CSR or ESG?

CSR and ESG are buzzwords that many of you will have heard in business. But what do they mean, and is there a difference?

CSR stands for Corporate Social Responsibility. ESG stands for Environmental, Social. and Governance. They’re quite similar in that they both reflect an organisation’s desire to have a more positive impact on the world around them, but there are some key differences.

Let’s dive in.

Voluntary v necessary

The simplest way to differentiate between CSR and ESG is by remembering that, generally speaking, one is voluntary, while the other is a requirement.

CSR

CSR is the voluntary one of the pair. A company or an organisation doesn’t NEED to have a CSR programme or strategy. CSR is typically active in businesses that have a genuine desire to create a positive impact on a community, a group of people, a good cause or the environment. It’s not required by law, so a business that has a CSR strategy is one that actually cares about its impact.  

CSR strategies are Neighbourgood’s bread and butter. While they don’t all look the same, CSR strategies generally feature these pillars.

Focus

CSR programmes typically have a focus. This varies per organisation, but the focus of most CSR campaigns will have an element of philanthropy. This usually takes shape in the form of volunteering with community organisations or donating money or products to these organisations.

Simply put, CSR programmes usually have the focus of having a positive impact on people.

Approach

A good CSR strategy has a clear approach – typically with the aim of benefitting a group of people or a community. Approaches for CSR programmes usually feature people-focused programmes that tie back to an organisation’s goals.

For example, a good idea for a food company is to work on a CSR campaign that tackles food security. A logistics company could assist with the transportation of charitable goods. A sportswear manufacturer would create a campaign to help get people active, and so on and so forth.

Let’s talk ESG

Where CSR is often employee-driven and managed, ESG is a more business-focused, structured and defined programme of activities. ESG is used to evaluate a company's sustainability and community impact through a specific set of measurable criteria.

This criteria is:

• Environmental: How an organisation manages environmental impact, including carbon footprint, waste management and energy use.

• Social: How an organisation conducts itself with employees, suppliers, stakeholders, customers and the community.

• Governance: The organisation’s leadership team, how much its c-suite gets paid, financial audits, shareholder rights, tax payments and more.

Regulation

In today’s business world, ESG is now seen as a requirement by many organisations. It can be part of an investment or funding strategy, where organisations are expected to meet certain criteria in order to get finance or win new contracts. It’s very data-driven and designed to make organisations more accountable and transparent.

CSR, on the other hand, is voluntary and will be dictated by an organisation’s vision, values and business priorities. CSR is more about the quality of how an organisation thinks and acts, whereas ESG is almost entirely quantitative.

Reporting

Typically, ESG is more measurable than CSR. Lots of businesses who have great CSR programmes often don’t measure their success; instead focusing on how they feel and look.

That’s where we come in.

Neighbourgood believes that CSR is just as measurable as ESG. We’re passionate about putting programmes in place that have a demonstrable impact on organisations and communities, but in order to understand this impact, it has to be measured.

We track everything – every pound donated, every hour volunteered, every beneficiary impacted – so that the organisations we work with can understand the power of the good they’re doing.

The beauty of tracking and reporting is that your CSR can then feed into your ESG strategy, ensuring the good work being done in the community is having an impact locally, and at boardroom level.

Organisations that understand the impact their CSR programmes are having will enjoy better ESG and compliance results. And if ESG and CSR are working hand in hand, then everyone benefits.

To summarise…

CSR is a voluntary activity that focused on the ethics of an organisation to make a positive contribution to the community through things like donations and volunteering.

ESG is a requirement that uses data, social, environmental and governance rules and regulations to prove a business is well-run to attract investment and new contracts.

CSR is a desire to do good, while ESG assesses an organisation’s risks and opportunities.

A good CSR strategy will have a positive impact on ESG.

Looking to boost your ESG scores and rating? Start with CSR!