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ESG vs CSR

By Alexandra Smith
Posted on February 7th 2024
Blogs
Economic Social Climate Environment Diversity & Inclusion

In sustainability, two acronyms gained prominence — ESG and CSR.

ESG, for Environmental, Social, and Governance, and CSR, or Corporate Social Responsibility, represent distinct approaches to businesses' engagement with social and environmental issues. In this blog, we will delve into the nuances of ESG and CSR, exploring their definitions, key components, the evolving landscape of corporate responsibility and how we at FuturePlus understand sustainability and impact.

Understanding ESG

ESG describes a comprehensive framework that evaluates a company's performance across three key pillars—Environmental, Social, and Governance. These factors are critical indicators of a company's sustainability and ethical impact.

Environmental (E)

This aspect assesses a company's environmental impact, including its carbon footprint, energy efficiency, waste management, and commitment to sustainable practices. Companies with strong ESG scores often commit to reducing their environmental impact, embracing renewable energy sources, and implementing eco-friendly initiatives.

Social (S)

The social component evaluates a company's relationships with its employees, customers, communities, and broader societal impact. This includes diversity and inclusion policies, labour practices, community engagement, and philanthropy. Companies with high social ESG scores are often recognised for fostering positive social change and prioritising the well-being of their stakeholders.

Governance (G)

Governance focuses on the internal structures and policies that guide a company's decision-making processes. It examines board composition, executive compensation, transparency, and ethical business practices. Strong governance is associated with ethical leadership, accountability, and a commitment to upholding the values of integrity and fairness.

Understanding CSR

Corporate Social Responsibility (CSR) is a broader concept and has become a somewhat outdated term. It encompasses a company's ethical and philanthropic initiatives to contribute positively to society. CSR initiatives often go beyond the core business functions and involve community engagement, charitable donations, and social impact projects.

CSR often involves philanthropic efforts, with companies allocating a portion of their profits or resources to charitable causes. This can include supporting local communities, funding education initiatives, or contributing to global humanitarian efforts.

CSR initiatives frequently address sustainability concerns, such as reducing environmental impact, promoting responsible sourcing, and investing in renewable energy. Companies embracing CSR prioritise ethical and sustainable business practices. Beyond the environmental aspect, CSR extends to the relationships companies build with their local and global communities. Engaging with communities through volunteering, partnerships, and social programs is a common CSR practice that fosters positive relationships and mutual growth.

However, companies have historically ventured into projects and communities beyond their core business model, but this approach has invited criticism. Detractors argue that these endeavours have not been integral to the organisations' core activities, raising questions about the authenticity and impact of such initiatives.

Summary

Many companies today recognise the relationship between the two approaches. ESG provides a structured framework for evaluating and improving a company's sustainability performance, ensuring that environmental, social, and governance factors are integrated into business strategies. On the other hand, CSR initiatives serve as tangible expressions of a company's commitment to social responsibility and community well-being.

As societal expectations evolve, so does the landscape of corporate responsibility. Modern consumers and investors are increasingly conscious of the impact of their choices on the world, leading businesses to adopt more robust sustainability practices. Companies are now expected to go beyond mere compliance and actively contribute to solving societal and environmental challenges.

The concepts of ESG and CSR have played crucial roles in shaping responsible business practices. ESG provides a structured framework for evaluating sustainability, while CSR embodies companies' tangible actions to contribute positively to society.

At FuturePlus, we consider sustainability across five themes, Climate, Environment, Social, Economic and Diversity and Inclusion, our indicators provide the ability to measure where you are and the opportunity to understand where you want to be. We focus on all five themes as we believe that they are connected, and to ensure there are no unintended consequences of negative impacts of good intent, it is important to understand the wider impact.

Our methodology, which can be found here, uses concepts from both CSR and ESG. It looks at how we impact the communities and ecosystems we engage with both locally, nationally and internationally but also provides a robust reporting framework to communicate your ESG.

However, we also allow companies to track intent and their impact, not just the outcome. This creates a comprehensive approach that aligns business success with ethical and sustainable practices, setting a new standard for sustainable, equitable and responsible businesses.

If you need help getting started on your sustainability journey or you just want to find out more about us, we’d love to hear from you: [email protected].

Alternatively you can book a FuturePlus platform demo, here.