How to differentiate CSR and ESG?
Sustainability leaders, investors, employees, and consumers are choosing companies that align with their values. Millennials and Generation Zs in particular have been leading the shift through their spending power and ability to publicize support or dissatisfaction widely. Over the past decade, many have confused CSR and ESG to be the same. We get it, all these acronyms can be a little tricky. But they definitely are not identical. In this blog post, you will be able to learn the definitions, how they overlap with one another, how they impact an organization in their own ways and the ways to implement them in a business.
What is Corporate Social Responsibility (CSR)?
Corporate Social Responsibility (CSR) refers to a company’s policies, procedures, and decision-making that address social, environmental, and economic problems. CSR pledges serve as cornerstones of corporate culture, providing insight into firm principles to employees, investors, and consumers. They are self-regulatory and can vary greatly. Despite the fact that CSR is about accountability, its qualitative character makes it difficult to define. CSR can capture the will, values, and spirit of business culture and be the stepping stone to being measurable, driving changes with data.
What is Environmental, Social, Governance (ESG)?
Environmental, social, governance (ESG) evaluates a company’s sustainability practices based on environmental, social, and governance considerations. CSR can help to make a business accountable, however, ESG criteria make businesses’ actions measurable.
ESG standards are based on quantitative outcomes that assist stakeholders in making better decisions regarding a company’s risks and ethics. Consumers can use ESG reporting to determine which businesses to support and which to avoid by seeing if a company’s practices and actions align with their own values. Quantitative performance indicators are connected to specific ESG criteria in ESG metrics.
What are their differences?
CSR can be incorporated by communicating internally and externally through media releases that the company is committed to being more sustainable and responsible. ESG builds on that foundation with measurable goals. They are related but just not the same.
ESG practices can be used to evaluate how well a company is adhering to the sustainability and corporate responsibility goals. CSR would include greater employee awareness of the environmental and social impact of the company or internal and external messaging about sustainable practices.
CSR gives context about sustainability agendas and corporate responsibility culture. ESG is the action and measurable outcome. To simplify, CSR can be thought of as the qualitative side and ESG as the quantitative side.
How to incorporate CSR?
- Company Culture: Implement a code of ethics and core values that include social and environmental stewardship.
- Health and Safety: Outline the standards for health and safety in the workplace and, explain how the company can reduce risks that have negative environmental impacts.
- Environmental: Be aware and proactive about the impact your company has on the environment. Create goals that improve resource management and reduce your carbon imprint.
- Social: Make diversity and fair treatment of employees a central value and implement programs that increase employee, customer and supplier diversity. Understand and improve the relationship your company has with local communities and find sustainable ways to give back.
- Educate and Listen: CSR isn’t just at the top — ask employees, suppliers and customers for input about how your company can shore up CSR ideals or improve policies. Educate employees about how they can be part of the solution and encourage them to recommend diverse suppliers and potential hires. Educate employees and the public about environmental and social risks for your industry.
How to incorporate ESG?
Implementing ESG is a more tedious process because it requires measurable goals, data collection, and reporting.
- Conduct a Materiality Assessment: Materiality assessments are methodical, informed reviews to determine the priority and current issues around ESG topics.
- Assess Current State: Gather data within the company based on the materiality assessment. Discuss specifics and collect insights from key stakeholders.
- Set Objectives and Goals: Determine what you are currently doing well and how to maintain and communicate. Set strategic goals to improve areas that are currently underperforming. Determine where your company can excel and move towards industry leadership in ESG.
- Develop a Strategic ESG Roadmap and Framework: The framework should include measurable, progressive goals. The roadmap guides efforts and communicates a clear picture of your goals to stakeholders and investors.
- Set Action Plans: Incorporate ESG goals into the culture, policies, and procedures of your organization. Communicate regularly to review, revise and update along the way. Determine how performance data will be collected and analyzed and define key performance indicators.
- Report Progress: Reporting can be internal, external, or a mixture of both. Decide how and when reporting will take place and keep a consistent schedule. Explain what is going well, what has been or needs to be revised, and present progress data.
Starting & Managing Corporate Sustainability & ESG Strategy
The latest survey by UN Global Compact Study of international CEOs confirms that companies increasingly see sustainability as critical to their business strategy. Corporate Sustainability and ESG Strategy are becoming corporate imperatives in all sectors. With more organizations reporting on their environmental impact and committing to lower their carbon emissions, consumers are more aware and opting for greener products and services. This has made Sustainability a hot and timely topic in terms of how organizations operate and engage their stakeholders. Do you know how to incorporate it into your corporate strategy? Can you define and track how sustainable your operations and initiatives are?
With our industry expert, Chan Mun Wei, you can gather more insights about ESG strategy and how you can incorporate it, with a 2-Day Classroom Learning Workshop!
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Sources
ESG vs. CSR: Key Distinctions & What Businesses Need to Know
