Chapter 2
Corporate Social Responsibility, Citizenship, and Sustainability
LEARNING OUTCOMES
After studying this chapter, you should be able to:
1. Describe some early views of corporate social responsibility (CSR). Explain how CSR
evolved and encompasses economic, legal, ethical, and philanthropic components. Explain
the Pyramid of CSR.
5. Describe how corporate citizenship is a valuable way of thinking about CSR. Explain its
broad and narrow views. Explain how corporate citizenship develops and proceeds in
stages.
6. Summarize the three perspectives on the relationship between corporate social
performance (CSP) and corporate financial performance (CFP).
7. Explain how sustainability is a broad concept that embraces profits, people, and the planet.
Describe how the triple bottom line is a vehicle for implementing sustainability.
TEACHING SUGGESTIONS
INTRODUCTION – This chapter explores several different aspects of the CSR topic and
provides some insights into what CSR means and how businesses are carrying it out. An entire
chapter is devoted to CSR concepts because it is a core idea that underlies most of the material in
the textbook. This chapter also focuses on the concept of corporate citizenship.
KEY TALKING POINTS – In some ways this may be a difficult chapter to teach, since the
instructor will be laying the foundation for future discussions that will more directly involve
analyzing and evaluating corporate social performance. The current chapter focuses on the
requires the simultaneous execution of economic, legal, ethical and philanthropic
responsibilities. Many students may struggle with the concept that these responsibilities need to
be addressed concurrently by firms, since previous exposure to the concept may have focused on
the idea that CSR is the culmination of the ethical and/or philanthropic activities of firms rather
than the culmination of all four responsibilities. Consequently, students in your class may not be
This chapter also is a good starting point for students to begin to focus on what they, as citizens,
want from the business sector. Do they want corporations to simply recognize their various
responsibilities to society, do they want them to make improvements, do they demand evidence
that corporations are making improvements, or do they have more general concerns about the
society.
PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of:
Cases:
1-Wal-Mart- The Main Street Merchant of Doom
2-The Body Shop (A) – Pursuing Social and Environmental Change
3-The Body Shop (B) – Reputation is Tarnished
23-McDonald’s Coffee Spill
24-The Betaseron Decision (A)
25-The Hudson River Cleanup and GE
26-Cloud Computing – Earth’s Friend or Foe
27-New Belgium Brewing, Defining a Business on Sustainability
Ethics in Practice Cases:
The Socially Responsible Shoe Company
Burgers with a Soul—Fresh, Local, Sustainable
Spotlight on Sustainability:
Sustainability’s Stock is Rising
Myths about Sustainability
LECTURE OUTLINE
I. CORPORATE SOCIAL RESPONSIBILITY (CSR) AS A CONCEPT
C. Evolving Meanings of CSR
D. A Four-Part Definition of CSR
1. Economic Responsibilities
2. Legal Responsibilities
3. Ethical Responsibilities
II. TRADITIONAL ARGUMENTS AGAINST AND FOR CSR
A. Arguments against CSR
B. Arguments in Support of CSR
C. The Business Case for CSR
III. AGES AND STAGES OF CSR
IV. CSR GREENWASHING
V. POLITICAL CSR
VIII. CORPORATE CITIZENSHIP
A. Broad and Narrow Views
B. Stages of Corporate Citizens
C. Global Corporate Citizenship
D. CSR and Corporate Citizenship Awards by Business Media
IX. THE SOCIAL PERFORMANCE AND FINANCIAL PERFORMANCE
RELATIONSHIP
A. Three Perspectives on the Social-Financial-Reputation Relationship
1. Perspective 1: Socially responsible firms are more financially profitable.
X. SUSTAINABILITY—PROFITS, PEOPLE, PLANET
A. Creating Shared Value and Conscious Capitalism
XI. SOCIALLY RESPONSIBLE, SUSTAINABLE, ETHICAL INVESTING
SUGGESTED ANSWERS TO DISCUSSION QUESTIONS
Students should recognize that their answers to these discussion questions should be well
reasoned and supported with evidence. Although some answers will be more correct than others,
students should be aware that simplistic answers to complex questions, problems, or issues such
as these will never be “good” answers.
1. Question: Explain the Pyramid of Corporate Social Responsibility> Provide several
examples of each “layer” of the pyramid. Identify and discuss some of the tensions among
the layers or components. In what sense do the different layers of the pyramid “overlap”
with each other?
Answer: The Pyramid of Corporate Social Responsibility is a graphic representation of
Carroll’s four-part definition of CSR. According to Carroll, society has four expectations
of a corporation—economic, legal, ethical, and philanthropic. The pyramid shows the
economic responsibility at the bottom, because it is the foundation upon which all others
Ch 2, Instructor’s Manual, Business & Society, Carroll 10e
operations by executives. If this expectation is violated, the executives can face criminal
charges, as Martha Stewart and several Enron officials discovered. More recently,
executives in financial services firms have found themselves subject to public scrutiny for
arguably unethical practices related to aggressive lending practices. On the other hand,
companies may find themselves recognized for their ethical activities. Starbucks and the
Timberland Company are often recognized for their ethical practices. At the top is the
philanthropic responsibility. Society desires this of corporations, but the company has
2. Question: In your view, what is the single strongest argument against the idea of corporate
social responsibility? What is the single strongest argument for corporate social
responsibility? Briefly explain.
Answer: There are few, if any, legitimate arguments against CSR. The closest one could
come to making a logical argument is that corporations should not be required to “fill the
gaps” in social policy. That is, corporations should not be held responsible for providing
funds and services for things that governments should be doing (e.g., school funding or
to society, just like actual persons are. The Wall Street Journal recently reexamined this
debate in an August 2010 story entitled “The Case Against Corporate Social
Responsibility.” In this article, Dr. Aneel Karnani, a Professor of Strategy at the
University of Michigan’s Stephen M. Ross School of Business, argues that “in cases where
private profits and public interests are aligned, the idea of corporate social responsibility is
irrelevant: Companies that simply do everything they can to boost profits will end up
3. Question: Differentiate between corporate social responsibility and corporate social
responsiveness. Give an example of each. How does corporate social performance relate
to these terms? Where do corporate citizenship and sustainability fit in?
Ch 2, Instructor’s Manual, Business & Society, Carroll 10e
Answer: Carroll’s four-part definition of corporate social responsibility is “The social
responsibility of business encompasses the economic, legal, ethical, and discretionary
(philanthropic) expectations that society has of organizations at a given point in time.”
The concept of corporate social responsibility has been criticized because its focus is on
accountability or obligation to meet certain minimum duties. Corporate social
responsiveness is a more proactive and action oriented concept, wherein business firms
4. Question: Analyze how the triple bottom line and the Pyramid of CSR are similar and
different. Draw a schematic that shows how the two concepts relate to one another.
Answer: The Triple Bottom Line provides results of operations in three inter-related fields
—economic, social, and environmental. The overriding theme in the Triple Bottom Line is
sustainability of the firm’s operations, its stakeholders’ lives, and the environment. The
5. Question: Compare and contrast the socially oriented concepts: CSR, corporate
citizenship, sustainability, creating shared value, and conscious capitalism. Do these
represent different forms of the business and society relationship or do they represent how
and why companies respond in a socially conscious manner?
Answer: Corporate Social Responsibility (CSR) can be boiled down to a company’s
actions and how they affect society. This is a more board concept whereas the others are a
bit more specific. Corporate citizenship is the concept that a company should give back to
a community simply because it is a member of that community. This is a philanthropic
expectation. Sustainability has three different parts for a company: 1) Economic
sustainability, which is looking out for its profits; 2) Social sustainability, which focuses
6. Question: Does socially responsible, sustainable, or ethical investing seem to you to be a
legitimate way in which the average citizen might demonstrate her or his concern for
CSR? Why is it also called impact investing? Discuss.
Answer: On the one hand, socially responsible investing seems to send the message that
the investor is concerned about the firm’s CSP. However, the fact that returns on ethical
investing approximate market returns seems to downplay this view. If the investor is truly
concerned with the firm’s CSP, he or she should be willing to accept a lower rate of return
GROUP ACTIVITY
Have students establish the parameters for a social screen for investments. Specifically, ask
students to identify the criteria for socially responsible investments. Once the class establishes
the “social screen” as a group, divide the students into groups of four to five students.
return on their investments through the end of the semester and report the value of their portfolio
at that time. Opportunity should be given to discuss why certain investments were made.
Instructors may want to provide some type of reward for the group with the greatest return on
investment. Groups that select companies that do not meet the class social screen should be
disqualified.
INDIVIDUAL ASSIGNMENT
should summarize the arguments for and against Corporate Social Responsibility based upon
their review of Dr. Karnani’s article and their own independent research. Students then should
state which argument that they find most persuasive and why.