Corporate culture including environmental, social, and governance have never been more important, but understanding the difference between CSR and ESG can be quite confusing. ARB Accountants is here to explain the difference between CSR and ESG, including some real life examples to help you understand.
So, what is the difference between CSR and ESG? Corporate Social Responsibility is the concept whereby organisations set company values that are relevant to their impact on society and the environment. Whereas Environmental, Social, and Governance focuses on measurable numerical targets in order to achieve these changes, for example, reducing waste by 20%.
Keep reading to find out more about the benefits of CSR and ESG reporting as well as some tips for implementing them into your workplace.
How are CSR and ESG Different?
The main difference between the CSR and ESG is that CSR focuses on overarching company values that affect society and the economy around them, whereas ESG reporting details specific numerical data which can then be assessed to determine how to improve corporate responsibility. Both work in tangent, but CSR is a lot more difficult to regulate and measure. Therefore completing an ESG report alongside the overall CSR goals can ensure that they are continuously monitored and worked upon to improve.
Corporate Social Responsibility is a model that companies follow to make themselves more accountable for their impact on society and the environment around them. This could be in the form of becoming a paperless company, with the focus of being more conscious about their environmental impact. ESG reporting, on the other hand, builds on the creation and meeting of targets that typically involve quantitative data, to make the goal more measurable. An example of this may be to reduce the use of paper by 30% in the next 6 months.
Why is CSR and ESG Important?
In 2022, corporate culture has never been more important and scrutinised. From customers, to potential employees and even investors, all stakeholders are becoming more interested in companies with corporate culture that aligns with their personal values. With added pressure from the media and meticulous shoppers who can affect revenue, companies are slowly beginning to adapt their values to become more responsible and accountable for their actions. The importance of Corporate Social Responsibility and ESG reporting is higher than ever, but sometimes it can be difficult to recognise the difference between them both. Below we have detailed the difference to make things clearer for you.
What are the Benefits of CSR and ESG?
|Benefits of Corporate Social Responsibility
|Benefits of Environmental Social Governance
|Responsible Business Reputation:
Implementing company-wide values relating to CSR, such as minimising environmental impact, or encouraging volunteering for charity fundraising can improve company reputation. This can increase investments from shareholders and improve sales.
|Improved Stock Liquidity:
Investors are more willing to fund companies that are actively making efforts to improve their environmental and social impact. Many investment funds include ESG reports in their financial portfolios because they know this is what investors are looking for.
|Higher Employee Retention:
Having a clear CSR strategy can improve your employee retention rate. This is because employees are becoming more conscious of the impact that their job has on society and the economy, and want to make a positive impact. Therefore if you demonstrate that you are such a company, you will not only attract better employees but also retain them for longer.
|ESG Investors Stick Around Longer:
ESG investors tend to be more interested in the next 10 years of a company that they are investing in, rather than the next quarter. Therefore having a strong ESG report can attract investors that are going to grow with you through the years. This means you can rely on them for funding and genuine quality advice.
Implementing a CSR strategy can also contribute to reducing the outgoings of a company. By reducing the use of paper, excessive electronic use or recycling, you will reduce the company’s outgoings. This additional money can then be invested back into the company or into other CSR targets.
If you have a clear ESG report, you can numerically demonstrate how you are improving your corporate responsibility. The best talent will be looking for evidence of this because they are more picky with who they work for. Attracting the best talent will improve how your business is run on a daily basis.
|Encouraged Professional/ Personal Growth:
A CSR strategy can also help to encourage professional or personal growth. As part of your strategy, you can encourage charity work or fundraising which can help employees to become more well-rounded and selfless people. What’s more, they may gain more respect for your company, and therefore want to work harder in their jobs.
|Good Media Reputation:
Implementing a strong ESG strategy and report not only deters bad media attention, but encourages good media attention when you start to make a real difference. This can improve your overall brand reputation and improve stakeholders opinion of your company.
What are Some Real Life Examples of CSR & ESG?
Many large companies have recognised the benefits of implementing CSR and ESG into their corporate responsibility strategies. As a result, there are an array of real life examples online that show exactly how you can improve your corporate responsibility and reputation for the better. Below are some key examples of companies doing CSR and ESG successfully.
Google has made great efforts to implement CSR strategies across the board. For example, in 2018, Google received the Reputation Institute’s highest CSR score due to their data centres reducing their energy usage by 50%. In addition to this, Google also made an effort to support CSR in the wider community by investing 1 billion dollars into renewable energy projects.
Coca-Cola, as a brand, has placed a lot of emphasis on their sustainability practices and ESG reporting. They have set out a target to reduce their carbon footprint by 25% in 2030, in comparison to their metrics in 2015. Furthermore, they have also invested in non-governmental organisations to support innovations such as the Ocean Clean Up in 2021. Following on from this they have set a target to significantly improve their use of reusable plastics by 2030.
Netflix has opted to make big changes to the social side of their ESG reporting. For example, Netflix has made a conscious effort to have equal representation of genders in their workforce by increasing the amount of women they employ to over 51%. What’s more, they have also increased the number of people from different racial backgrounds in their workforce to 50.5%. Having a mixed workforce will gain them huge respect from stakeholders for being inclusive as a company.
Tips for Implementing ESG into Your Workplace
It can be quite overwhelming to know where to start when implementing ESG’s into your corporate culture. Keep in mind that ESG’s have a very similar structure to SMART goals in that they are specific, measurable, achievable, realistic and related to an amount of time. From environmental impacts to social governance, here are our tips for implementing your ESG strategy.
- Identify the areas where your company needs to improve.
- Determine a realistic metric that you want to improve the issue by (e.g. 20%).
- Decide on a time frame for when you want to achieve this.
- Set out a roadmap for how you are going to achieve this (banning the use of single use plastic in the office).
- Record your metrics as you go.
- Reward people for contributing to the changes.
- Review your progress regularly.
- Report on your ESG strategy at the end of the year and identify areas for improvement.
If you follow the steps we have provided, you should create a clear roadmap for achieving your ESG goals. Not only that, you will understand how this can be used on smaller scale projects such as reducing the use of electricity and larger projects such as increasing company wide volunteering. From then you will begin to experience the benefits of having a responsible corporate culture such as good media attention, improved employee retention and reduced overheads.
Business Forecasting at ARB Accountants:
ARB Accountants are a team of experienced chartered accountants in Essex. Our accountants can monitor your progress on ESG reporting by determining how much money you have saved from reducing overheads, as well as identifying whether you have the capital to make particular ESG investments decisions.
Learn more about our services, or get in touch today for a free 60 minute consultation.