Aviva Geva is with the Open University of Israel, Department of Management and Economics, Israel.
Three Models of Corporate Social Responsibility: Interrelationships between Theory, Research, and Practice
Version of Record online: 28 FEB 2008
© 2008 Center for Business Ethics at Bentley College
Business and Society Review
Volume 113, Issue 1, pages 1–41, March 2008
How to Cite
GEVA, A. (2008), Three Models of Corporate Social Responsibility: Interrelationships between Theory, Research, and Practice. Business and Society Review, 113: 1–41. doi: 10.1111/j.1467-8594.2008.00311.x
- Issue online: 28 FEB 2008
- Version of Record online: 28 FEB 2008
Decades of debate on corporate social responsibility (CSR) have resulted in a substantial body of literature offering a number of philosophies that despite real and relevant differences among their theoretical assumptions express consensus about the fundamental idea that business corporations have an obligation to work for social betterment. All accounts of CSR recognize that business firms have many different kinds of responsibility, and seek to define both the scope of corporate responsibility in society and the criteria for measuring business performance in the social arena.1 Waddock2 used the metaphor of a branching tree to describe how the field has evolved into its current understanding of CSR, an understanding that attempts to link the relatively parallel universes of theory and practice, and to illustrate how various conceptual branches are related to each other. Fruitful as the development of a comprehensive organizing framework for the field has been, we are still left with the same quagmire of definitional problems that beclouded the old debate about the exact nature of CSR. The old claim that CSR “means something, but not always the same thing to everybody”3 is no less true today. This article seeks to add clarity to CSR theory and research by focusing on the core responsibilities that form the trunk of the branching CSR tree. A comparative analysis of three recognized CSR models—represented graphically as a pyramid,4 intersecting circles,5 and concentric circles6—might help locate and clarify ambiguities through revealing systematic differences in their underlying assumptions, conceptual structure, methodological tools, and managerial implications.
In the following section I briefly review the evolution of the CSR concept and its extensions. I next present the three CSR models beginning with a critical analysis of Carroll's CSR pyramid, a dominant model that has enjoyed wide popularity among business and society scholars; I will then examine the intersecting circles (IC) model, a CSR configuration representing overlapping responsibility areas; I will conclude with the concentric circle (CON) model, originally developed by the Committee for Economic Development (CED), and reformulated here so as to adjust to recent developments in CSR thought. In each section of the comparative analysis, I will first portray the general idea of the model, and then discuss its theoretical assumptions and its implications for research and practice. The last section discusses some of the implications of this analysis for future CSR research and teaching.
FROM CSR BRANCHES TO CSR TRUNK
- Top of page
- FROM CSR BRANCHES TO CSR TRUNK
- THE PYRAMID OF CSR
- THE INTERSECTING CIRCLES MODEL OF CSR
- THE CONCENTRIC-CIRCLE MODEL OF CSR
Early definitions of CSR, or CSR1 in Frederick's7 well-accepted classification, carried heavy philosophic overtones. The abstract and often highly elusive principles governing CSR1 yielded, toward the late 1970s, to the action-oriented managerial concept of corporate social responsiveness (CSR2) and corporate social performance (CSP). The new theoretical approaches to CSR went beyond the previous somewhat narrower focus and, instead, aimed to develop more comprehensive frameworks that incorporate operational and behavioral aspects of corporate endeavor, relate the corporation to its external environment, and ground CSR/CSP theory in one or more social sciences–humanities disciplines.8
Carroll's foundational article on social performance9 provided a three-dimensional model defined by categories of CSR (economic, legal, ethical, and discretionary) on the first dimension, managerial philosophies or modes of social responsiveness (reaction, defense, accommodation, and proaction) on the second dimension, and the range of social issues that business must address (e.g., consumerism, environment, product safety) on the third dimension. Wartick and Cochran presented their evolution of the CSP model, which extended Carroll's model recasting his three dimensions of responsibility, responsiveness, and social issues into a framework of principles (using Carroll's four-part definition of CSR), processes (social responsiveness—the general means to the ends of satisfying corporate social obligations), and policies (social issues management).10 They emphasized that CSP can integrate the three dominant orientations in the field of business and society: the philosophical orientation (relates primarily to the principles of social responsibility), the institutional orientation (relates primarily to the process of social responsiveness), and the organizational orientation (relates primarily to the policies of social issues management).
In what became an important framework that continues to shape the conceptualization of the field, Wood, building on Wartick and Cochran's CSP model, integrated much of the previous theoretical developments in an acknowledged definition of CSP as the “configuration of the principles of social responsibility, processes of social responsiveness, and policies, programs, and observable outcomes as they relate to the firm's societal relationships.”11 This definition permits CSP to be seen as an assessment tool, a guiding framework that provides an outline of what needs to be considered (policies, programs, processes, and social outcomes) in evaluating CSR. It, however, does not clarify whether or to what extent processes of responsiveness and observable social outcomes are linked to principles of responsibility. In other words, the CSP model escapes the central issue of defining the boundaries of CSR. Indeed, as Wood noted, one of the major attractions of the CSP model has been its ability to sever the implicit identity of responsibility, responsiveness, and social outcomes and to indicate, for example, that a firm having social programs and policies can be seen as responsive to social expectations, but not necessarily therefore as socially responsible.
In an effort to integrate normative and descriptive approaches to CSP, Swanson reoriented Wood's framework through shifting the focus of attention from the CSP branches—processes of corporate social responsiveness, programs, policies, and social impacts of corporate behavior—to the CSP trunk: the core responsibilities that cannot be escaped because they are integral to action.12 Using Frederick's nature-based approach to foundational corporate values,13 it seems that Swanson was looking for a more process-oriented, dynamic model of CSP that could accommodate mutual influences and combined effects of different clusters of values.
Consistent with Swanson's reorientation of the CSP model, there has been recently renewed interest in the core values or principles that provide the behavioral and philosophical rationale for socially responsible corporate practices. For example, Waddock suggests “generally agreed principles of corporate citizenship,”14 Clarkson lists seven principles for stakeholders management,15 Hemphill proposes sets of principles of excellence for managing corporate relationships with primary stakeholders,16 Logsdon and Wood provide a “relatively small set of basic universal principles”17 that govern the company's conduct, and Goodpaster presents the Caux Round Table Principles of global business as “one of the best known sets of transcultural principles available today.”18 Observing changes in social expectations from the business community, scholars may revise and adapt existing formulations of CSR, but, as Carroll noted,19 it seems unlikely that new concepts could develop apart and distinct from the groundwork that has been established to date.
Rather than articulating a set of principles that purports to offer necessary and sufficient conditions for CSR, this article focuses on the conceptual structure of CSR and the relations between its elements as depicted in three different schematic descriptions (Figure 1): pyramid, intersecting circles, and concentric circles.
As Bacharach pointed out, “A theory is a statement of relations among concepts within a set of boundary assumptions and constraints.”20 A comparative analysis of the three conceptual models will show that the same terminology represents different meanings and different approaches to CSR. More specifically, the comparative analysis will demonstrate that the nature of CSR, its underlying boundary assumptions, the methodological tools, and the performance assessments are both the cause and the consequence of how the relationship between its elements is understood. Analysis of the differences in the conceptual structure across the three models (see Table 1) may assist in clarifying ambiguity in CSR theory and research through explicating the implicit assumptions by which each is bounded, unraveling inconsistent findings on the social impacts of corporate behavior, and removing impurities in managerial decision making.
|CSR Pyramid||Intersecting Circles||Concentric Circles|
|General Description||Hierarchy of separate responsibilities||Nonhierarchical set of intersecting responsibilities||Integration of responsibilities; all sharing a central core|
|Nature of CSR||Normative restraints of responsiveness||Classification framework; no normative guidance||Incurred obligation to work for social betterment|
|Scope of Responsibilities||Narrow||split||Wide|
|Order of importance||Hierarchy; Economic responsibility first||No prima facie order||Inclusion system; economic circle at the core|
|Role of Philanthropy||“Icing on the cake”||Subsumed under economic/ethical responsibilities||Integral part of CSR|
|Operationalization||Constant-sum method||CSR portraits||Representative range of measures|
|CSR–CFP relationship||Positive||Positive, Negative, or Neutral||Nonlinear|
|Justification for CSR||Ethics pays||Strategic considerations||Normative obligation|
THE PYRAMID OF CSR
- Top of page
- FROM CSR BRANCHES TO CSR TRUNK
- THE PYRAMID OF CSR
- THE INTERSECTING CIRCLES MODEL OF CSR
- THE CONCENTRIC-CIRCLE MODEL OF CSR
A leading model of CSR is Carroll's four-part pyramid.21 The CSR pyramid was framed to embrace the entire spectrum of society's expectations of business responsibilities and define them in terms of categories. According to the model (Figure 1a), four kinds of social responsibilities constitute total CSR: economic (“make profit”), legal (“obey the law”), ethical (“be ethical”), and philanthropic (“be a good corporate citizen”). According to Carroll, the use of a pyramid to depict the conceptual model of CSR is intended “to portray that the total CSR of business comprises distinct components that, taken together, constitute the whole.”22 The model categorizes the different responsibilities hierarchically in order of decreasing importance. The most fundamental is economic responsibility, “all other business responsibilities are predicated upon the economic responsibility of the firm, because without it the others become moot considerations.”23 Businesses are expected to operate within the framework of law, thus legal responsibility is depicted as the next layer of the pyramid. Following is ethical responsibility defined in terms of “those activities or practices that are expected or prohibited by society members even though they are not codified into law.”24 Last in importance, at the top of the pyramid, is philanthropic responsibility, which is discretionary in nature. In the main, the pyramid purports to describe a necessary and sufficient set of obligations that socially responsible businesses should simultaneously fulfill, taking into consideration their decreasing importance.
The central assumptions underlying the CSR pyramid are presented below, followed by a discussion of their theoretical implications (see summary in Table 1).
Nature of CSR Taking a managerial approach, the four-part pyramid defines CSR in terms of social expectations that responsible corporations should strive to meet. Prevailing social norms and expectations provide external criteria against which corporate performance can be measured; thus, the notion of responsibility in the pyramid model is reduced to normative restraints of responsiveness.25 In other words, CSR in the pyramid formulation is basically accommodative. Suggesting that businesses should treat CSR not as a goal to be maximized but as a constraint, the pyramid does in effect promote satisficing behavior rather than striving for excellence.
Scope of responsibilities Understanding CSR as an array of separate domains naturally leads to narrow definitions of the different responsibilities. Thus, the economic role of the corporation is reduced in the pyramid model to the narrow emphasis on profit making of neoclassical economics.26 Likewise, legal responsibility is restricted to the “letter” of the law, while the “spirit” of law is reserved for the ethical domain.27 The ethical domain is further separated from the legal domain using a negative definition: ethical responsibility relates to those social expectations and norms not yet codified into law. In the same vein, philanthropic responsibility designates those areas of voluntary social involvement not specifically prohibited or demanded of companies because of their economic, legal, and ethical responsibilities.
Total CSR The pyramid is a conjunction of separate domains of responsibility. In contrast to the ordinary view, the so-called separation thesis,28 that businesses can focus either on profits or social concerns but not on both, the CSR pyramid “sought to argue that businesses can not only be profitable and ethical, but they should fulfill these obligations simultaneously.”29 However, the clear-cut separation of the domains raises the problem of integration. At most, the pyramid model can postulate that while separate, the bundle of responsibilities—formulated as a simple arithmetic sum30—must apply simultaneously; it says nothing about how these responsibilities are interwoven.
Order of importance If the four responsibilities taken together constitute a whole, what is the meaning of the decreasing order of importance? A number of explanations have been offered to answer this question: (1) the pyramid suggests a ranking of CSR priorities based on the level of essentiality—the most fundamental is economic responsibility, of smallest importance is the philanthropic category, which is a sort of “icing on the cake”;31 (2) the pyramid characterizes the social pressures imposed on the business sector in decreasing order of their strength—whereas economic and legal responsibilities are required of business and ethical practices are expected, philanthropic contributions, albeit desired, are voluntary; (3) the hierarchy of importance “simply suggest[s] the relative magnitude of each responsibility”;32 and lastly, (4) the four categories “are ordered in the figure only to suggest what might be termed their fundamental role in the evolution of importance. . . . [T]he history of business suggests an early emphasis on the economic and then legal aspects and a later concern for the ethical and discretionary aspects.”33
As it stands, the combination of simultaneity and hierarchy may explain the wide popularity of the pyramid model among ethicists and management theorists alike. Simultaneity reconciles the firm's profit-making concern with social concerns; the hierarchy of priorities provides the flexibility necessary to management decision making. In the ideal case, a responsible firm will simultaneously fulfill all component parts of the CSR pyramid. But this “win-win” outcome is not always possible. In daily life, where different corporate responsibilities often come into conflict, the good corporate citizen, though striving to fulfill all its responsibilities, will actually apply the proposed order of priorities to resolve the conflict.34
The role of philanthropy The role of philanthropy has been discussed in the context of the CSR pyramid from two perspectives: inwards—as compared to other components of CSR, and outwards—as compared to other notions of CSR. Inwards, the question arises whether the philanthropic category can be correctly considered a responsibility in itself. To the extent that responsibility is conceived as a normative restraint or an obligation it clearly contradicts the discretionary nature of philanthropy. In an attempt to reconcile this difficulty, Carroll has argued that in fact, “philanthropy is highly desired and prized but actually less important than the other three categories of social responsibility.”35
Looking outwards, philanthropy is often regarded as the defining component of CSR. Milton Friedman's statement that management is to make as much money as possible within the limits of the law and ethical custom embraces three components of the CSR pyramid—economic, legal, and ethical.36 A central tenet of present-day thinking on CSR is that businesses have a responsibility that goes beyond the demands of law and common morality. Philanthropy, which is usually understood as exceeding this minimum, appears to serve as the distinguishing point between the neoclassical economic position and the new widely accepted notion of corporate citizenship, which highlights the importance of corporate giving.37 However, given the discretionary nature of philanthropy, its role as the distinguishing component of CSR creates a boundary problem that, as shown below, will lead to two different resolutions.
The pyramid model of CSR has served as a platform for some of the major research developments in the field. As Clarkson claimed, “the strength of its influence can best be judged by its longevity and that of its progeny.”38 A considerable number of empirical studies published in recent years have focused first on operationalizing the framework, and then on developing and testing a set of hypotheses regarding the determinants and consequences of CSR.
Operationalization There has been extensive research on the issue of CSR in general and in reference to the pyramid model in particular.39 Here, I shall focus on the operationalization of the pyramid model. As Aupperle, Carroll and Hatfield claimed, the attractive feature of the CSR pyramid was its definition of CSR through four components.40 They viewed this comprehensive quality as particularly conducive to the construction of a research instrument, which could allow assessment of orientations toward social responsibility of corporate executives as well as inquiry into whether or not four separate components of CSR exist, and, if they do, whether they exist in the weighted proportions implied by the pyramid.
The most widely used research tool in CSR pyramid studies is the constant-sum instrument deployed by Aupperle.41 This sort of comparative rating scale involves relative judgments of the importance of each component with direct reference to the other components being evaluated. Raters are instructed to allocate a given sum (e.g., 10 or 100 points) among statements in each of several sets of four statements. Each statement in a set corresponds to one of the four components of the CSR pyramid. The results of content validity studies appear to support model and instrument as regards reliability, the number of CSR components, their content, internal consistency, and relative weightings.42 Note, however, that the more reliable the measure, the higher the similarity between the different attempts to measure the same construct, and, accordingly, the narrower the scope of this construct.
The partitioning of CSR in connection with the constant-sum method introduces, perhaps as an unintended artifact, a trade-off assumption. Adopting this method means assuming that societal concerns and concern for economic performance are mutually subversive rather than mutually supportive. This assumption has attracted widespread criticism in business and society literature,43 and certainly cannot be justified in the framework of the pyramid that requires simultaneous fulfillment of all four responsibilities. It is worth noting here that trade-offs among responsibilities must not be confused with trade-offs among outcomes. To be sure, many managerial decisions involve trade-offs among outcomes, not responsibilities. One may assume full responsibility and still make difficult decisions demanding high economic or social price.
While the constant-sum method does allow more insight into the relative ranking of CSR components, it does not readily lend itself to assessing total CSR. A different approach to evaluating total CSR is based on measuring CSP, the pyramid providing the framework for data gathering on each of its four components. Commonly, the measure of economic responsibility is profitability as presented in annual reports; legal responsibility is assessed by the absence of litigation and allegations of illegal corporate behavior or environmental or safety problems; ethical responsibility is evaluated by the existence of corporate code of ethics and other ethical programs and initiatives; and discretionary responsibility is defined in terms of the extent of the corporation's philanthropic activities.44 The fundamental problem with this method, besides problems of accessibility to corporate data, is one of validity; namely, of determining the types of behavior that can serve as valid indicators of, or surrogates for the corresponding responsibilities. For example, is the absence of allegations a valid indicator of legal responsibility? Is the existence of a corporate code of ethics a valid surrogate for ethical responsibility?
Several researchers have used Aupperle's constant-sum instrument to examine the impact of different factors, especially demographics and social context, on people's orientation toward CSR45 and to investigate whether and how society's changing expectations affect priority in CSR orientations across cultures and over time.46 Given the globalization of business activities, more and more organizations need to gain insight into the nature of CSR orientations in different countries and as public expectations put increasing demands on the business community. Research in this important direction is still in its infancy.
CSR–CFP relationship The question of CSR contributions can be approached from a normative as well as from an instrumental point of view. The former holds that no matter what the consequences of CSR, it must be adopted because it is the morally right thing to do; the latter emphasizes the connection between CSR principles and outcomes: CSR should be adopted because it may pay. Although corporate financial performance (CFP) is only one, and not necessarily the primary, expected consequence of adopting a CSR approach, the great bulk of empirical research on CSR contributions has focused on the relationship between the social and the financial performance of business corporations. After all, if it could be demonstrated that socially responsible firms were also profitable, this would be an added argument in support of the CSR movement. In spite of a long record of studies and continuous improvements in currently available databases and measurement methods, the connection, if any, between corporate social and financial performance is still far from clear—studies have reported a positive, negative, and neutral impact of CSP on CFP.47 One crucial reason for the inconsistent findings stems from conceptual and methodological differences in the operationalization of key terms. As Wood and Jones claimed, “the theory and the methods have been incongruent.”48 To make sense of this body of research, correlation studies must be integrated with a CSR model whose systematic power would provide the conceptual and methodological tools needed for formulating hypotheses and improving their testability. As my comparative analysis will show, different models tend to beget different research instruments and generate different hypotheses on the CSR-CFP link (see summary in Table 1).
A critical implication of the pyramid model is the positive relationship between CSR and CFP. There are numerous grounds for this claim. First, the four-part definition of CSR emphasizes the importance of the economic component as the foundation upon which all others rest. In other words, a company is defined as socially responsible primarily if it is profitable. Because of the interrelationship between profitability and being defined as socially responsible, it can be expected that companies having a favorable (unfavorable) reputation for CSR have favorable (unfavorable) financial results. Indeed, as reputation researchers have shown, CSR can have a positive impact on CFP through its impact on reputation. And conversely, the absence of CSR can damage CFP due to negative reputational effects.49 Second, the CSR pyramid is presented as an expectations-based model. There is a CSR premium that can be earned by meeting the expectations of various stakeholders. According to the good management theory, well-matched attention to CSR domains can increase the efficiency of the company's adaptation to internal and external demands.50 Resulting benefits such as employees’ productivity, reputation for product quality, and consumer satisfaction lead to better financial performance. Finally, the pyramidal structure suggests that companies high in CSR ranking are high on financial performance because only well-to-do companies can afford the luxury of above-average social performance.
Unfortunately, the measures used to assess the relationship between CSR and CFP in empirical studies to date are somewhat illusory. The wide range of existing methods—including reputational surveys, content analysis of disclosure documents, examination of implementation arrangements, accounting-like auditing procedures, and even Aupperle's constant-sum measure of the four-part CSR construct—are all based on a presumed dichotomy between corporate economic and social performance.51 In defiance of the four-part definition, Aupperle, Carroll and Hatfield claim that “[t]he social orientation of an organization can be appropriately assessed through the importance it places on the three non-economic components compared to the economic.”52 Devoid of its core component, it is doubtful whether this reduced yardstick can be considered a valid measure of CSR. Studies using Aupperle's constant-sum instrument did not find any relationship between social responsibility and profitability.53 An ironical complementary result of these studies is the finding, which though not reported can be logically inferred, that neither was there any relationship between economic responsibility and profitability.54
The partitioning method deviates from the basic tenets of the pyramid model: it excludes the core component from the measure of total CSR, it mandates trade-off between social and economic responsibilities, it assumes a positive correlation between social concern and total CSR and it ignores the hierarchical order of priority. A more consistent measure of total CSR would embrace all its components while allowing for more complex relationships among them and between them and the total CSR. For example, a CSR function could be developed that, for each possible bundle of the four responsibilities, would yield a number representing the level of CSR provided by that bundle. The assumption is, of course, that the raters are always able to rank each possible bundle in order of preference. Their rankings could then be used to assess the correlation between CSR and profitability.
In recent years, the friendship model of the relationship between financial and social interests has gained growing acceptance premised on management's belief that “ethics pays.” The CSR pyramid dovetails well with this current trend among corporate managements. While attempting to extend the neoclassical economic paradigm to accommodate societal expectations and the effects of business operations, the pyramid does emphasize that the fundamental responsibility of business is economic. It suggests that it is in the financial interest of businesses to comply with the law, to engage in ethical behavior, and to exercise philanthropy. Stated differently, social responsibilities are accepted to the extent that they can serve a part of the firm's competitive strategy. The underlying assumption of an expectations-based model such as the CSR pyramid is that companies do not pursue their humane policies for altruistic reasons alone. They do so because the nature of society is such that they could not behave any other way and expect to survive as viable entities. The main problem with such a responsive strategy is, of course, that it is highly contingent and thus may lead to dual standards in the global market when dealing with stakeholders operating in different sociopolitical contexts.55
A basic question regarding the provision of CSR is: precisely how much should a firm spend on social responsibilities? Should it strive to maximize profits? Given that philanthropy is a positive duty, should it assume a more-is-better attitude toward this activity? The pyramid advances a proportionate allocation of resources among the different kinds of responsibility. It implies that the firm must achieve a critical level of profit; thereafter, priority is given to the fulfillment of other social obligations in decreasing proportions: profit making gets the largest portion, philanthropy the smallest. In practice, however, the pyramidal lexicographic view of CSR can mean that “legal, ethical, and discretionary (charitable) responsibilities might be ‘put on hold’ if business is bad or times are tough.”56 Considering the lower weights given to the upper levels of the pyramid, these responsibilities could be subject to a LIFO method of placement on a firm's action inventory, that is, “last in, first out.”57
In sum, the pyramid framework is consistent with the widely accepted general view that CSR is an extensive and inclusive concept, encompassing a range of responsibilities that must be simultaneously fulfilled. Within the broad consensus on CSR as a compound concept, there are diverse views on the intricate relationships among the different domains of responsibility. The pyramid model suggests hierarchical relationships between separate domains of CSR; the intersecting circles model below attempts to account for overlapping nonhierarchical relationships among the different responsibilities.
THE INTERSECTING CIRCLES MODEL OF CSR
- Top of page
- FROM CSR BRANCHES TO CSR TRUNK
- THE PYRAMID OF CSR
- THE INTERSECTING CIRCLES MODEL OF CSR
- THE CONCENTRIC-CIRCLE MODEL OF CSR
The intersecting circles (IC) model of CSR (Figure 1b) contrasts with the pyramid model in two main aspects: (1) it recognizes the possibility of interrelationships among CSR domains; and (2) rejects the hierarchical order of importance. The distinctive features and implications of the IC model, as contrasted with the pyramid model, are summarized in Table 1 and will become apparent as my analysis proceeds.
A pyramid framework cannot fully capture the interpenetrating nature of the CSR domains, nor does it denote all possible tension points among them. Such mutuality has been recognized as an integral characteristic of CSR58 and of such fundamental importance that Schwartz and Carroll saw it necessary to propose an alternative approach to CSR, one that includes the major domains of responsibility and clearly depicts their interrelationships.59 The IC model refutes the notion that CSR is nothing but a collection of contingent, externally related topics; it holds rather that the different responsibilities are in dynamic interplay with each other, and it is the overall corporate responsibility to advance harmony and resolve conflicts between them.
As Schwartz and Carroll claim, the primary idea behind the IC model is that none of the CSR domains is prima facie more important or significant relative to the others.60 In particular, the economic responsibility is not necessarily the most fundamental. According to Davis's Iron Law of Responsibility,61 it is true that corporations are designed for business, but before anything else they are social creations whose very existence depends on the willingness of society to endure and support them. In this view, the social responsibilities of the firm are not necessarily less important than its economic undertakings.
The following discussion focuses on Schwartz and Carroll's three-domain model (Figure 2) as a recent example of the IC approach to CSR that stands in sharp contrast to the pyramid insofar as its conceptual structure is concerned.62 Schwartz and Carroll's new model of CSR (and see the comparison with Jones's model below) is an attempt to develop the CSR domains “more completely both in terms of what each means or implies and in terms of the overlapping categories that are identified when the three domains are depicted in a Venn diagram format.”63 Unfortunately, their use of a three-circle Venn diagram to amend the difficulties inherent in the pyramid model introduced new difficulties that undermine its ability to provide a proper conceptualization of CSR. Guided by Table 1, let me highlight a few points that may help clarify controversial issues in CSR theory.
Nature of CSR The IC model seems to be primarily intended as a descriptive model of CSR, not a normative model. A major feature of Schwartz and Carroll's version of the model is the depiction of the main domains of responsibility in a Venn diagram, which highlights the overlapping nature of the domains and the resultant creation of a set of CSR categories in which corporations and their activities may be described, classified, and analyzed. As a descriptive model, it permits CSR to be seen not as something that is implicitly good in itself, but as a construct that must be used in conjunction with explicit values about appropriate business–society relationship.64 Put differently, the categories of CSR should not be thought of as normative standards, but as analytical forms to be filled with the content of explicit values preferences that exist within a given cultural and organizational context.
Scope of responsibilities The depiction of a three-domain CSR in a Venn diagram creates eight sections: seven inner and one outer. Let us label the three different responsibilities, economic, legal, and ethical (moral), “E,”“L,” and “M,” respectively, and the corresponding complements, ““ (no E), “” (no L), and “” (no M), in that order; the eight categories are: E, EM, EL, L, LM, M, ELM, and .
The creation of pure and mixed classes of responsibilities in the framework of the intersecting circles raises concerns about the definition of the boundaries of CSR. CSR scholars gave different answers to this question. According to Schwartz and Carroll, CSR is composed of all seven inner sections, suggesting that each one of them represents instances of CSR. However, considering that Venn diagrams chart a logical space of mutually exclusive classes in a universe of all instances, it is difficult to make much sense of what particulars would fall into each of these classes. For example, the so-called purely economic (E) category, that part of the economic responsibility domain (E), which is, by definition, empty of social (legal and ethical) concerns, is nevertheless included in the universe of CSR as one of its classes. Schwartz and Carroll describe this class as follows: “[A]ctivities which are purely economic in nature must have a direct or indirect economic benefit, be illegal (criminally or civilly), or passively comply with the law, and be considered amoral or unethical.”65 This description of the purely economic domain of CSR represents a radical notion of economic responsibility that even well-known critics of most social responsibilities for corporations such as Milton Friedman would not accept. Taking the purely ethical (M) category as another example, we learn that this domain of CSR is defined by a loss-making practice that cares about ethics but disregards the law. Obviously, the new categories created by the partition of the three main domains of CSR are difficult to justify in terms of social responsibility.
The nature of the Venn categories as closed areas requires a dichotomous definition of what is in and what is out. The difficulty to define responsibility in a dichotomous framework is perhaps the reason why what was meant to be a categorization of the three core domains of corporate responsibility glossed almost unnoticeably into a classification of corporate activities: responsible activities are in, irresponsible activities are out. Thus, for example, according to Schwartz and Carroll, a corporation's actions would fall outside of the economic domain if “they are engaged in without any real consideration of the possible economic consequences to the firm.”66 If irresponsible practices fall outside of the relevant domain of responsibility, in what terms of accountability are they to be treated? Paradoxically, the very distinction between responsible and irresponsible activities excludes from the domain of responsibility (whether economic, legal or ethical) the most important matter of liability, i.e., reckless behavior. As Wood has noted, every firm is responsible for its social performance, and a firm's social performance can be negatively or positively evaluated; however,
The entire CSP concept has taken on subtle “good” and binary connotations, as though corporate social performance is something that responsible companies do, but irresponsible companies do not do. Even though such connotations are common in the literature, they are misrepresentations of CSP.67
Total CSR If each of the seven categories is problematic as a class of CSR, what can we say about the total CSR? In contrast to the pyramid framework which depicts the total CSR as an "and" orientation, namely a conjunction of the different responsibilities; the Venn model implies an "or" orientation, which is a disjunction of the different categories. The pyramidal notion that a CSR firm should strive to make a profit, obey the law, and be ethical is easy to follow, but what is the meaning of CSR that incorporates E, L, M, EM, EL, LM, and ELM in the same framework? While the main responsibilities as defined in the pyramid framework are complementary components of the total CSR, their parts as defined in Schwartz and Carroll contradict each other and therefore cannot add up to a coherent global concept of CSR. Thus, the proposed application of the Venn model to CSR undermines its all-encompassing orientation.
Jones's social control of business model, in contrast, used the Venn diagram for general integration purposes.68 As a general framework for business and society, the model was intended to describe the interrelationships of the various subjects in the field and show how the parts fit together. Since the field is concerned with the tensions that arise from the interaction of business and society, only those segments representing the interplay of the economic system with the political (law) and cultural (ethics) systems are considered relevant.69 In reference to CSR, the relevant area is confined to those domains where corporate economic concerns meet with social concerns, namely, EM, EL, and ELM. Pure economic responsibilities (which are empty of social concerns) as well as pure ethical and legal responsibilities (which are empty of economic concerns) do not count among the components of CSR, and thus fall outside its boundaries. Jones's institutional definition of CSR gains concrete meaning in the reality of cross-sector partnerships that have become a widely adopted vehicle for business, government, and communities to work together to address social issues.70 However, the issue of cross-sector partnerships extends the discussion of CSR to the field of public policy.
Order of importance Being committed to multiple objectives at one and the same time, how are the different corporate responsibilities to be reconciled in cases of conflict? The CSR pyramid resolves this fundamental difficulty by specifying the order of priority among the various responsibilities; the concentric-circle model (see below) offers a normative core of integration as another solution. The IC model, in contrast, fails to provide any clear normative guidance for managerial decision making. It leaves managers faced with competing responsibilities with no way to make principled or purposeful decisions. As Jensen has pointed out, “multiple objectives is no objective.”71
The role of philanthropy In general, the domain categories in the three-circle Venn diagram are defined in a manner consistent with Carroll's four-part model, with one exception: the philanthropic category is subsumed under the ethical and/or economic domains. Many would argue that to subsume the philanthropic category under economic responsibility is to convert what is seen as a virtue into self-interest.72 Eventually, however, the choice to consider the philanthropic category separately or subsume it under other domains of responsibility largely depends on the costs and benefits of the particular framework of the problem at hand.
Operationalization Under the assumption that none of the three CSR domains is prima facie more important relative to the others, the immediate research question concerns the assessment of the relative mix of economic, legal, and ethical forces and orientations that pervade the business community. As Schwartz and Carroll suggest, the model could be especially useful for the establishment of “CSR portraits” for different entities (e.g., individuals, corporations, stakeholders, industries, nations). Thus, for example, CSR portraits could be established for stakeholder groups based on the domains they believe the corporation is currently emphasizing or would prefer the corporation to operate within. As yet, however, the IC model is in an early stage of development, still waiting for the operationalization of the variables under consideration and the creation of a valid and reliable data-gathering instrument. The most basic issue of CSR research is: How do we measure better versus worse? Or, in terms of the IC model, which portrait is better and which is worse: purely economic (E) or purely ethical (M), legal and economic (EL) or ethical and economic (EM)? The IC framework, as a descriptive model of possible partnership between corporate responsibilities, fails to provide a range of levels for evaluating CSR portraits.
CSR–CFP relationship Are CSR portraits associated with CFP? Considering the variety of CSR portraits, all kinds of relationships can be hypothesized—positive (e.g., for “purely economic” and CFP), negative (e.g., for “purely ethical” and CFP) or neutral.
The IC model draws managers’ attention to the overlapping nature of the CSR domains and sets the running of the interrelationships among them as the central issue of the CSR management agenda. As Schwartz and Carroll suggest, the model could be useful in identifying and analyzing existing as well as anticipated points of tension among the different domains. Considering that the different responsibilities are in dynamic interplay with each other, the role of the manager is not only to resolve existing conflicts or, better, to prevent them before they develop, but to advance harmony and create opportunities for beneficial partnerships.
From a managerial point of view, the most important advantage of the IC model is its flexibility. Allowing for all sorts of interrelationship among the different domains of responsibilities with no prima facie order of priority, the model is open to a wide range of interpretations. In fact, its managerial prescriptions and implications are nearly limitless. With such a breadth of interpretation, it seems clear that this model can be attractive to all kinds of managers and directors, socially responsible and opportunistic alike. Directing managers to promote multiple responsibilities, while leaving them with no principled criterion for decision making, plays into their hands by allowing them to exercise their own preferences in spending the corporation's resources.73 One could make a case that the nonhierarchical nature of the IC model provides unscrupulous managers with a ready excuse to act in their own self-interest. By appealing to whichever responsibilities they like, opportunistic managers are able to justify all but the most egregious self-serving behavior. Without specifying what better is, the IC model effectively leaves managers unaccountable for the effects of their decisions on the firm and on society at large.
THE CONCENTRIC-CIRCLE MODEL OF CSR
- Top of page
- FROM CSR BRANCHES TO CSR TRUNK
- THE PYRAMID OF CSR
- THE INTERSECTING CIRCLES MODEL OF CSR
- THE CONCENTRIC-CIRCLE MODEL OF CSR
The concentric-circle (CON) model (Figure 1c) is similar to the pyramid in that it views the economic role of business as its core social responsibility, and similar to the IC model in that it emphasizes the interrelationships among the different corporate social responsibilities. But underlying these similarities are essential differences in the very definitions of the corporate responsibilities. Thus, the pyramid defines the corporate economic role in terms of narrow self-interest (“be profitable”), whereas the CON model defines this same role in terms of CSR, namely, enhancing the good of society (“be constructively profitable”). In contrast to the pyramid, which scales down the importance of the noneconomic social responsibilities (i.e., legal, ethical and philanthropic), and in contrast to the IC model which, along with interrelationships, also allows for no relations among the different domains of responsibility, the CON model outlines the noneconomic social responsibilities as embracing and permeating the core economic responsibilities.
The CON model is adapted from a notable statement issued in 1971 by the Committee for Economic Development (CED), an American association of influential business leaders. In this statement, CED advocated the notion that social contracts for business firms are not only feasible but morally necessary, and urged business to adopt a broader and more humane view of its function in society. The original CED model consists of three concentric circles. The inner circle represents the core responsibility of business in terms of CSR. It includes the basic responsibilities for the efficient execution of the economic function—products, jobs, and economic growth. The intermediate circle, which can be viewed as the ethical circle, encompasses responsibility to exercise the economic function with a sensitive awareness of basic ethical norms as well as changing social values and priorities. The outer circle, equivalent to the philanthropic circle, outlines newly emerging and still amorphous responsibilities that business should assume in order to become more broadly involved in actively improving the social environment. Legal responsibilities are not explicitly presented in the original CED framework, but rather subsumed under other corporate responsibilities. Thus, for example, the economic function of business includes “cooperating with the government in developing more effective measures to control inflation and achieve high levels of employment” or “supporting fiscal and monetary policies for steady economic growth.”74 The CON version presented here differs from the original model in that, for clarity and to create a common basis for comparison between the three CSR models, it places the corporate legal responsibilities in a particular circle, between the economic and the ethical.
For the sake of clarification, it should be noted that the structure of concentric circles, as opposed to concentric rings, represents a system of inclusion relations rather than a scheme of mutually exclusive domains. In a system of concentric circles, every member of the inner circle is also a member of the wider, more inclusive outer circle, but not vice versa. Thus, from a CSR perspective as expressed in the CON model, all economic responsibilities also have legal and ethical aspects.
Nature of CSR The CON model represents a normative approach to CSR. Compatible with recent developments in CSR thinking, the fundamental idea embedded in the CON model is that business corporations have an incurred obligation to work for social betterment, and this obligation acts as a constant function throughout all phases—mainstream and peripheral—of the company's operations. Applying Logsdon and Wood's line of reasoning, “Above all, CSR is a concept supporting social control of business that resides and operates inside business itself, with the aim of protecting and enhancing the public welfare as well as private interests.”75 While the pyramid and the IC models focus on the tension between business and society, the CON model highlights their interdependence. Advancing this notion of CSR, the CON model presents the relationships between business and society from two perspectives: outside-in and inside-out. The move from the outer circle inward reflects the long-standing concept of social control that refers to society's need to impose some standards of behavior on business activity in order to preserve the core function of business as an important instrument for social progress.76 The move from the inner circle toward the outside represents the internalization of social norms that reside and operate within business itself as affirmative or positive duties.77 In the framework of the CON model, the inside-out and the outside-in dimensions work in tandem. Translating the same approach to CSR into practice, Porter and Kramer have recently argued that a CSR company must integrate a social perspective into the core frameworks it already uses to guide its business strategy.78
Scope of responsibilities Understanding CSR as a framework of integrated responsibilities with a common core requires that each of the different responsibilities be defined in reference to this unifying meaning or purpose. The narrow definitions that characterized the separation of the CSR domains in the pyramid framework and in the seven-category IC model are replaced here with broad definitions that account for their common essence. A brief examination of these broad definitions may be useful in clarifying the critical differences between the contrasting CSR models.
The economic circle As we have seen, both the CSR pyramid and the seven-category IC model adopt a narrow definition of economic responsibility that focuses on the fundamental call on business to be a profit-making enterprise. In the CON framework the scope of economic responsibility is much broader and directly oriented toward the good of society. According to the CED statement, the principal economic responsibility of the corporation in CSR terms is “to serve constructively the needs of society—to the satisfaction of society.”79 Economic responsibility, in this view, is not simply about wealth creation; it is about generating wealth that improves the nation's standard of living, supplying the needs and wants of people for goods and services, and selling them at fair prices, providing jobs and decent wages to the work force, expanding career opportunities in all parts of society, and eliminating poverty.80 Under this wide definition, profitability is not the critical test for economic responsibility. Contrary to the narrow focus on profit making, which represents the neoclassical economics “IF” doctrine (if certain conditions are met, then if a firm concentrates on profit making, it contributes to the common good), the CON model holds that the CSR firm has direct responsibility to promote the quality of life, even at the expense of profitability.81
The legal circle Christopher Stone distinguishes between two senses of legal responsibility: responsibility 1, which emphasizes following the law, and responsibility 2, which emphasizes deliberation with preparedness to give good reasons for one's actions in terms that admit for generalization.82 In more common parlance we would say that responsibility 1 refers to the letter of law—i.e., observing the law per se, and responsibility 2 refers to the spirit of law—i.e., approaching law through socially appropriate considerations. The first type demands obedience; the second, in a way almost diametrically opposed to the first, puts a premium on autonomous choice. This distinction between the two senses of legal responsibility has direct relevance to a comparative analysis of the three CSR models. The pyramid and the seven-category IC models both limit the legal responsibility to responsibility 1: obey the law. The narrow focus on obedience reflects an external view of law-abiding behavior, and so breeds a cost–benefit approach to the law. The legal system, in this view, is a burden that should be avoided or, as there is no alternative, borne; the rationale for obedience being to seek pleasurable consequences and avoid negative consequences. Under the title of CSR, this kind of legal responsibility includes such varieties as restrictive compliance, opportunistic compliance, avoidance of civil litigation and anticipation of changes in legislation;83 all of which are characterized by what Stone has called “morality of duty,” namely the specification of minimum standards of conduct (“I won't do anything more than I am absolutely required to do”), rather than “morality of aspiration” and exhortations to realize one's fullest potential.84
The CON model, in contrast, incorporates into the legal circle both notions of responsibility: obedience (responsibility 1) and considered autonomy (responsibility 2). When rules of corporate behavior are relatively unambiguous and well established, legal responsibility demands nothing but observing the law; however, when legal control over corporations is ineffective, and perhaps even counterproductive, the responsibility that is needed is of the perceptive sort, emphasizing considerations of the general good. Defined in terms of commitment to the common good, legal responsibility represents an internal view of the company's behavior. The CSR company seeks to comply with legal obligations not because of the threat of litigation, but rather because these obligations have been internalized as guiding standards of behavior.85 Rather than seeking to “outsmart the law by the law,”86 a CSR firm is required to help to define the point at which regulation is not only necessary but desirable. This idea is directly expressed in Thomas McCabe's memorandum cited in the CED document:
Indeed, if corporations cannot deal individually with major social responsibilities such as pollution because of competitive cost disadvantages, and if they are unable to cooperate in resolving such difficulties, then they logically and ethically should propose and support rational governmental regulation which will remove the short-run impediments from actions that are wise in the long run.87
The ethical circle The ethical domain in both the CSR pyramid and the IC model refers to those standards and norms of business behavior that are expected by stakeholders and society at large even though they are not codified into law. As argued above, this negative definition creates an artificial separation between intimately related domains of responsibility, and identifies ethical responsibility with responsiveness to external expectations and social conventions, regardless of the motivation for responding. In contrast, the CON model maintains that ethical issues are an integral part of every business activity. Ethical responsibility cannot be performed in a detached way that conforms to external constraints without value-judgments. In line with Wood's argument, socially responsible firms are guided by their inner sense of commitment, and thus “need not choose between the demands of economics and the demands of ethics; nor is ethics something that is tacked onto economics, as in the phrase ‘economics and ethics.’ Economics is ethics, though ethics is more than economics.”88
Rather than expedient conformity, the CON model defines ethical responsibility in terms of self-governance based on internal commitment to the good of society. While responsiveness-based morality may prompt companies to “act smart,” it does not necessarily induce them to act ethically; a company may take advantage of ill-defined local norms and still be considered socially responsible. In keeping with recent developments in CSR thought, the CON model would judge the ethical corporation by the extent to which it upholds its duty to seize the opportunity to be an active participant in contributing to greater stability, prosperity, and sustainability, and by the extent to which it does not exploit its power against those stakeholders who are not protected by well-established ethical norms and customs.89 The CON model's emphasis on the active aspect of corporate ethical responsibility is largely connected with the process of globalization. In the words of Sethi:
The large corporation, and especially the multinational corporation, must become an active agent for social change. . . . As a dominant institution in society, the corporation must assume its rightful place and contribute to shaping the public agenda instead of simply reacting to policy choices advocated by others.90
Total CSR The CON model regards CSR as a global concept whose parts are bound together by means of a shared intrinsic content, which can be defined as a commitment to operate in a way that promotes the good of society.91 One can argue that the notion of the “good of society” is too abstract to serve as a benchmark for assessing CSR. However, despite, and perhaps owing to, the many meanings of this notion, nearly all today's large corporations have their mission codes stated in terms of commitment to the good of society, and in most cases this general commitment is further translated into a list of more practical goals.
Rather than a mere aggregation, CSR is conceived as an entity or system made up of interrelated responsibilities, with mutual and reciprocal influence on each other. In other words, the value of the whole is greater than the sum of its parts. Fulfillment of one responsibility will always affect the fulfillment of the others. For example, fulfilling (avoiding) the economic responsibility to provide jobs and good wages to the work force while earning a profit, directly affects the fulfillment (avoidance) of the legal responsibility to pay for labor, the ethical responsibility to enhance justice, and the philanthropic responsibility to help the workforce. The CON model rejects the pyramidal trade-off assumption, and holds that the interaction among the different CSR responsibilities creates an enhanced combined effect.
Order of importance A basic feature of the concentric circles is the existence of a common core. In terms of CSR this means that all different corporate social responsibilities share a common essence. The CON model recognizes that the vital function of business is economic; even so, business decisions consist of continuous, interrelated economic and moral components. Indeed, the inclusion structure of the responsibility circles might blur the distinction between the different responsibilities. However, this structure helps the manager to see that the different types of obligations are in constant and dynamic interrelationships. At the same time, it does not prevent the manager from considering each responsibility in itself in the process of decision making.
The notion of shared intrinsic content stands in sharp contrast to the notion of a range of separate responsibilities that must be simultaneously fulfilled. There is no linearity and no hierarchy in the CON model. Rather than inter-responsibilities, as in the pyramid, the order of essentiality in the CON model is intra-responsibilities, with the more intense, straightforward, well-established, and universally advantageous requirements in the center, and the more amorphous, newly emerging, contestable, and indeterminate obligations along the periphery.92 Thus, for example, in the CSR pyramid, ethical considerations are by definition less important than economic considerations, whereas in the CON model, ethical considerations can be less important, more important, or equivalent to economic considerations. A CSR firm can indeed focus on one kind of responsibility and then on another; but always through the lens of the general purpose, namely promoting the good of society.
Role of philanthropy Corporate philanthropy commonly refers to the contributions of business firms to humanitarian and social causes, which are usually considered outside the firms’ natural line of business. Indeed, as we have seen, Carroll's pyramid treats philanthropic giving, or for that matter, good corporate citizenship, as a discretionary responsibility, separated from daily business operations and secondary to the more basic economic, legal, and ethical responsibilities; and the IC model treats corporate philanthropy as either “strategic philanthropy,” subsumed under economic responsibility, or “charity expected by society,” subsumed under ethical responsibility. The CON model holds a broader view of corporate philanthropy that draws on the general purpose of CSR, namely the obligation of the corporation to help in achieving the good of the larger society. In contrast to the pyramid, where the actions of a company in society are divorced from its operating practices, the CON model presents an all-encompassing view that integrates citizenship both locally and globally with day-to-day business functions. Good citizenship is no longer a sort of “icing on the cake” but, to use Porter and Kramer's terms, “a sine qua non of CSR,”93 and CSR companies need to integrate social considerations into core business operations and strategy.
In the broad sense of the CON model, corporate philanthropy is not simply corporate contributions to other entities to further a particular cause, but the use of the corporate special competencies and advantages to solve major social problems. Implicit in this broad definition is the view, once expressed in the CED document and currently becoming increasingly commonplace, that because large corporations possess considerable resources and skills that could make a critical difference in solving social problems, they “must take up the slack resulting from inadequate performance of other institutions, notably government.”94 A wider spectrum of corporate philanthropic responsibility is all the more significant in the global arena where serious market imperfections, absence of strong background institutions, inadequate regulation, and ineffective enforcement place multinational corporations in a unique position to help alleviate harsh living conditions, especially in developing countries.95
As we have seen, the CSR pyramid generated a proliferation of empirical research attempting to establish its validity and study its nature in different contexts. Unfortunately, this is not the case with the CON model. Taking a comparative approach, two questions are on target: the validation of the CON model and the hypothesized relationship between CSR and profitability.
Operationalization With regard to the question of validation, Guttman's definition of a theory, which establishes a partnership between concepts and observations, seems most useful:
A theory is an hypothesis of a correspondence between a definitional system for a universe of observations and an aspect of the empirical structure of those observations, together with a rationale for such hypothesis.96
The universe of observations that corresponds to the CON model is clearly different from that corresponding to the pyramid (or the IC model). In the former case, the definitional system refers to the common core of all corporate social responsibilities, while the latter lacks a common core. Thus, research tools that have been developed to test the validity of the pyramid are inadequate in testing the CON model. Let us take Aupperle's aforementioned constant-sum instrument as an example. Corresponding to the idea of interresponsibilities difference in importance, respondents were instructed to distribute up to ten points to four statements reflecting the pyramid's four domains; and, corresponding to the view of separate domains, the allocation of points among them had to be “based on their relative importance and application to your firm.”97 Note that reference is made to the multifunctional target, “your firm,” and not to the more articulated target, “your firm's social responsibility.” A hypothesis on the correspondence between this definitional system and the pyramidal structure of the resulting observations is straightforward.
The CON model requires a different research tool. Since it maintains that all corporate social responsibilities share a common core, a measurement method ignoring this feature is irrelevant; and since it stands for intra-rather than interresponsibilities order of importance, a measurement method based on distribution of points among different domains of responsibility makes no sense. One way to approach the research on the relationships between conceptual definitions and empirical observations draws on facet analysis, which, with the companion of multidimensional scaling (MDS) procedures, provides a powerful set of tools for studying the content of and order relations between and within facets (subsystems or components) of the construct of interest.98 In the course of gathering data for assessing the geometry of the CON model, respondents could be instructed to evaluate a range of items—wide enough to represent thickly populated responsibility circles—based on their relative importance in fulfilling the corporate commitment to enhance the good of society. To the extent that the set of items is representative, we might find essential as well as peripheral responsibilities in each of the circles, whether economic, legal, ethical, or philanthropic. For example, the duty of the firm to ensure that its operations do not put people's life in danger can be thought of as an item representing essential ethical responsibility; and the requirement that managers take advantage of opportunities to avoid paying taxes to increase profits—an item representing peripheral legal responsibility, or, for that matter, perhaps economic responsibility (a clear-cut distinction is not very important from a CON perspective). Using the proposed methodology, we would expect that the interrelationships among the resulting observations be structured in concentric circles in the same order as that depicted in the CON model.
CSR-CFP relationship As previously mentioned, relationships between CSR and profitability (or CFP) have been generally assumed to be linear. Under the CON theoretical assumption that there is more to CSR than responsiveness to social expectations, the prevailing hypothesis of positive correlation between CSR (that is, responsiveness) and profitability (that is, reward for responsiveness) requires modification. As Sethi noted, under conditions of imperfect competition, as in most modern economies, social expectations play a rather small role in inspiring good corporate conduct.99 Instead, it is the values and the traditions of the corporations, and their perceived risks in exploiting market opportunities, that influence the extent of a corporation's socially responsible conduct. Rather than a simple linear CSR-CFP link (as reflected in the common use of correlations and regression analysis for the detection of positive or negative association between social and economic performance),100 a hypothesis of an inverted U-shaped relationship between these two variables is called for. To wit, a positive relationship between CSR and CFP can be expected for the range of under-normal and normal profits (here profit levels are acceptable, i.e., higher profits mean higher reward for responsiveness), and an inverse CSR–CFP relationship for the range of above-normal profits (here corporate power is used to deprive ineffectual stakeholders of their market-based gains, i.e., higher profits mean less social responsibility). According to the CON model, a socially responsible firm is expected to refrain from chasing unfairly high profits and to follow its inner commitment to contribute to achieving social progress, even at the expense of profitability.
A curvilinear hypothesis calls into question the adequacy of the conventional methods used to substantiate the CSR–CFP link. First, there is a problem of measurement. To capture the form of the relationship in its entirety, the entire span of the variables must be covered. It is doubtful whether, assuming linearity, all the diverse CSR–CFP studies to date actually covered, or attempted to cover, the entire span. One may interpret the inconsistent results of these studies as representing different segments of the plot, thus indicating, in fact, a curvilinear relationship between variables. Second, data analysis must be appropriate to the problem as specified. While the conventional linear hypothesis-testing techniques may be convenient, they are useless for confirming a nonlinear relationship.
Both the pyramid and the IC models direct socially responsible managers to serve “many masters” simultaneously (i.e., make profits, obey the law, and so forth), with or without a fixed order of priorities. As Porter and Kramer claim:
The result is oftentimes a hodge-podge uncoordinated CSR and philanthropic activities disconnected from the company's strategy that neither make any meaningful social impact nor strengthen the firm's long-term competitiveness. Internally, CSR practices and initiatives are often isolated from operating units—and even separated from corporate philanthropy. Externally, the company's social impact becomes diffused among numerous unrelated efforts, each responding to a different stakeholder group or corporate pressure point.101
In the same vein, Jensen has argued that without the clarity of mission provided by a single criterion, corporate executives facing multiple objectives will experience managerial confusion, conflict, and inefficiency.102 The CON model solves the problems that arise from the multiple objectives that accompany the other two models by giving managers wishing to be socially responsible a single criterion by which to choose among alternative courses of action: the improvement of social welfare. This criterion, which resides incontestably as the implicit raison d’être of the economic institution, is made explicit in the CON model. Rather than assuming that profit maximization leads to the maximization of social welfare, managers are guided to directly consider the social value of alternative policy options before making their decisions. In more general terms, rather than pursuing each of the diverse corporate responsibilities per se hoping that this, in turn, will enhance the good of society, the CON model guides managers to consider each responsibility in direct relation to the overall objective of social welfare.
The CON model prescribes a CSR strategy that could, perhaps, be best described in terms of Paine's notion of “integrity strategy,” which is characterized by “a conception of ethics as a driving force of an enterprise. Ethical values shape the search for opportunities, the design of organizational systems, and the decision-making process used by individuals and groups.”103 Managers who regard CSR as nothing more than conformity to externally imposed standards necessarily endorse a code of moral mediocrity for their companies. In contrast, managers who adopt the commitment strategy no longer view CSR as a burdensome constraint within which they have to operate, but as the governing purpose of the firm, a purpose that incorporates all corporate social responsibilities, unites members of different divisions and inspires corporate excellence.
- Top of page
- FROM CSR BRANCHES TO CSR TRUNK
- THE PYRAMID OF CSR
- THE INTERSECTING CIRCLES MODEL OF CSR
- THE CONCENTRIC-CIRCLE MODEL OF CSR
This paper has sought to add clarity to CSR theory and research by comparing and contrasting the underlying assumptions, the conceptual structures, the methodological tools, and the managerial implications of three basic CSR models—the pyramid, the intersecting circles, and the concentric circles. The four-part CSR pyramid dovetails well with the current trend among corporate managements towards growing acceptance of a friendship model of the relationship between the basic economic role of the firm and its extended social obligations. The pyramid's unique combination of simultaneity and hierarchy of importance attempts to reconcile the changing social expectations of businesses with the traditional emphasis on profit making, the ideal CSR behavior with the pragmatic considerations of CSR management. Unfortunately, the supposed alliance between social concerns and profit making depends to a large extent on the surrounding cultural and institutional context. Where external stakeholders fail at holding corporations to account for the social consequences of their activities, the necessary condition that glues the economic and social responsibilities together in a coherent framework is lost, and the ability of the pyramid to guide companies to take actions that would support both their communities and their business goals is undermined. The IC model contrasts with the pyramid in two main aspects: it refutes the notion that CSR is a range of externally related domains of responsibility, and it rejects the hierarchical order. The radical idea behind the IC model is that the different domains of CSR are interrelated and none of them is prima facie more important relative to the others. This advantage is also the main difficulty of the IC model. Failing to provide any clear normative guide, it leaves managers to face competing responsibilities with no way to make principled decisions. The CON model combines considerations of external constraints on corporate behavior with a self-binding commitment to the common good. Like the pyramid, it views the economic role of business as its core responsibility, but this core is embedded in, rather than separated from, the broader responsibility to the good of society. The pyramidal view of CSR as a range of separate responsibilities that must be simultaneously fulfilled is replaced in the CON model with a framework of integrated responsibilities, all sharing a common essence—the responsibility to promote the quality of life. According to the CON model, every corporate decision must be considered through the lens of social betterment. The main conclusion of the comparative analysis is that unless we are willing to acknowledge that all corporate social responsibilities share a common normative essence, there is little prospect of finding a way out of the difficulties inherent in disintegrated frameworks such as the CSR pyramid and the IC model.
The development of the CON model may open new directions for CSR research investigating intra as well as interresponsibilities order of importance, and studying more complex relationships between CSR and profitability than the regular linear hypothesis. However, the CON model needs further development of research tools in the general directions outlined above. This is a task for future research. Once the research tools are developed, a central objective would be to establish a valid and reliable scale for total CSR.
At this stage, the immediate lesson from the comparative analysis for both CSR research and teaching is that the same concept of responsibility may carry different meanings, depending on the parent model. Unfortunately, when alternative models of the same concept are held by different people in different contexts, discussion frequently seems to represent mutual understanding and agreement, while in fact there are no common points of reference, and problems of ambiguity arise. To ensure that CSR theory and concepts can be established and provide a source of managerial guidance, attention should be given to the explication of the underlying assumptions which bound the theory, to the distinction between different definitions of its constructs and variables, and to the implications of the assumed interrelationships among them. Focusing on the boundaries of CSR, the comparative analysis might also be used to help interpret and discuss growing trends in the business and society field such as stakeholder management, corporate citizenship, triple bottom-line accounting, and sustainability. Each of these theoretical trends involves, to some extent, aspects of the core responsibilities that form the trunk of CSR, so that the comparative analysis might provide an initial framework to better understand the branches of CSR thinking.
For instance, “A three-dimensional conceptual model of corporate performance,” Academy of Management Review 4, 4(1979): 497–505; , “A stakeholder framework for analyzing and evaluating corporate social performance,” Academy of Management Review 20, 1(1995): 92–117; W. C. Frederick, Corporation, Be Good! (Indianapolis, IN: Dog Ear Publishing, 2006); , “Dimensions of corporate social responsibility: an analytical framework,” California Management Review 17, 3(1975): 58–64; , “Addressing a theoretical problem by reorienting the social performance model,” Academy of Management Review 20, 1(1995): 43–64; , “Creating corporate accountability: foundational principles to make corporate citizenship real.” Journal of Business Ethics 50, 4(2004): 313–327; , “Corporate social performance revisited,” Academy of Management Review 16, 4 (1991): 691–718.,
“Parallel universes: companies, academics, and the progress of corporate citizenship,” Business and Society Review 109, 1(2004): 5–42.,
“Genius becomes rare: a comment on the doctrine of social responsibility Part. I.” California Management Review 15, 2(1972): 25–31.,
For instance, Carroll, “A three-dimensional conceptual model of corporate performance.”
For instance, “An integrating framework for research in business and society: a step toward the elusive paradigm?” Academy of Management Review 8, 4(1983): 559–564; and , “Corporate social responsibility: a three-domain approach.” Business Ethics Quarterly 13, 4 (2003): 503–530.,
6. Adapted here from the Committee for Economic Development (CED), Social Responsibilities of Business Corporations, (New York: Author, 1971).
7. W. C. Frederick, “Theories of corporate social performance,” in Business and Society: Dimensions of Conflict and Cooperation, eds. S. P. Sethi and C. Falbe (New York: Lexington Books, 1987): 142–161.
For a detailed review, see for example, “Corporate social responsibility: evolution of a definitional construct.” Business and Society 38, 3(1999): 268–295; Frederick, Corporation, Be Good!; Waddock, “Parallel Universes.”,
9. Carroll, “Three-Dimensional.”
“The evolution of the corporate social performance model,” Academy of Management Review 10, 4(1985): 758–769.and ,
11. Wood, “Corporate social performance revisited,” 693.
Swanson, “Addressing theoretical problem”; cf., “Toward an integrative theory of business and society: a research strategy for corporate social performance,” Academy of Management Review 24, 4(1999): 506–521.,
13. W. C. Frederick, Values, Nature, and Culture in the American Corporation (New York: Oxford University Press, 1995).
14. Waddock, “Creating corporate accountability,” 313.
15. M. B. E. Clarkson, Principles of Stakeholder Management (Toronto: The Clarkson Centre for Business Ethics, 1999).
“Corporate citizenship: the case for a new corporate governance model,” Business and Society Review 109, 3(2004): 339–361.,
“Business citizenship: from domestic to global level of analysis,” Business Ethics Quarterly 12, 2(2002): 177., and ,
“Some challenges of social screening,” Journal of Business Ethics 43, 3(2003): 239.,
19. Carroll, “Corporate social responsibility.”
“Organizational theories: some criteria for evaluation.” Academy of Management Review 14, 4(1989): 496.,
Carroll, “Three-dimensional”; see also, “The pyramid of corporate social responsibility: toward the moral management of organizational stakeholders,” Business Horizons 34(July–August, 1991): 39–48.,
22. Ibid., 42.
23. Ibid., 41.
24. Ibid., 41.
25. Swanson, “Toward integrative theory.”
26. For instance, A. B. Carroll, “Social responsibility,” in The Blackwell Encyclopedic Dictionary of Business Ethics, eds. P. H. Werhane and R. E. Freeman (Oxford, UK: Blackwell Publishers Ltd. 1997): 593–595.
27. Ibid., 593–595.
“The politics of stakeholder theory: some future directions,” Business Ethics Quarterly 4, 4(1994): 409–421.,
“Ethical challenges for business in the new millennium: corporate social responsibility and models of management morality,” Business Ethics Quarterly 10, 1(2000), 35.,
30. A. B. Carroll and A. K. Buchholtz, Business and Society: Ethics and Stakeholder Management, 6e. (Mason, OH: South-Western, Thomson, 2006): 40.
31. Carroll, “Pyramid of CSR,” 42.
32. Carroll, “Three-dimensional,” 499.
33. Ibid., 499.
“An empirical exploration of measures of social responsibility across the spectrum of organizational types,” International Journal of Organizational Analysis 9, 1(2001): 26–57., and ,
35. Carroll, “Pyramid of CSR,” 42.
36. Ibid., 43.
37. Carroll, “Corporate social responsibility”; Hemphill, “Corporate citizenship.”
38. Clarkson, “Stakeholder framework,” 94.
For a general review of the empirical studies on CSR and the associated measurement problems see, for example, Acar et al., “Empirical exploration”; “The corporate social performance-financial performance link,” Strategic Management Journal 18, 4(1997): 303–319.and ,
“An empirical examination of the relationship between corporate social responsibility and profitability,” Academy of Management Journal 28, 2(1985): 446–463., and ,
“An empirical measure of corporate orientation,” Research in Corporate Social Performance and Policy 6(1984): 27–54.,
42. For instance, Acar et al., “Empirical exploration”; Aupperle et al., “Empirical examination.”
For instance, “Convergent stakeholder theory,” Academy of Management Review 24, 2(1999): 206–221.and ,
44. Clarkson, “Stakeholder framework.”
For instance, “Some determinants of student corporate social responsibility orientation,” Business and Society 38, 2(1999): 188–205; and , “Giving back: an examination of the philanthropic motivations, orientations and activities of large black-owned businesses,” Journal of Business Ethics 19, 2(1999): 171–179.and ,
For instance, “Measuring corporate citizenship in two countries: the case of the United States and France,” Journal of Business Ethics 23, 3(2000): 283–297; and , “A retrospective examination of csr orientations: have they changed?” Journal of Business Ethics 15, 2(1996): 199–206.and ,
For instance, “The corporate social performance and corporate social financial performance debate: twenty-five years of incomparable research,” Business and Society 36, 1(1997): 5–31; and , “The corporate social-financial performance relationship: a typology and analysis,” Business and Society, 36, 4(1997): 419–430; and , “Stakeholder mismatching: a theoretical problem in empirical research on corporate social performance,” The International Journal of Organizational Analysis, 3, 3(1995): 229–267.and ,
48. Wood and Jones, “Stakeholder mismatching,” 230.
“Corporate social and financial performance: a meta-analysis,” Organization Studies 24, 3(2003): 403–441; and , “The core competence of the corporation,” Harvard Business Review, (May–June, 1990): 79–91; Waddock and Graves, “Social performance-financial performance.”, and ,
50. Waddock and Graves, “Social performance-financial performance.”
51. Acar et al., “Empirical exploration.”
52. Aupperle et al., “Empirical examination,” 458.
Ibid.; “Board members, corporate social responsiveness and profitability: are tradeoffs necessary?” Journal of Business Ethics 8, 5(1989): 353–357., and , 1989.
54. The constant sum method places social responsibility (SR) and economic responsibility (E) as complementary variables (SR + E = constant); i.e., SR is a linear transformation of E. Since the correlation coefficient is invariant under a linear transformation of the variables, if the correlation between SR and profitability approaches zero, so does the correlation between E and profitability.
“Exploring the ethics and economics of global labor standards: a challenge to integrated social contract theory,” Business Ethics Quarterly 13, 2(2003): 193–220., and ,
56. Wood and Jones, “Stakeholder mismatching,” 233.
57. Wood, “Corporate social performance revisited,” 698.
58. Jones, “Integrating framework”; Waddock, “Parallel universes.”
59. Schwartz and Carroll, “Corporate social responsibility.”
60. Ibid., 508.
“The case for and against business assumption of social responsibilities.” Academy of Management Journal, 16, 2(1973): 312–322.,
62. Schwartz and Carroll, “Corporate social responsibility.”
63. Ibid., 508.
64. Wood, “Corporate social performance revisited.”
65. Schwartz and Carroll, “Corporate social responsibility,” 513.
66. Ibid., 509.
67. Wood, “Corporate social performance revisited,” 693.
68. Jones, “Integrating framework.”
69. See figure 1: Business and society graphic model in Jones, “Integrating framework,” 560.
“Creating the partnership society: understanding the rhetoric and reality of cross-sectoral partnerships,” Business and Society Review, 105, 1(2000): 127–144.and ,
“Value maximization, stakeholder theory, and the corporate objective function.” Business Ethics Quarterly 12, 2(2002): 238.,
“The new meaning of corporate social responsibility.” California Management Review 16, 2(1984): 53–63.,
73. Jensen, “Value maximization.”
74. CED, Social Responsibilities, 37.
75. Logsdon and Wood, “Business citizenship,” 158.
76. Jones, “Integrating framework.”
77. cf. Swanson, “Toward integrative theory.”
“Strategy and society: the link between competitive advantage and corporate social responsibility,” Harvard Business Review, (December 2006): 78–92.and ,
79. CED, Social Responsibilities, 11, italics added.
80. See for example, A. Sen, Development as Freedom. (New York: Anchor Books, 1999); J. E. Stiglitz, Making Globalization Work (New York: W. W. Norton, 2006).
81. CED, Social Responsibilities, 15.
82. C. D. Stone, Where the Law Ends. (New York: Harper and Row, 1975).
83. Schwartz and Carroll, “Corporate social responsibility.”
Stone, Where the Law Ends, 101; cf. “Managing for organizational integrity.” Harvard Business Review 72, 2(1994): 106–117.,
85. See one implementation of this idea in Caux Round Table, Principles for Business: Principle 3 –Going beyond the letter of law toward a spirit of trust, Available from CRT network at: http://www.cauxroundtable.org/principles.html.
“Moral implications of law in business: a case of tax loopholes,” Business Ethics: A European Review 12, 4(2003): 378–393.and ,
87. CED, Social Responsibilities, 46.
“Toward improving corporate social performance,” Business Horizons 34(July–August, 1991): 66, italics in the original; cf. A. Etzioni, The Moral Dimension: Toward a New Economics (New York: The Free Press, 1988); and , “Business ethics: the state of the art,” International Journal of Management Reviews 1, 1(1999): 1–16.,
Frederick, Corporation, Be Good!; Logsdon and Wood, “Business citizenship”; “Globalization and the good corporation: a need for proactive co-existence.” Journal of Business Ethics 43, 1(2003): 21–31.,
90. S. P. Sethi, Setting Global Standards: Guidelines for Creating Codes of Conduct in Multinational Corporations (Hoboken, NJ: John Wiley & Sons 2003), 288.
CED, Social Responsibilities; see also “Moving to CSR4: what to pack for the trip.” Business and Society 37, 1(1998): 40–60; Goodpaster, “Some challenges.”,
92. CED, Social Responsibilities.
93. Porter and Kramer, “Strategy and society,” 85.
CED, Social Responsibilities, 16; “Building successful social partnership,” Sloan Management Review 23, 4(1988): 17–23.,
“The legitimacy of direct corporate humanitarian investment.” Business Ethics Quarterly 10, 1(2000): 95–110 ; Sen, Development as Freedom.and ,
96. L. Guttman, “What is not what in theory construction,” In eds., R. M. Hauser, D. Mechanic and A. Hailer, Social Structure and Behavior (New York: Academic Press, 1982), 338.
97. Aupperle, “Empirical measure,” 30.
98. S. Shye and D. Elizur, Introduction to Facet Theory: Content Design and Intrinsic Data Analysis in Behavioral Research (Thousand Oaks, CA: Sage Publications, 1994).
99. Sethi, “Globalization.”
100. For instance, O’Neill et al., “Board members”; Aupperle, Carroll and Hatfield, “Empirical examination.”
101. Porter and Kramer, “Strategy and society,” 83.
102. Jensen, “Value maximization.”
103. Paine, “Managing integrity,” 111.