CIMA BA4 · Chapter 8
Corporate social responsibility and sustainability MCQs with Answers
10 multiple-choice questions on Corporate social responsibility and sustainability for CIMA BA4 Fundamentals of Ethics, Corporate Governance and Business Law. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
Which of the following best describes corporate social responsibility (CSR)?
- A) The voluntary commitment of a business to act ethically and contribute to economic development while improving the quality of life of employees, communities and society
- B) A legal duty to maximise profits for shareholders
- C) A tax charged on large companies by government
- D) The obligation to publish audited financial statements
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Answer: A) The voluntary commitment of a business to act ethically and contribute to economic development while improving the quality of life of employees, communities and society
CSR refers to an organisation taking responsibility for the impact of its activities on stakeholders and society beyond legal minimums. It is largely voluntary. Profit maximisation, taxes and audited accounts are legal or economic obligations, not CSR.
Question 2
The 'triple bottom line' requires organisations to report on which three dimensions of performance?
- A) Revenue, costs and profit
- B) Assets, liabilities and equity
- C) Economic, social and environmental
- D) Shareholders, directors and auditors
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Answer: C) Economic, social and environmental
The triple bottom line, associated with John Elkington, broadens reporting from purely financial results to economic (profit), social (people) and environmental (planet) performance. The other options are financial statement elements or governance parties.
Question 3
In Carroll's pyramid of corporate social responsibility, which responsibility forms the base of the pyramid?
- A) Philanthropic responsibility
- B) Ethical responsibility
- C) Legal responsibility
- D) Economic responsibility
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Answer: D) Economic responsibility
Carroll's pyramid has four levels: economic (be profitable) at the base, then legal (obey the law), ethical (do what is right and fair) and philanthropic (be a good corporate citizen) at the top. A business must be economically viable to fulfil the higher responsibilities.
Question 4
Which view of CSR is most closely associated with the economist Milton Friedman?
- A) Businesses should give a fixed percentage of profit to charity
- B) Managers must balance the interests of all stakeholders equally
- C) The social responsibility of business is to increase its profits, within the rules of the game
- D) Businesses have no obligation even to obey the law
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Answer: C) The social responsibility of business is to increase its profits, within the rules of the game
Friedman argued that the main social responsibility of business is to use its resources to increase profits, provided it stays within the rules of the game, meaning open and free competition without deception or fraud. He did not argue that businesses can ignore the law, and the balancing of stakeholder interests reflects stakeholder theory.
Question 5
A manufacturer pays suppliers in developing countries a fair price, monitors their labour conditions and refuses to use child labour. Which area of CSR does this primarily address?
- A) Shareholder dividend policy
- B) Responsible supply chain management and human rights
- C) Capital structure
- D) Tax planning
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Answer: B) Responsible supply chain management and human rights
Ensuring fair dealing with suppliers and acceptable labour conditions throughout the supply chain is a central part of CSR concerning human rights and ethical sourcing. Dividends, capital structure and tax planning are financial decisions with little direct link to these issues.
Question 6
Which of the following is the best example of sustainable business practice?
- A) Meeting present needs without compromising the ability of future generations to meet their own needs
- B) Maximising short-term output regardless of resource depletion
- C) Expanding into as many markets as possible each year
- D) Keeping prices constant for as long as possible
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Answer: A) Meeting present needs without compromising the ability of future generations to meet their own needs
Sustainability, as defined by the Brundtland Report, means development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Practices that deplete resources for short-term output are unsustainable, and market expansion and price stability are unrelated concepts.
Question 7
Which of the following is a likely business benefit of a strong CSR policy?
- A) Improved reputation, helping to attract customers, employees and investors
- B) Guaranteed exemption from environmental legislation
- C) Elimination of all competition in the market
- D) Removal of the need for corporate governance
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Answer: A) Improved reputation, helping to attract customers, employees and investors
Effective CSR can strengthen brand reputation, customer loyalty, staff recruitment and retention, and access to capital from responsible investors. It does not exempt a company from law, eliminate competitors or replace governance requirements.
Question 8
Which stakeholder theory approach holds that managers should consider stakeholder interests because doing so will ultimately improve long-term financial performance?
- A) The normative view
- B) The instrumental view
- C) The shareholder primacy view
- D) The legal compliance view
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Answer: B) The instrumental view
The instrumental view of stakeholder theory treats attention to stakeholders as a means to an end: satisfying stakeholders improves long-term profitability. The normative view holds that stakeholders have intrinsic moral claims regardless of financial benefit. Shareholder primacy rejects broader stakeholder duties.
Question 9
Under English law, section 172 of the Companies Act 2006 requires directors to promote the success of the company for the benefit of its members as a whole. Which of the following must directors also have regard to in doing so?
- A) The personal political views of the majority shareholder
- B) The profits of the company's competitors
- C) The impact of the company's operations on the community and the environment
- D) The directors' own personal tax position
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Answer: C) The impact of the company's operations on the community and the environment
Section 172 lists factors that directors must have regard to, including the long-term consequences of decisions, employees' interests, relationships with suppliers and customers, the impact on the community and the environment, high standards of business conduct and acting fairly between members. This is often called 'enlightened shareholder value' and links company law to CSR.
Question 10
A company publishes a glossy sustainability report highlighting a small tree-planting project while its main factory continues to breach pollution limits. Which term best describes this behaviour and which principle does it threaten?
- A) Philanthropy; it demonstrates the top level of Carroll's pyramid
- B) Triple bottom line reporting; it shows balanced performance
- C) Stakeholder mapping; it identifies key players
- D) Greenwashing; it threatens integrity because the reporting is misleading
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Answer: D) Greenwashing; it threatens integrity because the reporting is misleading
Greenwashing is presenting a misleading impression of environmental responsibility through selective disclosure. Accountants associated with such reporting risk breaching integrity, which forbids being associated with misleading information. It is neither genuine philanthropy nor balanced triple bottom line reporting, since it ignores legal breaches at the base of Carroll's pyramid.