In today's rapidly evolving business landscape, where sustainability and ethical practices take center stage, terms like CSR (Corporate Social Responsibility) and ESG (Environmental, Social, and Governance) have become increasingly prevalent. These concepts encapsulate the core values and responsibilities that companies hold towards society and the environment. However, while CSR and ESG may seem synonymous at first glance, a closer examination reveals intriguing nuances and distinct approaches.
So, what is the difference between CSR and ESG? This article will introduce you to both concepts accompanied by examples and then dive into the ways that CSR and ESG differ from one another.
What is CSR?
CSR stands for corporate social responsibility, and it refers to a company’s policies that are put in place in order to offer a positive change in the world. A CSR program helps to ensure that the company is meeting goals to be better. When it comes to ‘better’, it can refer to several different things.
From improving the company culture to fighting against climate change by improving the sustainability practices within the company, and even fighting for social justice within the policies and practices of the company, a CSR program helps to fight for a change that aligns with the morals of the company.
An effective CSR strategy can help a business to gain loyal customers. Studies show that today’s customer base places a heavy focus on how businesses are run. When we look at younger generations, generation Z and millennials place particular importance on the way brands they buy from operate and how they implement their CSR strategy.
In fact, 62% of Gen Z’ers have made a purchase decision based on the morals of the brand they buy from, and 88% of consumers as a whole say that they would rather spend more to buy a more ethical product. The younger generations are more ethically aware of the goods that they are buying, and to stay competitive, a company must consider this in their business plan.
CSR projects are also likely to help a company retain and attract valuable employees. In the hunt for top talent, more and more prospective employees are looking for a company that doesn’t necessarily pay the most but offers good benefits and aligns with their moral standing. Likewise, if existing employees agree with the morals of the business then they are more likely to stay in the business longer, lowering hiring and training costs overall.
CSR Examples
CSR is not a new concept, but it is one that is rapidly gaining traction and becoming a significantly more prominent part of modern business strategy. To understand how CSR is applied in the business world, it can be helpful to look at companies that already have an effective strategy in place.
Google's CSR strategy tackles some major problems. From their data centers using 50% less energy than competitors to a commitment of a billion dollars to renewable energy projects, and the CEO’s vocal commitment to social projects such as fighting against Donald Trump’s anti-Muslim statements.
Because Google is a global company they focus the majority of their CSR strategies on initiatives that are globally beneficial. While smaller, local companies may choose to focus on more local projects, such as reducing waste or running back to work programs for the local population.
Netflix
Netflix does a fantastic job of CSR, dedicating themselves to several different initiatives. They offer 52 weeks of paid maternity and paternity leave, which also applies for adopting parents. They also have made the commitment to net-zero carbon emissions by the close of 2022, and are making great strides toward being more inclusive in the workplace.
Over half of Netflix employees are female, and over half of their employees are from historically-excluded racial and ethnic backgrounds. They also work towards offering content that emphasizes inclusion, and started a project titled “The Netflix Fund for Creative Equality”, which works towards creating equitable opportunities for creators of all backgrounds.
Starbucks
Starbucks’s commitments to their CSR strategy focuses heavily on the company culture and aims to bring social justice programs into the heart of their business practices. One way that they have done this is by pledging to employ twenty five thousand veterans by 2025.
In addition to this, Starbucks also has an established mentorship program for BIPOC (Black, indigenous, people of color) people which will connect them to senior leaders and investment partnerships.
What is ESG?
ESG (or Environmental, Social, and Governance) refers to operational criteria that is used to help socially conscious investors judge what may be a good investment for them.
When analyzing the Environmental aspect of CSR one must consider what and how the company offsets and contributes to climate change and environmental issues.
The social aspect of CSR looks at how clients, employees, suppliers, and communities are affected by the business. If the supply chain is shaky then it implies that problems are likely to arise in the near future- likewise, if employees aren’t happy then businesses will likely end up with a high staff turnover which can be bad for business.
The governance aspect of CSR ensures that the people in charge are doing their jobs effectively. It also examines the rights of the shareholders and the way in which audits are conducted and internal affairs are handled.
The trends say that consumers are not the only ones who prefer to align themselves financially with their personal ethical beliefs. Investors (particularly younger investors) prefer to invest their money into businesses they feel that they can relate to the values of.
ESG Examples
To consider some examples of putting ESG into action, we must break down the categories. Since ESG is essentially a way for investors to find a brand that aligns with their beliefs, it’s important to break down the E, the S, and the G.
E - Environmental
- Efficient energy usage
- Making use of renewable or low carbon energies in favor of more damaging counterparts
- Responsible waste management, including but not limited to recycling and aiming for a waste-free workplace
- Focusing on how sustainable your supply chain is and ensuring that there are no cracks throughout the production process
S - Social
- An inclusive and diverse workforce is the first step to a strong social ESG framework
- Healthy and safe conditions for workers
- Policies are put in place to respect the human rights of every part of the supply chain
- A good relationship with local and relevant communities.
G - Governance
- How taxes are filed
- Risk management
- Compensation for executives
- Political standpoints: How involved in politics is the company? What are they lobbying for? What are they donating to?
- Brand independence
- Shareholder protection
Each of these examples must be supported by evidence in order to make the business a viable consideration for investors.
What’s the difference between CSR and ESG?
CSR and ESG are different but related concepts, with both being related to companies’ social and environmental impact.
ESG is focused on solid goals and helps with the evaluation of the company's current sustainability practices. CSR on the other hand focuses more on the internal structural side of things, as well as press releases and publications
Essentially, CSR is the ideals that a company holds and how they intend to incorporate the moral ideals into the business and everyday life of the business. ESG focuses on the actionable results of CSR efforts, and the measurement of said CSR efforts.
Therefore, the difference between CSR and ESG is that CSR refers to the strategy of individual companies to create a positive social or environmental impact, whereas ESG is a way for investors to measure that impact in quantitative terms in order to inform their investment decisions.
Check out this useful comparison chart below to learn more about the differences between CSR and ESG:
Conclusion
Both CSR and ESG are important ways of thinking about a company’s commitment to sustainability and improving the planet. The difference between CSR and ESG mostly lies in the before and after. CSR programs are the plan of how to change, and ESG shows how a business has already changed, as well as helping to measure that.
If your business would like to promote its CSR efforts or ESG accomplishments then get in contact with Prodigium Pictures today to talk about your company’s CSR or ESG strategy.
