CSR Theories PDF

THEORIES OF CSR Module 2 THREE BASIC THEORIES OF CSR i) Carroll’s CSR Pyramid ii) Triple Bottom Line CSR Theory iii) Stakeholder Theory CARROLL’S CSR PYRAMID ECONOMIC RESPONSIBILITIES -BE PROFITABLE Businesses have an economic responsibility to society, that is, they need to be profitable to...

THEORIES OF CSR Module 2 THREE BASIC THEORIES OF CSR i) Carroll’s CSR Pyramid ii) Triple Bottom Line CSR Theory iii) Stakeholder Theory CARROLL’S CSR PYRAMID ECONOMIC RESPONSIBILITIES -BE PROFITABLE Businesses have an economic responsibility to society, that is, they need to be profitable to be sustained. Business creates goods and services that society needs or wants. To continue operations while meeting other responsibilities – legal, ethical, and philanthropic – a company must be financially stable. This means being attentive to revenues, cost-effective, investing appropriately, and running effective marketing campaigns. LEGAL RESPONSIBILITIES-OBEY THE LAW Legal systems are society’s codified ethics of operation. They’re fundamental moral principles written as rules. Law is born from society wanting to operate with a rudimental moral grounding. For a business, these ground rules include laws, regulations, and fair business practices. These rules are established by lawmakers at federal, state, and local levels. BUSINESS ETHICAL RESPONSIBILITIES: DO WHAT’S RIGHT The ethical responsibilities of a business are important because the normative expectations society holds in law are not always sufficient. Sometimes the law does not provide guidance or dictate a business course of action. This is when ethical principles of practice are needed to protect a stakeholder’s moral rights. BUSINESS PHILANTHROPIC RESPONSIBILITIES: BE A GOOD CORPORATE CITIZEN Philanthropy in business embraces activities that are voluntary and discretionary. These activities go above and beyond a society’s expectations of what’s required. Society will label a business as unethical if it does not meet philanthropic responsibilities. TRIPLE BOTTOM LINE THEORY https://youtu.be/1-Ct_53XKYY TRIPLE BOTTOM LINE The triple bottom line is a business concept that states firms should commit to measuring their social and environmental impact—in addition to their financial performance—rather than solely focusing on generating profit, or the standard “bottom line.” The triple bottom line can be broken down into “three P's”: profit, people, and the planet. Firms can use these categories to conceptualize their environmental responsibility and determine any negative social impacts to which they might be contributing. From there, companies can integrate sustainable practices into every facet of their business operations—including supply chains, business partners, and renewable energy usage—to positively impact society and the environment in addition to turning a profit. TRIPLE BOTTOM LINE 3 P’S Profit In a capitalist economy, a firm’s success most heavily depends on its financial performance, or the profit it generates for shareholders. Strategic planning initiatives and key business decisions are generally carefully designed to maximize profits while reducing costs and mitigating risk. People The second component of the triple bottom line highlights a business’s societal impact, or its commitment to people. It’s important to make the distinction between a firm’s shareholders and stakeholders. Traditionally, businesses have favored shareholder value as an indicator of success, meaning they strive to generate value for those who own shares of the company. As firms have increasingly embraced sustainability, they’ve shifted their focus toward creating value for all stakeholders impacted by business decisions, including customers, employees, and community members. CONT… The Planet The final component of the triple bottom line is concerned with making a positive impact on the planet. Since the birth of the Industrial Revolution, large corporations have contributed a staggering amount of pollution to the environment, which has been a key driver of climate change and environmental concerns. To some, adopting a triple bottom line approach may seem idealistic in a world that emphasizes profit over purpose. Innovative companies, however, have shown time and again that it’s possible to do well by doing good. The triple bottom line doesn’t inherently value societal and environmental impact at the expense of financial profitability. Instead, many firms have reaped financial benefits by committing to sustainable business practices. STAKEHOLDERS THEORY Stakeholders are described broadly by Freeman and Reed as any identifiable group or individual who can affect the achievement of an organization’s objectives or who are affected by the achievement of an organization’s objectives STAKEHOLDERS 1) Employee: The employees expect to be treated and compensated fairly and to be given reasonable working hours. Otherwise, there would be bad word of mouth among potential workforce and the company will be adversely impacted. 2) Suppliers: Like employees, the expectations of the suppliers in the stakeholder theory also includes fair treatment and compensation. The stakeholder theory also expects due diligence on the part of the suppliers that they will also conduct their business in a fair and ethical manner. 3) Manufacturers: With the opening of the economy, there are instances when the product or their parts are manufactured at a location away from the project, sometimes even in a different country. It is expected that the working conditions and wages should be fair for the manufacturers as well. CONT… 4) Environmentalists: People living in vicinity to the project need to be assured that the environment, power, or water will not be adversely affected due to the project. These people who are affected by the local ecology are also considered as stakeholders in the stakeholder theory and need to be apprised of the plans and developments and their views should also be taken into account while planning the project. 5) Government Bodies: Government approvals need to be sought for any project before it starts its operations. Hence government bodies and various regulating agencies are also one of the stakeholders. 6) Community: People living in the nearby neighbour hoods, are also stakeholders and the project should consider their concerns of whether it will enhance or maintain their quality of life and not impact it negatively in any manner.