Corporate culture has never been more transparent or important than it is now. Sustainability leaders, investors, employees, and consumers are choosing companies that align with their values. Millennials in particular have been cited as key to this shift through their spending power and ability to publicize support or dissatisfaction widely.
Corporate Social Responsibility (CSR) and Environment, Social, and Governance (ESG) policies guide business practices and inform the public about the values, goals , and risks of a company. This post will explain the difference between the overlapping concepts of CSR and ESG and how each can be incorporated, measured, and refined.
What Is Corporate Social Responsibility (CSR)?
Corporate Social Responsibility (CSR) covers the overarching social, environmental, and economic concerns in a company’s policies, practices, and decision-making. CSR commitments serve as keystones for corporate culture and give employees, investors, and consumers insight into company values. They are generally self-regulated and can vary widely. Though CSR is about accountability, the qualitative nature of CSR makes it difficult to pin down. The will, values, and spirit of corporate culture can be captured by CSR which serves as a starting point to get to the next step of measurable, data-driven change.
What Is Environment, Social, Governance (ESG)?
ESG uses environmental, social, and governance factors to evaluate sustainability practices within a company. As Lexology puts it: “While CSR aims to make a business accountable, ESG criteria make such business’ efforts measurable.”
ESG criteria focus on quantitative results that help investors make better decisions about the risks and ethics of particular companies. ESG reporting also helps consumers decide which businesses to support, and which not to, by giving them an indication if a company’s practices and actions align with their own values. ESG metrics have quantitative performance indicators aligned to particular ESG criteria. Antea Group explains the need for ESG:
Proactively evaluating your company according to ESG criteria is not only appealing to the eyes of potential investors or the public, but it gives your company the information it needs to shore up any gaps.
The Differences Between CSR and ESG
CSR and ESG are related but not the same. Let’s say a paper bag manufacturer wants to implement CSR and ESG policies. CSR can be incorporated by communicating internally and in press releases that the company is committed to being more sustainable and responsible. ESG builds on that foundation with measurable goals such as a 30% increase in recycled materials within five years and planting one million trees in 10 years.
ESG practices can be used to evaluate how well a company is adhering to the sustainability and corporate responsibility goals they set. Harder-to-measure indicators under the CSR banner would include greater employee awareness of the environmental and social impact of the company or internal and external messaging about sustainable practices.
CSR is the ideal and 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.
Tools for Business: Putting CSR and ESG into Practice
How to Incorporate CSR
CSR starts with recognizing the key sustainability concerns in your industry and incorporating improvement as part of your culture. Five key CSR factors are:
- Company Culture: Implement a code of ethics and core values that include social and environmental stewardship.
- Health and Safety: Clearly outline the standards for health and safety in the workplace and, where applicable, explain how the company reduces risk of accidents 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 involved process than implementing CSR because it requires measurable goals, data collection, and reporting. Antea Group offers a way to start with 7 steps to develop and implement an ESG strategy.
- Conduct a Materiality Assessment: Materiality assessments are methodical, informed reviews to determine the priority and current industry landscape around ESG topics.
- Assess Current State (Baseline): Gather data within the company based on the priorities from your 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 about it.
Improve: Set strategic goals to improve areas that are currently underperforming.
Optimize: Determine where your company can excel and move towards industry leadership in ESG. Implement incremental, measurable goals and reporting strategies.
- Analyze Gaps to Achieving Future State: Conduct a gap analysis to identify roadblocks and optimize your strategies.
- Develop a Strategic ESG Roadmap and Framework: This is where ESG is really set apart from CSR. 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 and Measure Key Performance Indicators: Incorporate ESG goals into the culture, policies, and procedures of your organization. Set a regular cadence of communication 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.
ESG reporting can be reviewed for internal auditing of sustainability practices and is used in the due diligence process for investors.
Antea Group can help navigate CSR and ESG evaluations and provide research-backed assessments. Reach out to us to learn more about our Sustainability Consulting Services.
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