ESG vs CSR: The difference and their relationship with sustainability
The face of business is shifting as buyers and investors expect to see organizations evolve their corporate sustainability efforts. In light of this, numerous businesses are developing initiatives that are impactful in their local areas and in some cases, the wider world. All companies should be looking to make significant, positive, and tangible changes that truly reflect their commitment to sustainability. This movement has driven focus onto CSR (corporate social responsibility) and ESG (environmental, social, and governance) strategies.
While both terms are part of sustainability and may seem synonymous, they have different purposes. Sustainability is the capacity to exist and advance without diminishing current or future supplies of natural resources. For companies, this means planning and considering how the workforce, environment, and external entities are affected through positive change.
ESG is the measurable result pertaining to a company’s total sustainability performance, whereas CSR is a company’s framework of sustainability plans and responsible cultural impact. CSR is a broad framework for sustainability that is primarily employed by businesses while ESG is a quantifiable sustainability rating that is used by investors. ESG has gained enormous popularity in recent years with some suggesting it may one day replace CSR. But for now, ESG and CSR are used separately to describe specific business models, and sustainability is an overall notion.
Corporate Social Responsibility (CSR)
CSR is no longer just an admirable business practice; it’s becoming a demand. People are becoming more socially conscious, and they are prepared to buy sustainable products even if it costs slightly more. Companies can create, manage, and report on their efforts by creating a CSR model. It can enhance business reputation in addition to providing social and environmental benefits. But the success of a brand depends on prioritizing corporate social responsibility. Loss of profit will push businesses to act if social and environmental issues don’t.
Some examples of CSR in action:
- Lowering carbon footprint by going paperless
- Investing in environmentally conscious businesses
- Upgrading labor policies
An example of a great CSR initiative is shown through Verizon’s approach at the start of pandemic. The company devised a plan to specifically provided under-resourced schoolchildren with the necessary technology so they could participate in virtual learning.
Environment, Social, and Governance (ESG)
All three elements work together to create a framework for assessing a company’s performance in terms of long-term sustainability. ESG performance is typically rounded up by ratings agencies as a score based on information. In that sense, it is similar to CSR but more quantitative. Even while social responsibility is crucial, achieving financial success is another key ESG objective. As a company’s ESG score increases, its capital expenses decrease and its valuation increases. This is attractive to investors who use the ESG score to assess the company’s sustainable efforts that are effective, and progressive.
Examples of ESG in action
- Company donations to local community projects for upliftment.
- Facilitating volunteering opportunities for employees.
- Fair wages to the workforce and safe, healthy working conditions.
The bottom line for both is that a worldwide pandemic has increased sustainability consciousness rather than decreased it. In the long run, in a society where everyone is focused on sustainability, it will be challenging to protect financial success and business reputation without complete transparency and measurable action.
It’s also crucial to keep in mind that even when businesses switch to more ethical practices, it’s not always a sign of success or sincerity. ESG and CSR can both be used to deceive the public. However, in general, ESG standards can assist in better management of unethical behaviour, and those responsible are held accountable. The final value of ESG standards will depend on whether they motivate businesses to effect genuine change for the common good or just check boxes and issue reports as ESG-minded business practices acquire more support.
Small Steps to Tangible Change
Going paperless is one of the first steps to sustainability. Even though eliminating all paper usage would not be practical for every firm, just a small reduction could result in cost savings and improved productivity. It doesn’t matter if your business is just getting off the ground or has established solid standards and procedures; there are always benefits to cutting back on paper use.
KRIS Document Management System (DMS) is designed to help companies start their transition to becoming a paperless office. Securely store, share, create, sign, edit, and distribute your documentation with automated workflows and audit trails to fulfill compliance requirements. Despite efforts on the part of businesses to recycle, office copy paper still makes up a significant portion of worldwide recycling. But going green involves more than just using less paper. A paperless workplace can also use less energy. When copiers, printers, and fax machines are not in operation, small businesses consume less energy.
Find out how a Document Management System can simplify your everyday office processes.