Corporate Social Responsibility (CSR) refers to sustainability strategies businesses employ to ensure that the company is carried out ethically. In contrast, Environmental, Social and Governance (ESG) are criteria used to measure a company’s overall sustainability. Think of it this way, CSR is a sustainability framework employed by organizations, while ESG measures the organization’s level of sustainability – increasingly demanded by investors and other stakeholders. A decade ago, Corporate Social Responsibility (CSR) was the buzzword for sustainable business practices. Today, everyone seems to be talking about Environmental, Social, and Governance, also known as ESG. Many understand ESG as CSR raised into a measurable strategy – bringing transparency and accountability to a company’s environmental and social impacts. While that is a good start for grasping the differences, there is still much more to it. Keep reading to dive deeper into what CSR and ESG are, where they differ and where they substitute each other. Corporate Social Responsibility (CSR) is a management concept in which companies integrate social and environmental concerns into their business strategy, to positively impact society while improving brand reputation. CSR objectives could, for instance, be to reduce carbon footprint, improve labor policies, build green office spaces, or initiatives such as creating new products from plastic waste – as Adidas has. The term started to gain attention in the 1970s, and by the early 2000s, it had become an essential strategy for many companies, large and small. A lot has changed since then. While CSR is an excellent strategy for driving awareness of an organization’s initiatives – today’s stakeholders demand transparency and clear evidence showing that you walk the talk. Companies that do not have the relevant data to support their CSR commitments or solely focus on the wrong things risk being accused of greenwashing. That is where CSR can go wrong. A recent study found that even the companies with a high overall CSR score are involved in some form of greenwashing practice. Today, transparency is the backbone of a company’s sustainability claims – and that is where ESG comes in. ESG is a sustainability assessment using Environmental, Social, and Governance metrics to evaluate how sustainable and resilient a company is to make it accountable for its sustainability claims. In recent years, investors and other corporate stakeholders’ interest in ESG has skyrocketed, and it has even been described as the decade’s trend. On the one hand, it is seen as a way to better capture a company’s risks and opportunities. On the other, the growing number of ESG regulations being introduced, such as the EU Taxonomy and the SFDR, is currently reshaping the entire corporate world and investors have no other option but to adjust. In fact, responding to evolving regulations and legal requirements was the number one driver for considering ESG factors in investment decisions and implementation, according to a survey by Barnett Waddingham. source: Barnett Waddingham ESG regulations vary on country and industry, but as we are witnessing nation after nation adopting stricter regulations, companies must stay informed of – and compliant– across the regional differences. This is especially important for those doing business internationally. The repercussions of non-compliance can be severe, such as facing huge fines that can negatively affect both publicity and revenue. To conclude, CSR is a self-regulated strategy employed by organizations to have a positive impact on society. CSR helps a company to: ESG, on the other hand, takes it one step further by measuring these efforts at a more precise assessment, often demanded by investors. It helps companies set measurable goals to show their process and where they are on their sustainability journeys. Stakeholders today do not want impressive sounding targets. What they really want is to understand the company. So do not shy away from reporting the goals that have not yet been met. Instead, be transparent with where you have excelled but also where you have opportunities to improve. Remember, it progresses over perfection! ESG helps a company with: It is not if, but rather when your organization will be affected by the growing ESG requirements. So start your ESG journey today to future-proof your organization. Use Worldfavor to collect ESG data from suppliers and business partners and streamline your sustainability performance. Easily standardized your ESG reporting with leading frameworks such as SFDR, GHG, GRI, SDGs, WEF, and more – just as your stakeholders want it. Sound interesting? Contact us today and we will tell you more! Related blog posts you might like:What is the difference between CSR and ESG?
What is CSR?
What is ESG?
So what is the difference between CSR and ESG? In short, the metrics!
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FAQs
What is the main difference between CSR and ESG? ›
CSR focuses on corporate volunteering, lowering carbon footprint, and engaging with charities. ESG provides a more quantitative measure of sustainability. ESG considers environmental, social, and governance factors. ESG improves the valuation of the business.
What sets ESG apart from CSR? ›CSR usually encompasses how a company will approach its internal framework of sustainability plans and responsible cultural influence, whereas ESG relates to the assessable outcome concerning a company's overall sustainability performance.
What is the difference if any between corporate social responsibility CSR and sustainability? ›Corporate social responsibility, or CSR, is a business approach that prioritizes doing good for the community through responsible actions. Corporate sustainability is a business approach that prioritizes altruistic, long-term decisions over short-term financial gains.
What is the difference between ESG and corporate sustainability? ›It's a measured assessment using benchmarks and metrics. So, sustainability is a broader concept that encompasses environmental, social and governance considerations, whereas ESG specifically refers to a set of criteria within these three areas that are used to evaluate the performance and behaviour of companies.
When did ESG replace CSR? ›However, the term ESG did not come into use until 2005. Yet, ESG has always included business objectives while striving to make the world a better place. Since that time, the terms ESG, CSR, and sustainability have been used interchangeably by companies.
What is socially responsible vs ESG options? ›ESG looks at the company's environmental, social, and governance practices alongside more traditional financial measures. Socially responsible investing involves choosing or disqualifying investments based on specific ethical criteria.
What to say instead of ESG? ›In addition, terms like "sustainable investing," "responsible business," and "transition investing" have also been floated by business leaders and corporate advisers in recent months as other ways to talk about the issues raised by ESG without using the term itself.
What is ESG and examples? ›ESG is a practice in which investors consider a company's environmental, social and corporate governance impact when making investment decisions. This makes ESG not only a priority for investors but also an imperative for corporations that want to both attract more shareholders and satisfy those they already have.
What are the three pillars of sustainability vs ESG? ›The same report introduced the three pillars or principles of environmental, social and economic sustainability, also known as ESG (Environmental, Social, Governance).
What is the new term for ESG? ›The ESG moniker has become so politicized that it now prevents clear-headed thinking, said Alex Edmans, who teaches at London Business School. He's instead proposing the term “rational sustainability.” It may be bland, he said, but sustainability is about producing long-term value—and that's hard to politicize.
Why is CSR not sustainable? ›
But such measures do not always acknowledge the long-term impact on the communities. Keep in mind that schools and hospitals require staff and ongoing servicing. So CSR measures can actually impose long-term liabilities on affected communities, making well-intentioned actions unsustainable.
What does ESG cover? ›ESG – short for Environmental, Social and Governance – is a set of standards measuring a business's impact on society, the environment, and how transparent and accountable it is.
What is difference between CSR and ESG? ›CSR refers to a company's commitment to operating ethically and responsibly, considering its impact on society, the environment, and its stakeholders. ESG takes this concept a step further, requiring integration into the company's core purpose and supported by concrete evidence and data.
What is replacing ESG? ›Professor Edmans proposes a new approach – Rational Sustainability. It is 'sustainable' in that it considers 'long-term value', and 'all factors that create value, regardless of whether they fall under an ESG label…'.
What is the opposite of ESG? ›The term anti-ESG investing is somewhat subjective. For some proponents, anti-ESG investing is about maximizing profits without regard to a company's governance factors or its impact on society and the planet. These investors often argue that a company should be evaluated solely on the basis of financial performance.
What is the relationship between CSR and sustainability? ›In summary, CSR and sustainability are linked but not the same. CSR is a shorter-term reporting initiative whereas sustainability focuses on the future growth and survival of the business while supporting the environmental, social and economic elements that are reported on in CSR.
What is the difference between ESG and purpose? ›Consensus: Purpose is about creating societal impact, whereas ESG is focused on reducing risks to the business.
Why are CSR programs important part of ESG? ›Explanation : CSR (Corporate Social Responsibility) programs are an important part of ESG (Environmental, Social, and Governance) actions taken at Axis Bank because they help the bank to address social and environmental issues, improve its reputation, and build a sustainable business model.
What is the difference between ESG and social impact? ›ESG Investing VS Impact Investing Objectives:
ESG investors hope to push businesses to adopt more sustainable practices in this way and to help create a more sustainable future. On the other hand, impact investing's primary goal is to provide favorable social and environmental effects and financial returns.