Ateneo de Davao University

Senior High School

Business Ethics and Social Responsibility

Handouts

Lesson 3: Social Responsibility, Pyramid and History of Corporate Social Responsibility

Social Responsibility is an idea that suggests that organizations behave ethically and with
consideration to social, cultural, economic, and environmental issues.

Social Responsibility applies to all types of businesses that implement social responsibility
initiatives. Small businesses may have a greater impact in local communities. Social responsibility,
as it applies to business, is known as corporate social responsibility (CSR).

Social responsibility adopts a strategic focus that involves action, measurement, and result. It
requires a formal commitment, or way of communicating the company’s social responsibility
philosophy. It must be fully valued and championed by top management. It depends on collaboration
and coordination across business and among its constituents.

Social responsibility is the duty of business to do no harm to society. In other words, in their daily
operations, businesses should be concerned about the welfare of society and mindful of how its
actions could affect society as a whole. We know that social responsibility doesn’t always happen,
despite the seemingly best efforts of a company. For example, court papers accuse British Petroleum
(BP) of gross negligence for safety violations and knowingly failing to maintain the oil rig, which
caused the death of eleven workers and leaked oil in the Gulf of Mexico for eighty-seven days. In
this case, and others like it, people question the ability of companies to fulfill their duty to society.

Social responsibility fulfills societal expectations. Businesses should accept and abide by four
types of responsibility (Archie Carroll’s Pyramid of Social Responsibility):

ECONOMIC
o This is the responsibility of business to be profitable
o Only way to survive and benefit society in long-term
LEGAL
o This is the responsibility to obey laws and other regulations
o E.g. Employment, Competition, Health & Safety

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 ETHICAL
o This is the responsibility to act morally and ethically
o With this responsibility, businesses should go beyond narrow requirements of the law
o E.g. Treatment of suppliers & employees

PHILANTHROPIC
o This is the responsibility to give back to society
o The responsibility is discretionary, but still important
o E.g. charitable donations, staff time on projects

Social responsibility requires a stakeholder orientation. Those constituents who have a stake in,
or claim on, some aspect of a company’s products, operations, markets, industry, and outcomes.

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Sustainable Development Goals
• The Sustainable Development Goals are the blueprint to achieve a better and more sustainable
future for all.
• They address the global challenges we face, including those related to poverty, inequality,
climate, environmental degradation, prosperity, and peace and justice.
• The Goals interconnect and in order to leave no one behind, it is important that we achieve
each Goal and target by 2030.
• Sustainability has been defined as “development that meets the needs of the present
without sacrificing the right of future generation to fulfill their needs.”

How can businesses contribute to the attainment of the SDGs?

THE CONCEPT OF CORPORATE SOCIAL RESPONSIBILIY

“Corporate Social Responsibility means seriously considering the impact of the company’s
actions on society.” – Bauer

“Social Responsibility is the obligation of decision makers to take actions which protect and
improve the welfare of the society as a whole along with their own interests.” – Davis and
Blomstrom

“The idea of social responsibility supposes that the corporation has not only economic and legal
obligations, but also certain responsibilities to society which extend beyond these obligations.”
– McGuire

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“Social responsibility is the response of the corporation to issues beyond its narrow, economic,
technical, and legal requirements. It is the obligation of the corporation to evaluate the effects of its
decisions on the external social system.”
– Professor Keith Davis

“One of the responsibilities of business to society is to operate at a profit… Business is the wealth-
creating organ of society. But what is important is that management realizes that it must consider the
impact of every business policy and business action on society. It has to consider whether the
action is likely to promote the public good, to advance the basic beliefs of society, to contribute to
its stability, strength, and harmony… to make certain that this assertion does not remain lip service
but becomes hard fact… is the ultimate responsibility of management to itself, to our heritage,
to our society and to our way of life.” – Peter Drucker

Corporate Social Responsibility (CSR) means extending beyond the business compliance with laws
and other legal requirements. It is a continuing commitment by business to behave ethically and
contribute to economic development while improving the quality of life of the workforce and their
families, the local community, and society at large.

PROS CONS
• Enhances reputation among • Costs money to implement
stakeholders. • Conflicts with the Profit Motive
• Better customer relations • Customers are careful about
• Attract and retain employees Greenwashing / PR ploys
• It’s the right thing to do. • Many businesses put the cost on
consumers

Greenwashing is the practice of making an unsubstantiated or misleading claim about the

environmental benefits of a product, service, technology, or company practice. Greenwashing can
make a company appear to be more environmentally friendly than it really is.

Historical Phases of Corporate Social Responsibility

Phase 1: (1800s to 1900s) Profit Maximizing Management

1. Management must maximize profit.
2. Individual drive for profit maximization would ultimately create wealth for the nation.
3. Business systems as a profit maximizer are used as a tool for the elimination of economic
scarcity.
4. Business ignored unsafe working conditions, paid starvation wages and used child labor in
order to maximize profit.

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 5. Problems of cultural minorities, unsafe products, unfair advertising and urban poor problems
were given little if no attention at all.
6. Abuses of capitalism are extremely rampant and the government tolerates these deplorable
business practices.

Phase 2: (Early 1900s) Trustee Management

1. Management was considered both as an instrument of stockholders and as a trustee for all
groups who contribute to the business enterprise.
2. Aside from the profit maximization, the management’s concern is also to maintain a fair
balance in the interests of employees, customers, creditors, stockholders and the community.

Phase 3: (1930s) Quality of Life Management

1. Security of basic goods and services was no longer a principal problem.
2. Social and economic problems brought about by economic growth expanded the concept of
social responsibility management.
3. Society demanded management’s active participation in helping solve social and
environmental problems in view of the cast resources (funds, manpower, materials,
management, skills and technology) of businesses.
4. Business is expected to contribute to the improvement of the quality of life which involves
cultural, social, education, political factors and economic security.
5. Society is unstable if the quality of life of the people is poor. Businesses contribute to a good
quality of life and society.
6. A prosperous society is the best environment for a business to thrive in. Businesses will
benefit from its self-investment in society.

Current Activities related to Corporate Social Responsibility

1. Establishment of Certifying Bodies

Develop standards and programs and to train and certify businesses with quality programs
Example: ISO Certifications, Total Quality Management
2. Training their employees for consumer care and people skills with the application of
Customer Relationship Management standards.
3. Improvement of Compensation and benefits packages for employees
4. Establishment of programs for the protection and preservation of the environment
Examples: Tree-planting activities, recycling of waste materials
5. Active participation in socio-civic and charitable activities
Examples: adopt-a-community programs, books and toys donation, scholarship grants,
volunteer

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6. Development of customer complaint desks or hotlines
7. Recruitment of competent and technical employees to ensure manufacturing of their products
follows the strictest standards
8. Training quality people that will handle all aspects of the business processes
9. Application of good manufacturing practices and advance quality assurance standards of
safe and good quality products
10. Strengthening of ties with agencies and creating organizing bodies that aim at the promotion,
monitoring, and recognition of companies that adhere to their moral obligation

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