It is important for businesses to not only focus on increasing their profits but also ensure that they have a positive impact on society. Each business has its own mission, vision, and values that they aim to instill in their operations and showcase their benefit to society. Aside from these concepts, some businesses promote and practice corporate social responsibility to improve their corporate image. These businesses utilize different types of corporate social responsibility to address certain aspects of their operations. While the different types of corporate social responsibility have varying focuses, they share a unified objective of improving the lives of entrepreneurs and society.
Corporate Social Responsibility Definition
Corporate social responsibility refers to an organization’s responsibility towards society. It encourages organizations to assess the effects of their operations on society and the environment (Commission of European Union, cited in Yevdokimova et al., 2019). The concept promotes responsible use of organizational resources that not only benefit a business but also society. Additionally, Gerard & Zwetsoot (2003) stated that corporate social responsibility is not a business model but a company’s moral duty (cited in Yevdokimova et al., 2019). This argument implies that individuals cannot build their organizations around corporate social responsibility. The concept is every company’s duty to secure the welfare of society. It further implies that any type of company can practice corporate social responsibility despite their business model.
The Four Types of Corporate Social Responsibility
Corporate social responsibility encompasses various aspects regarding a company’s societal impact. Researchers argued that corporate social responsibility contributes to environmental sustainability, community involvement, and ethical marketing. To address these factors, business experts, such as Archi Carrol and Howard Bowen, established the different types of corporate social responsibility. Currently, most organizations recognize four types of corporate social responsibility. These are Ethical responsibility, Philanthropic responsibility, Environmental responsibility, and Economic responsibility.
Ethical responsibility refers to an organization’s treatment of employees, customers, partners, and the public. It involves taking care of the environment, providing a livable salary, and refusing to work with autocracy (Yevdokimova et al., 2019). This type of corporate social responsibility encourages organizations to consider and assess their treatment of society. It requires them to assess the potential negative impact of their business on the environment. For example, an organization may be expanding its operations which requires cutting down trees from a protected area. Ethical responsibility may dictate that the company should find alternative space instead of causing damage to the protected area. This type also encourages organizations to ensure that their employees receive competitive wages. Organizations should refrain from underpaying their workers and ensure that their salaries are enough for a standard living condition. Lastly, Yevkodimova et al. (2019) stated that ethical responsibility promotes the refusal to work with autocracy. Autocratic organizations may be prone to unethical practices which can harm the companies associated with them.
Aside from an organization’s direct treatment of society, ethical responsibility promotes ethical operations. According to Stobierski (2021), this type of responsibility refers to fair and ethical business operations. Organizations must practice transparency towards their partners which includes stakeholders, investors, suppliers, and customers. They must practice ethical marketing and build trust through legal operations. They should refrain from falsifying documents or creating misleading reports that can affect investor decisions. They must ensure their suppliers that they will not utilize their products for illegal use nor engage in fraudulent transactions. Additionally, organizations must also ensure that their partners are trustworthy and do not engage in illegal activities. Conducting transactions with criminal organizations can harm a company’s corporate image and endanger its customers. Through ethical responsibility, companies can avoid issues regarding illegal operations and build an image that the public can trust.
Philanthropic responsibility refers to the charitable acts of an organization. According to Yevdokimova (2019), philanthropic responsibility includes actions that exceed an organization’s mission. These charitable acts can be in various forms from donating money to funding projects. Organizations that practice philanthropic responsibility surpass their standards in their attempt to contribute to the wellbeing of society. Additionally, Stobierski (2021) defined philanthropic responsibility as an organization’s desire to make society a better place. For example, a shoe company may have a mission to provide poor students with high-quality shoes. The company’s mission state that they contribute to the welfare of society by providing affordable shoes. Practicing philanthropic responsibility, the company may decide to conduct an event where they provide free school supplies to their customers. This action exceeds their mission and greatly benefits their customers.
Environmental responsibility refers to an organization’s environmental impacts. This type of corporate social responsibility encourages organizations to become environmentally friendly (Stobierski, 2021). An organization exercising environmental responsibility will aim to limit its contributions towards environmental issues, such as climate change, energy crisis, and pollution. Organizations can do this through ecological footprint monitoring, using renewable resources, reducing waste, and supporting environmental-friendly projects. Additionally, governments have legislated laws regarding the effects of companies on the environment. These legislations aid in the increased practice of environmental responsibility in various industries. Environmental responsibility is a significant duty as it not only impacts the welfare of the environment but also the living beings that depend on it.
Economic responsibility refers to an organization’s proper utilization and management of financial assets. Stobierski (2021) defined this type as the responsible financial decision of a company. These responsible financial decisions refer to an organization using its profits to practice corporate social responsibility. The other types of corporate social responsibility require an organization to spend money on fair wages, ethical marketing, supporting charities, and other socially responsible activities. Additionally, the responsible management of financial assets may also refer to the legitimate use of the resources. Organizations must ensure that they do not use their financial assets for illegal activities nor acquire profit through illegal means. Economic responsibility encourages organizations to manage their financial assets for the benefit of society.
Aside from managing financial assets, economic responsibility is also concerned with an organization’s profits. An organization has the responsibility to generate profit to continue its operations. The profit that the company earns is a significant factor that allows an organization to practice corporate social responsibility. Without it, an organization may close which results in unemployment, halt of quality service, loss of investor money, and other disadvantageous societal impacts. Business managers and other leaders must develop strategies to ensure that a company earns its profit. This type of responsibility is necessary for an organization to continue its corporate social responsibility activities and should be a priority.
Similarities Among the Four Types
Positive Effect on Organizational Performance
The four types of corporate social responsibility share a similarity regarding their impact on corporate sustainability. According to Xie, et al. (2018), corporate social responsibility activities lead to better organizational sustainability. Organizations that practice a certain type of corporate social responsibility can experience an improvement in certain aspects of their operations. For example, Gurlek et al. (2017) conducted a study where they revealed that hotels that engage in corporate social activities receive customer loyalty through their improved corporate image. Their study showcased that conducting activities regarding social and environmental issues can help an organization improve its performance.
Similar to Gurlek et al.’s study, Olaniyan et al. (2021), Hwang et al. (2021), and Zelazna (2020) conducted studies regarding the effects of ethical responsibility, philanthropic responsibility, and environmental responsibility on an organization’s performance. Olaniyan et al.’s study revealed that ethical responsibility can improve an organization’s financial performance due to the improved behavior of employees. Ethical responsibility promoted positive behaviors in the employees which resulted in an increased profit and improved reputation for the organization. Hwang et al.’s research revealed that philanthropic responsibility had a positive effect on customer attitude which increased the organization’s financial performance. The study involved observing a Starbucks store that employed disabled individuals. The researchers found out that customers preferred to use brands that practiced philanthropic activities. This preference leads to increased organizational performance and sustainability. Lastly, Zelazna (2020) stated that environmental responsibility can allow a company to reduce costs, increase customer loyalty, and improve the morale of employees. These studies indicate that the four types of corporate social responsibility have positive effects on an organization’s financial and overall performance.
Contribution to the Welfare of Society
The four types of corporate social responsibility have the same objective of contributing to the welfare of society. Each type addresses different aspects of an organization and society but aims for the same objective of helping society. The commission of Eurpoean Union (2001) defined corporate social responsibility as an organization’s responsibility regarding its societal impact (cited in Yevdokimova et al., 2019). This definition further implies that the four types of corporate social responsibility aim to address the societal impact of organizations. For example, ethical responsibility encourages organizations to treat their partners fairly. Actions regarding these activities will lead to a healthy community and better living conditions for workers. Similarly, philanthropic responsibility may encourage an organization to donate to an orphanage or a homeless shelter. This action leads to a healthy community and better living conditions for the recipients. Environmental responsibility and economic responsibility also encourage activities that improve the lives of the members of society. The four types of corporate social responsibility share this objective since it is the foundation of the concept.
Contribution to the Welfare of the Environment
While environmental responsibility encourages companies to conduct environment-friendly practices, the other types also promote the welfare of the environment. The status of the environment has a significant effect on the living condition of society and the other types of corporate social responsibility aim to support its welfare. Yevdokimova et al. (2019) included taking care of the environment in their definition of ethical responsibility. This implies that an organization must consider the ethics of its actions concerning the environment. Aside from this, philanthropic responsibility encourages companies to donate to environmental charities and projects. In some cases, a philanthropic responsibility action can also be an environmental responsibility practice. For example, a book publishing company may exercise philanthropic responsibility by funding a climate change research study. The philanthropic act of funding the study is also an environmental responsibility practice since its purpose is to help the environment. Additionally, since economic responsibility pertains to financial management, funding an environmental research study is within its scope. This concludes that the four types of corporate social responsibility contribute to the welfare of the environment.
Differences of the Four Types
The main difference between the four types of corporate social responsibility is their focus on different business aspects. Ethical responsibility refers to ethical business practices that promote a positive corporate image. Philanthropic responsibility focuses on charitable actions that exceed company standards. Environmental responsibility aims to promote environmental-friendly actions and reduce the negative environmental impact of an organization. Finally, economic responsibility pertains to the responsible management of an organization’s financial assets. These differences showcase the different actions that each type focuses on. Some types directly address internal operations while others focus on building external relationships. Additionally, the different focus of each type allows companies to recognize lapses in their operations and assess their impact on society regarding ethical, philanthropic, environmental, and economic aspects.
Since each type of corporate social responsibility has its own focus, different benefactors benefit from each activity. Ethical responsibility mostly benefits employees, investors, stakeholders, suppliers, consumers, and other organizational partners. These benefactors have direct relationships with the organization and greatly benefit from ethical practices that improve performance and corporate image. Philanthropic responsibility benefits individuals that a certain charity or cause represents. Some examples of benefactors are homeless people, poor individuals, immigrants, crime victims, hospital patients, and the disabled. Environmental responsibility mostly benefits the environment which in turn helps society. However, other benefactors can include endemic species, endangered species, protected areas, and significant sites. Lastly, economic responsibility benefits an organization and its owner. This type promotes proper financial management and the pursuit of profitability. These factors allow an organization to continue its operation and allow the owner to earn money.
Companies that Utilize Each Type of Corporate Social Responsibility
Companies have different missions and objectives which can dictate the type of corporate social responsibility that they will practice. Certain types like economic responsibility and ethical responsibility are common in most companies, however, the other types may be absent due to the limitations of an organization. For example, a young company may be unable to practice philanthropic responsibility since it is still in the process of earning back the initial investment. The company’s profit may only be enough to pay livable wages to its employees and provide them with comfortable living conditions. In this scenario, while the company lacks philanthropic responsibility, it can still practice ethical responsibility through proper wages. It is important to note that this particular difference mostly applies to philanthropic responsibility since companies can easily practice the other types through their operations. A young company can still practice environmental responsibility by proper waste management and utilization of renewable resources. The company can easily practice ethical responsibility through livable wages, additional leaves, and health benefits for their employees. Despite this ease of access, other companies may ignore or prefer certain types of responsibility.
Businesses that Requires Corporate Social Responsibility
Many companies and industries have begun incorporating the different types of corporate social responsibility into their operations. However, there are still many companies that need to address certain aspects of their operations due to the negative impact they have on society. One example of this is the cryptocurrency industry’s effect on the environment. According to Cho (2021), one Bitcoin transaction can consume 707 kWh while Bitcoin mining consumes 121.36 TWh per year which is more than the energy consumption of Google, Apple, Facebook, and Microsoft. This high energy consumption contributes to the current global energy crisis. Due to this, Bitcoin mining businesses like Stronghold Digital Mining should aim to prioritize environmental responsibility in their operations. They need to engage in activities that will allow the industry to compensate for the environmental damage it has inflicted. For example, they can fund research studies regarding alternative sources of energy. This type of study can greatly benefit the crypto mining industry and society due to the many applications of alternative sources. They can also promote the reduction of electronic waste since Bitcoin miners tend to frequently upgrade computer systems and discard old hardware.
Another industry that needs to exercise strong corporate social responsibility is the video game development sector. Various video game companies, such as Activision Blizzard, are currently facing backlash due to the poor treatment of their employees. These companies force their employees to work long overtime hours to meet tight deadlines. This practice has led to the popularity of the term “crunch” in the industry. Additionally, Activision Blizzard is currently facing lawsuits due to sexual harassment and discrimination cases. Reports from news media stated that the company has a frat-boy culture that led to sexual harassment. There are also reports of female employees receiving less pay than their male counterparts. Activision Blizzard will need to exercise various corporate social responsibility activities to rebuild its reputation and regain public trust. They will need to promote ethical responsibility and ensure that no discrimination takes place in the workplace. They can also engage in philanthropic activities and support the women’s rights movement. Additionally, they will need to ensure that the victims of sexual harassment receive justice and compensation for their negative experiences. These activities can help the company regain public trust and develop a healthier work environment.
Corporate social responsibility is a concept that can help an organization improve its performance while also contributing to the welfare of society. The four types of corporate social responsibility allow companies to address different aspects of their operations and create activities that promote societal benefits. They all promote positive effects on an organization’s performance, contribute to the welfare of society, and contribute to the welfare of the environment. While they share these similarities, they differ on their focuses, benefactors, and the companies that utilize them. While the different types of corporate social responsibility focus on ethical, philanthropic, environmental, and economic aspects of an organization, they also share the goal of promoting a healthy society.
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