Approaches to Social Responsibility: CSR, Stakeholder Theory, and Triple Bottom Line

Every large company today faces the same question: who exactly is a business responsible to? Shareholders demanding returns? Employees expecting fair wages? Communities living next to the factory? Over the decades, management thinkers have proposed different answers, and three frameworks now dominate the conversation: CSR Theory, Stakeholder Theory, and the Triple Bottom Line. Each one approaches social responsibility from a different angle, and understanding how they differ helps explain why companies behave the way they do when profit and public good seem to pull in opposite directions.

Why social responsibility needed a theoretical framework 🔗

For most of the twentieth century, the dominant view of business was simple: a company exists to maximise profit for its owners, full stop. Milton Friedman’s famous line that the social responsibility of business is to increase its profits summed up this position neatly. But as industrialisation deepened environmental damage, labour exploitation, and community neglect, scholars and practitioners began arguing that this narrow view left out too much. CSR Theory, Stakeholder Theory, and the Triple Bottom Line each emerged as a response, offering businesses a more structured way to think about obligations beyond the balance sheet.

CSR theory: discretionary practices for community welfare 🔗

CSR Theory treats social responsibility as a set of voluntary, discretionary actions a business takes to improve the welfare of the community it operates in, actions that go beyond what the law strictly requires. Archie Carroll’s well-known pyramid model breaks corporate responsibility into four layers: economic, legal, ethical, and philanthropic. The first two are baseline expectations, while the ethical and philanthropic layers are where genuine CSR activity happens, things like funding a village school, running free health camps, or sponsoring skill-development programmes.

What typically counts as CSR 🔗

In practice, CSR activities cluster around a few recurring themes: education and skill development, healthcare and sanitation, environmental conservation, rural development, and disaster relief. The common thread is that these are not the company’s core commercial activities. A cement manufacturer building schools near its plants is engaging in CSR precisely because school-building has nothing to do with cement.

CSR in India: from voluntary gesture to legal mandate 🔗

India took an unusual step in global corporate governance by making CSR a statutory obligation rather than leaving it purely to corporate discretion. Section 135 of the Companies Act, 2013 requires companies crossing specified thresholds of net worth, turnover, or net profit to spend at least two per cent of their average net profits of the preceding three years on CSR activities. The law also lists permissible activities in Schedule VII, covering areas such as poverty eradication, healthcare, education, gender equality, and environmental sustainability. The Ministry of Corporate Affairs continues to refine this framework; a recent expansion of Schedule VII even allows companies to route CSR funds into instruments listed on the Social Stock Exchange, widening how firms can channel money toward public welfare.

This shift matters for how we think about the theory itself. When CSR becomes law, does it stop being “discretionary”? Most scholars would say the underlying philosophy, businesses owing something back to society, remains the same even though India chose to enforce it through legislation rather than leave it to goodwill. Government audit data reinforces how significant this spending has become: as per the Comptroller and Auditor General’s reports, thousands of eligible companies are now required to spend this mandated two per cent every year, turning what began as a discretionary idea into an institutionalised compliance requirement.

Stakeholder theory: protecting everyone who has a stake 🔗

While CSR Theory asks “what can a company give back,” Stakeholder Theory asks a more fundamental question: “who does the company actually owe consideration to in the first place?” The theory was formally developed by management scholar R. Edward Freeman in his 1984 book, which argued that a business should be managed for the benefit of all its stakeholders, not just its shareholders. A stakeholder, in Freeman’s definition, is any group or individual who can affect or is affected by the achievement of the organisation’s objectives.

Who counts as a stakeholder 🔗

Stakeholder Theory widens the lens considerably compared to the older shareholder-first view of business. Instead of prioritising shareholder wealth above everything else, managers are expected to balance the legitimate interests of multiple groups at once.

Why the theory was revolutionary 🔗

Freeman’s core departure from the shareholder-only view was that businesses cannot succeed by treating other groups as mere means to shareholder ends. Managing for stakeholders means recognising that a business relationship is the essence of doing business, and value gets destroyed, not created, when one group’s interests are consistently sacrificed for another’s. This idea has since expanded well beyond management theory into fields like public policy, healthcare, and environmental regulation, largely because it offers a practical checklist: before making a decision, ask which stakeholder groups will be affected and how.

A useful, if imperfect, way to think about it: a company that pays its shareholders handsomely while underpaying its factory workers or polluting the surrounding river is not failing at Stakeholder Theory occasionally, it is rejecting the theory’s core premise altogether.

Triple bottom line: adding people and planet to profit 🔗

The third major approach comes not from a business school department but from a sustainability consultant. In 1994, John Elkington coined the term “triple bottom line”, arguing that measuring corporate success purely through the financial “bottom line” gives an incomplete picture of a company’s real value. A firm could be profitable on paper while quietly damaging the environment or the communities it operates near.

The three Ps: people, planet, profit 🔗

Elkington’s framework asks organisations to report and evaluate performance across three simultaneous dimensions, often summarised as the three Ps:

• People: the social impact of business, covering fair labour practices, employee wellbeing, and community welfare.
• Planet: the environmental footprint, including resource use, emissions, and ecological impact.
• Profit: the traditional economic performance, still necessary, but no longer the sole measure of success.

HEC Paris researchers note that the triple bottom line stands for the idea that a firm’s performance should never be assessed on economic terms alone, but should be judged along social, environmental, and economic dimensions together. This idea pushed sustainability reporting from a fringe activity into something investors and regulators now routinely expect.

The theory’s own inventor had second thoughts 🔗

Interestingly, Elkington himself later expressed concern that companies were treating the triple bottom line as a simple accounting checklist rather than the deeper challenge to capitalism he originally intended. He called for a “recall” of the concept, urging businesses to use it as a genuine driver of systemic change rather than a box-ticking sustainability report. This criticism is worth remembering: a framework is only as powerful as the sincerity with which a company applies it.

How the three approaches compare 🔗

Though they overlap, each theory has a distinct centre of gravity. CSR Theory is about discretionary giving back. Stakeholder Theory is about who a business must consider in every decision. The Triple Bottom Line is about how success itself gets measured.

In real corporate practice, these frameworks rarely operate in isolation. A company running a Section 135-mandated education programme (CSR Theory) is often doing so because it recognises the surrounding community as a stakeholder (Stakeholder Theory), and it may report the programme’s outcomes as part of a broader sustainability disclosure (Triple Bottom Line). The three theories are less like competing schools of thought and more like three lenses that, used together, give a fuller picture of what responsible business actually looks like.

What do you think? If a company is legally required to spend on CSR, does that make its social responsibility less genuine than a company that spends voluntarily? And when profit, people, and planet conflict in a real business decision, which one should a manager prioritise first?

References

1. https://ebook.mca.gov.in/Actpagedisplay.aspx?PAGENAME=17923
2. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2266792&reg=3&lang=1
3. https://cag.gov.in/uploads/download_audit_report/2024/07-Chapter-IV-06690d23bdfbc72.95547184.pdf
4. https://www.darden.virginia.edu/stakeholder-theory
5. https://hbr.org/2018/06/25-years-ago-i-coined-the-phrase-triple-bottom-line-heres-why-im-giving-up-on-it
6. https://www.hec.edu/en/what-triple-bottom-line