Skip to content

CSR vs. ESG vs. Sustainability: What’s the Difference?

FigBytes

Seceda, Ortisei, Italy, bright green grass, blue and yellow flowers blur in the foreground, green and gray craggy mountainside rises in the background.

Does it ever feel like everyone wants to be sustainable, but no one really knows what that means? You’re not alone. Is your business sustainable? Green? Inclusive? Environmentally-friendly? Carbon neutral? Pair that with an alphabet soup of acronyms for different sustainability task forces and standards and it can be hard to know if you’re up to speed with the shifting landscape of sustainability in business.

The most effective sustainability initiatives are the ones that meet three criteria. They have a clearly defined goal. They’re integrated with an organization’s strategic priorities and built into corporate culture. And they can be quantified and reported on to provide progress updates and create transparency both internally and externally.

To achieve this, we need to expand our definition of corporate sustainability to include things like Corporate Social Responsibility (CSR) and Environmental Social Governance (ESG). You probably hear these talked about in relation to sustainability. Maybe you even thought they were the same thing. But while they can both be an important part of your sustainability toolkit, they serve different functions.

To better understand, let’s take a closer look at sustainability, CSR, and ESG. We’ll consider what the terms mean, where they overlap, how they’re different, and what you need to do to integrate them into a functional and successful sustainability program.

What Is Sustainability?

What do you want it to be? No really, there are as many definitions of what makes a business sustainable as there are businesses making claims to sustainability. It might be about product formulation, waste management, energy consumption, or employee wellness and diversity.

At the end of the day, sustainability is a goal. All businesses would like to be sustainable. But what that looks like varies by industry, region, and time. What was deemed an innovative sustainable business practice in 1999 might seem more like the bare minimum today.

Sustainability has evolved significantly over time and particularly in the later half of the 20th century and into the 21st century. And the definition of sustainability has shifted to reflect the priorities of businesses, governments, and society.

In the 1980s, for example, efforts toward achieving sustainability were often about averting or responding to environmental damage. The US congress created the superfund to clean up contaminated industrial sites, while disasters like the nuclear meltdown in Chernobyl or the Exxon Valdez oil spill were on the front page of the newspaper.

By the 2000s, sustainability wasn’t just about reacting to pollution and contamination. The rise of natural and green brands meant sustainability was coming home with the consumer. Shoppers were changing their buying habits and demanding greater accountability from their favorite businesses.

These days, sustainability has become an all-encompassing term that looks at everything from environmental impacts to social considerations to ethics in governance. Everyone from contractors to oil and gas companies to TV production companies can make a claim to sustainability. They comply with international green building standards, work hard to hire and promote inclusively, make efforts to reduce their carbon footprint, and use fragile natural resources efficiently. 

But if everyone is sustainable, is it really a valuable measure of business performance? If everyone is free to set their own unique vision and goals to become sustainable, is it really a meaningful achievement?

FigBytes. Smarter Sustainability. Leverage the power of a comprehensive, all-in-one sustainability platform. Learn how FigBytes can automate your data collection and reporting programs today >

 

What Is Corporate Social Responsibility?

CSR often gets used interchangeably with sustainability, and while there is some overlap between the two, they are not always the same.

CSR is about the way a business incorporates its impacts on society into its decision making. While this can include some of the environmental considerations most commonly thought of under the sustainability umbrella, it can also include other social contributions like charitable giving and community outreach.

The origins of CSR go back to the 1950s. A hundred years past the industrial revolution, and in the economic boom after the Second World War, corporations were coming to understand their broader position in society. According to economist Howard Bowen in his 1953 book Social Responsibilities of the Businessman, businesses and business owners were responsible for:

      • Steady employment and economic growth through well-run businesses

      • Treating customers and employees fairly

      • Engaging in society and the community in which the business operates

    This foundation for CSR remains today. Considering these, it’s clear to see how “green” sustainable business practices like waste management, non-toxic formulations, and reducing carbon emissions can be folded under CSR, but also how it can encompass much more.

    According to the Business Development Bank of Canada, there are seven steps for a company to implement CSR:

        1. Adopt a business code of ethics

        1. Follow a workplace health and safety program 

        1. Commit to protecting the environment

        1. Get your suppliers on board

        1. Be smart about donating money 

        1. Don’t greenwash your business

        1. Explore B Corp certification

      Many of these steps are probably something your business already does. Modern legislation means only the very smallest of workplaces don’t have a formally documented health and safety program. And many suppliers are quick to offer green solutions often before they’re asked.

      There are international standards for CSR reporting, like the Global Reporting Initiative (GRI) or ISO 26000. These are broad standards meant to be used by businesses across numerous industries and around the world. Using these standards creates a degree of comparability from one business to the next, but the reports are still often highly tailored to individual priorities and goals.

      CSR can be used to drive internal corporate culture and create a workplace people are proud to be a part of. But the qualitative nature of most CSR programs means they don’t offer much transparency. A commitment to protecting the environment is not the same as quantifying emissions. For that, companies need to go one step further than CSR.

      What Is Environmental Social and Governance?

      ESG has gained attention and wider adoption in the last few decades, but in fact has been around since the 1960s. While it’s often used interchangeably with the broader term of sustainability, it actually has a fairly narrow focus, developed as a tool for investors to better make informed investment decisions in a global marketplace.

      Unlike CSR, which needs qualitative action like developing a code of ethics and engaging with the community, ESG focuses on mostly quantifiable reporting and year-over-year progress in achieving targets. This allows investors to be able to compare results between companies and over time.

      ESG includes three reporting areas: Environment, Social and Governance. The exact requirements will depend on the standard being used, but typically include the following:

          • Environment
                • Climate, energy efficiency and carbon emissions

                • Water stewardship

                • Forestry

                • Biodiversity

                • Waste management

            • Social
                  • Gender inclusivity

                  • Diversity

                  • Data protection and privacy

                  • Human rights

                  • Labor standards

                  • Community engagement

              • Governance
                    • Leadership and board composition

                    • Executive compensation

                    • Incentives to include sustainability considerations in policies and procedures

                    • Shareholder rights

                    • Auditing procedures

              ESG strives to take a full-picture view of your organization’s risks and opportunities. This includes not only the direct impacts of your operations—questions like how water resources are used and greenhouse gasses reduced, for example—but also the impacts of your value chain, including estimates of Scope 3 emissions and cradle-to-grave waste management.

              What Are the ESG Standards?

              There are a number of ESG standards available, and choosing the right one will depend on your industry, location, and the requirements of investors, financial institutions, and other external stakeholders.

              Some of the ESG standards include:

                  • CDP – focusing on carbon, water and forestry, this standard is available for various public and private sector organizations. Along with the data being used by investors, the program also includes a CDP Score, which is made publicly available.

                  • ISSB/SASB – this standard focuses on data reportable to the financial services sector, setting standards in the same way its sister organization at the International Accounting Standards Board sets requirements for accounting data.

                  • TCFD – this standard is similar to the CDP and is designed to help investors, lenders and insurance underwriters make informed decisions among their portfolio and assets.

                  • BRSR – this ESG standard came into effect in January 2023 and the 1000 largest companies in India will need to file reports at the end of the fiscal year under this guidance.

                  • CSRD – another geography-specific standard, this one is applicable to EU companies, with the first reports due from the largest companies for the 2024 fiscal year, with reports for other organizations to be phased in

                  • SEC Climate Disclosure rules – the SEC’s ruling was expected in April 2023 and focuses primarily on climate-related risk and disclosures in American businesses. 

                In general, the goal of all these standards is to help businesses identify and quantify financial risks and opportunities related to the ESG metrics in the standards, whether that be the cost of environmental liabilities or the potential for moving into new sustainability markets.

                How Do Sustainability, ESG, and CSR Work Together?

                There are a lot of philosophical conversations going on about the function and value of sustainability, CSR and ESG. Some say CSR is about changing minds and attitudes, while ESG is just about meeting investor requirements.

                In truth, they’re all related and interconnected. Sustainability is the goal, CSR provides a means of shaping business and internal culture to achieve sustainability, and ESG creates a measurable means of proving a business’s sustainability and its room for improvement.

                Particularly for publicly traded companies, claims to sustainability need to be backed up with numbers. Investors and shareholders expect transparency and a clear understanding of how ESG-related risk and opportunities will affect financial performance into the future.

                Following a published and validated ESG reporting standard means organizations can document the risks and opportunities that are material to their business. Many of the ESG standards include guidance for individual industries, so that teams responsible for reporting don’t waste resources on considerations that won’t have a material impact on the business’s performance.

                Integrate CSR and ESG to Increase Sustainability

                Sustainability isn’t a one-time effort. It’s an ongoing initiative that integrates leadership, procedures, tracking and accountability. Investors and shareholders expect transparency and regular updates on how targets are being met.

                Building a valuable CSR program and preparing a validated ESG report can be time consuming. Sometimes it may feel like you spend all year writing reports and pulling data and never actually get around to implementing the efforts you need to achieve your sustainability goals.

                Using a sustainability software solution can help streamline your efforts and reduce the documentation workload so you have time to focus on implementation. Software like FigBytes use a cloud-based platform that makes it easy to collect and enter data, even integrating with other systems or internet-of-things equipment at your organization.

                FigBytes is fully integrated with established and emerging standards, including:

                    • BRSR

                    • CDP

                    • GRESB

                    • GRI

                    • PRI

                    • SASB

                    • SBTi

                    • TFCD

                  This integration means the software stays up to date on the requirements of each standard, including reportable metrics and quantification methodologies. All you need to do is enter the necessary data and update as needed to produce a compliant report that can be shared with leadership, investors, and other stakeholders.

                  FigBytes’ modules include reporting for climate action and water stewardship as well as additional ESG insights related to diversity, equity and inclusion, as well corporate responsibility. You also have an option to customize KPIs to include additional operational metrics and information from your value chain.

                  If you have looming ESG reporting deadlines, or if you’re struggling to turn your sustainability goals into reality, a business software solution like FigBytes can help. Schedule a meeting with one of our advisors and take the first step to achieving meaningful sustainability for your business.

                  Explore the latest insights to help you on
                  your ESG journey

                  Connect with us.

                  Build your ESG strategy, align your data, tell the world!