Levels of Social Responsibility

Clearly, in today’s society, the question is not whether business should be socially responsible. Instead, the question is, at what level of CSR should the business operate? Businesses do vary greatly in their social responsibility activities, based on the overall level of CSR at which they decide to operate.

Managers can choose to operate the business at one of three levels of CSR. The levels of corporate social responsibility are legal, ethical, or benevolent. However, a firm can be between levels or be on different levels for different issues. Legal CSR focuses on maximizing profits while obeying the law; it focuses on increasing sales and cutting costs to maximize returns to stockholders. In dealings with market stakeholders, these firms meet all of their legal responsibilities, such as fulfilling contract obligations and providing legally safe products while honoring guarantees and warranties.

Ethical CSR focuses on profitability and doing what is right, just, and fair. Providing ethical leadership and avoiding questionable practices mean doing more than is required in dealing with market stakeholders, such as treating employees right and paying them fair wages, providing safer products, not squeezing suppliers, and competing to win business ethically. These companies meet reasonable societal expectations and exceed government laws and regulations to be just and fair to stakeholders.

Benevolent CSR focuses on profitability and helping society through philanthropy. This highest level of CSR is also called “good corporate citizenship.” Benevolent firms are philanthropic, giving gifts of money or other resources to charitable causes. Employees are expected, encouraged, and rewarded for being active volunteers in the community, often on company time.

Determining the appropriate level of CSR to meet the business’s and stakeholders’ self-interests is not quick and easy. Each issue requires analysis, risk–reward considerations, and determining how stakeholder relations affect the overall health of the corporation.

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