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ACCA Strategic Professional · Strategic Business Leader · Stakeholder analysis and organisational social responsibility

Marlow Chemicals discovers that a legally permitted effluent discharge is damaging a river used by a nearby fishing community. No law is broken. The board decides to install costly treatment equipment because it is the right thing to do, accepting lower profit this year. Which layer of Carroll's pyramid does this decision primarily reflect?

The decision reflects ethical responsibility. Carroll's ethical layer expects firms to act fairly and avoid harming stakeholders even where the law permits the conduct. Marlow is remedying harm it causes, which is an expectation of society, rather than a legal duty or a discretionary donation.

  1. ALegal responsibility, because the discharge is within permitted limits
  2. BPhilanthropic responsibility, because the company is giving money to the community
  3. CEconomic responsibility, because the equipment is a capital investment
  4. DEthical responsibility, because it acts fairly and avoids harm beyond what the law requiresCorrect

Explanation

The ethical layer covers doing what is right, just and fair and avoiding harm even where the law does not require it. The spending responds to harm, not to a legal duty, so it is not the legal layer. Philanthropy is discretionary giving to improve quality of life, not remedying harm the firm causes.

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