Corporate Social Responsibility (AQA A Level Business): Revision Note

Stakeholder versus shareholder concept

• A shareholder is an individual or institution that owns shares in a company, making them a part-owner

• A stakeholder is any individual or group with an interest in or affected by the activities of a business

• A business can take a shareholder or a stakeholder approach in its business strategy

The shareholder approach

• The shareholder approach is focused on meeting the needs of shareholders over all other stakeholder groups 

  • A business that adopts a shareholder approach

    • Is likely to take a short-termist view

    • Will focus on maximising profits to increase dividends and improve the share price

The stakeholder approach

• A stakeholder approach focuses on a range of stakeholder groups

  • A business takes steps to ensure that the benefits and drawbacks of its operations are shared equally amongst them

  • This is likely to decrease profits, as competing stakeholder needs may require solutions that involve increased costs

    • e.g. Meeting employees' needs by paying higher wages increases salary costs

  • A business that adopts a stakeholder approach

    • Recognises its impact on a range of stakeholder groups

    • Understands how stakeholder groups can impact its operations

    • Communicates effectively with stakeholder groups 

    • Tries to minimise the negative impacts of business operations on stakeholder groups

The value of corporate social responsibility

• Corporate social responsibility (CSR) is where businesses voluntarily go beyond legal requirements to manage their social, environmental and ethical impacts

  • They aim to benefit society, protect the planet and build trust with stakeholders while still making a profit

Social responsibility objectives

Reasons for implementing CSR

Risks of implementing CSR initiatives

• However, there are some risks of implementing CRS initiatives

  1. High upfront costs and resource demands

     • Implementing CSR (for example, installing solar panels or switching to ethical suppliers) takes money and staff time

     • Smaller businesses may not have these resources

  2. Potential competitive disadvantage

     • If rivals don’t invest in CSR, a company that does may have higher costs and struggle to match their lower prices

     • E.g. Ryanair has focused on keeping ticket prices low by avoiding costly carbon-offset schemes, helping it stay cheaper than some competitors

  3. Risk of greenwashing accusations

     • Poorly planned or half-hearted CSR can backfire. If consumers see it as fake or minimal, it can harm the company’s reputation more than having no CSR at all

     • E.g. BP’s Beyond Petroleum campaign in the 2000s was criticised after oil spills, leading to public distrust

Carroll's Corporate Social Responsibility Pyramid

• Carroll’s Corporate Social Responsibility (CSR) Pyramid is a framework developed by Archie B. Carroll that outlines the four levels of responsibility a business should fulfil to be socially responsible

  • It is used to analyse how firms balance profit-making with ethical and social responsibilities

1.Economic responsibility (base of the pyramid)

• Be profitable: This is the foundation of the pyramid. Businesses must be financially viable to survive and support all other responsibilities

• It involves producing goods/services that customers want at a profit in such a way that the business:

  • Pays employees

  • Provides returns to shareholders

  • Creates jobs and wealth

2. Legal responsibility

• Obey the law: Businesses must operate within the framework of laws and regulations set by governments

• These include:

  • Employment laws

  • Consumer protection laws

  • Health and safety regulations

  • Environmental laws

3. Ethical Responsibility

• Do what is right, just, and fair: This goes beyond legal obligations. Ethical responsibilities involve doing the right thing, even when not legally required

• It includes:

  • Fair treatment of employees

  • Ethical sourcing and marketing

  • Respecting human rights and the environment

4. Philanthropic responsibility

• Be a good corporate citizen: This is about giving back to society through voluntary actions

• Examples include:

  • Charitable donations

  • Community initiatives

  • Supporting education or healthcare projects

  • Sponsorships

Uses and limitations of the model