When your company seeks to make a conscious effort towards ethical and more sustainable business practices, the terms ESG vs CSR may come up. What do they mean, and do you need both? Are they required or a nice-to-have for your business?
In this article, we’ll share how your company values are linked to ESG and CSR initiatives and what you need to know to start your own ethical and sustainable roadmaps for your company.
What is ESG?
ESG relates to marketing your social responsibility. It’s used in reference to a company’s behaviour, ethics, and performance as they relate to:
- Environmental: This is how your company actively reduces or eliminates waste or lowers carbon emissions.
- Social: This is about your reputation, the relationships between other companies and organizations, and your internal inclusion and diversity values.
- Governance: These are the internal practices, controls, and procedures that oversee and govern the business.
The principles of ESG marketing are centuries old, but the modern definition of ESG, as it relates to investing and business, came into being in the mid-2000s. It became mainstream in 2004 in a United Nations Report, “Who Cares Wins.” The report suggested that businesses should embrace ESG marketing for the long term. Since then, it has evolved and gotten more specific regarding guidelines and regulations for compliance.
Examples of ESG activities include:
- Investing or partnering with eco-aware, ethical, and B Corp Businesses
- Becoming a net-zero company
- Supporting or implementing greener, renewable energy sources
- Becoming a B Corp Business
- Supporting diversity in hiring
ESG messaging is important because 72% of millennials expressed moderate to high interest in investing in ESG companies. To attract these investors, share your ESG messaging and ensure it relates to your company’s values of inclusivity, sustainability, equity and transparency.
What is CSR?
CSR stands for Corporate Social Responsibility and refers to how a company gives back to its community or the environment, financially or in kind. These typically include financial donations or volunteer hours by your employees and owners. It contributes to a positive brand image in the eyes of consumers and stakeholders.
Like ESG, CSR has been around for a long time, but has evolved to meet the needs of our changing society. Modern corporate social responsibility began to take shape in the 1800s, when John D. Rockefeller, inspired by Scottish businessman and philanthropist Andrew Carnegie, began making large corporate donations. In the 1970s, it began to take hold in the US through what was known as a “social contract.” This social contract set out that businesses had an ethical obligation to support and serve the needs of society.
Today giving back through an organization’s CSR is usually based on one of four themes:
- Environmental (like reducing pollution, riverfront garbage clean-up)
- Ethical (fair treatment of employees)
- Philanthropic (donating to charities, non-profits)
- Economic (supporting community programs and initiatives)
Examples of CSR activities include:
- Buying fair trade
- Volunteer work and participating in charitable projects
- Implementing zero-waste workplaces
- Honest and ethical employee rights
Differences between ESG vs CSR
Your company doesn’t have to choose between ESG and CSR because, while they overlap in some respects, they have a few differences.
Here are the key differences between ESG vs. CSR:
- Data orientation: ESG reporting is usually data-based to meet the needs of investors and stakeholders. While they may sometimes reference data points, CSR reporting is more strategic than data-oriented and aimed at developing a positive corporate brand image, rather than meeting a quota.
- Compliance: ESG reporting may not be optional for many businesses, as some regional business laws require it. This reporting is also becoming more standardized, outlining how a company should collect, track, and report this information. CSR is optional for businesses and has no guidelines for compliance.
- Material risks and opportunities: ESG activities are usually related to measurable goals and change, such as the amount of donations, hours of volunteering, or carbon offset credits purchased. CSR is more about aligning your company values with making a difference in your community or world.
Similarities between ESG vs CSR
Despite several differences, ESG and CSR activities contribute to a more favourable brand image desired by customers, clients, investors, stakeholders, and the community.
Here are a few other similarities between ESG and CSR:
- Focused on environmental and community betterment: Both relate to being mindful of others and less focused on a business’s self-interests. ESG and CSR relate to sustainable practices regarding the environment, fair treatment of people, and supporting ethical causes to make our communities and the world a better place.
- Can be used for good or greenwashing: Both can significantly benefit your company if done honestly and ethically. However, companies can use exaggerated or false claims about their sustainability intentions and practices to “look good on paper.” This is an unethical business practice known as greenwashing.
- Should be a priority: Today, consumers and other stakeholders demand that companies hold themselves accountable and consider their impact on the community and the environment. Consumers demand that you have a social responsibility model and that you prove your compliance through measurable ESG results.
The ethics of ESG and CSR
As we mentioned in the similarities, both ESG and CSR messaging can go wrong for many reasons, primarily due to being unethical regarding your claims or marketing of your values.
Greenwashing is when a company is (purposefully or is perceived to be) making false claims about its ESG and CSR initiatives and values. Whether you intended the deception or not, it’s based on public opinion. Either way, being accused of bad ethics or greenwashing can devastate your business.
The best way to ensure you’re being ethical and accurate when communicating your ESG and CSR framework and values is:
- Be specific and intentional with your words and imagery choice.
- Be transparent
- Ensure claims match values
- Ensure you can back up all claims
Read more about ethical ESG marketing for your organization.
The future of ESG and CSR
As long as the consumers and community demand it, companies must have ESG and CSR mandates. Looking at Google search data for the past 20 years, the average monthly search volume for CSR-related terms remained steady, whereas ESG terms began to skyrocket in Feb 2020 to be close to CSR search volume. This means people are searching for both terms near-equally online.
In the future, successful businesses must show they are considerate and mindful of things beyond profitability. We expect businesses to see success from businesses that offer a concentrated, measurable effort to contribute to the betterment of their community and the environment. They will outlast other businesses without these ethics and values.
What does this mean for your organization? It means that if you don’t have any public sustainability values or actions, now is the time to establish your sustainability framework and begin taking action. Your internal and external stakeholders will thank you for it.
The bottom line: CSR vs ESG
In a nutshell, think of CSR as your sustainability framework and ESG as how you carry out and assess your sustainability performance. Ethically communicate your corporate responsibility values to the world and back them up by participating in ESG activities.
At Out-Smarts Marketing, we work with businesses with solid CSR strategies and ESG practices. We can help you incorporate your CSR and ESG messaging into your website, social media, and other communications.
Book a complimentary Discovery Call with us today to tell us about your company values, and we can help you communicate them successfully and ethically through your communications and marketing.
info@out-smarts.com
604 909 3532
