1953 publication of Howard R. Bowen's book, "Social Responsibilities of the Businessman." It became more talked about during the social upheaval of the 1960s, including civil rights and environmental responsibility, with some authors writing about 30 or more points of CSR. Then, in 1991, Archie B. Carroll simplified CSR into a four-part pyramid. Its simplicity, yet ability to describe the idea of CSR with four areas, has made the pyramid one of the most accepted corporate theories of CSR since.
TL;DR (Too Long; Didn't Read)
The four levels of social responsibility are economic, legal, ethical and philanthropic responsibilities,
First Level: Economic Responsibilities
The lowest level of the pyramid represents a business's first responsibility, which is to be profitable. That's the reason it was created to begin with; not out of greed, although some businesses have been accused of having greed at their core. But businesses are created to be the livelihood of their owners. It's how the owners pay their own bills. That goes for its investors, too. Although the business may not be the sole livelihood of the investors, they invested with the hope of making money. After all, their funds are tied up in this business, so getting earnings from it is the reward for investing.
Businesses also need to be profitable to be able to pay their employees, vendors and contractors. If it isn't profitable, all of these people will be affected, vendors won't sell to them, employees will quit and the business will fail.
Two friends who love to bake use their savings and a loan from a relative to open a bakery. They hire two part-time employees to work mornings, waiting on customers and restocking pastries while the owners bake. At first, the bakery only makes enough money to pay the part-time helpers minimum wage and pay for rent, supplies, utilities and other bills. As the bakery becomes a bit more profitable, the owners advertise to attract more customers. With more customers, they need to give their part-timers more hours and buy more supplies to bake more pastries for the extra customers. As the business grows, they'll use some of the profits to pay back the loan. Eventually, the owners want to take a salary and give their employees raises as a reward for their hard work and an incentive to stay. None of this would be possible without profits.
Second Level: Legal Responsibilities
The second level of the pyramid is the business's legal obligation to obey the law. Not just some of the laws, but all the laws, all the time. It means not looking the other way while gray areas of the law are ignored, because doing so jeopardizes the business.
Fines can be steep for disobeying business laws. Skirting food safety laws can get the business shut down quickly. If someone gets sick, there could be an expensive lawsuit with legal fees and even higher fines to pay, which could put the company out of business. This would put the employees out of work and cause financial setbacks for suppliers.
Third Level: Ethical Responsibilities
The ethical layer of the pyramid is described as doing the right thing, being fair in all situations and also avoiding harm. At first, this sounds simple enough. But when coupled with the first level, to be profitable, conflicts can occur. Can a business always be fair and turn a profit? And, these ethics apply to all stakeholders, including investors and employees, as well as to customers. What about to competitors? Well, always means in all cases at all times, so yes, these ethics would apply to dealings with competitors.
Advertising is an area where firms are known to stretch the truth, making statements that aren't necessarily false, but aren't necessarily true in all cases either. Advertisers must meet the guidelines set by the Federal Trade Commission and they are sometimes told to stop making certain health or other claims that aren't proven. But what about statements like, "best pies east of the Mississippi." To be true, the owners would have had to personally try the pies of every bakery east of the river. And, when it comes to food, "the best" is quite subjective. One person might describe a crust as "buttery, light and flaky," while another person would deem it "tastes like cardboard."
Fourth Level: Philanthropic Responsibilities
At the top of the pyramid, occupying the smallest space is philanthropy. Businesses have long been criticized for their carbon footprint, their part in pollution, using natural resources and more. To counterbalance these negatives, they should "give back" to the community they take from.
They could do this directly, with a monetary donation to plant more trees in the park. This helps to offset the bags and boxes they put their pastries in. Or, they could get the company's employees involved by having a tree-planting day at the park. The company will pay for the seedlings, and they will make time for the volunteer work, which costs the company money in the time the employees are being paid, but aren't producing any work for the company. Additionally, the bakery could donate leftover bread, donuts, cookies and other pastries to a local homeless shelter at the end of the day instead of selling day-old items at a discount in the bakery.