One way to differentiate Corporate Social Responsibility (CSR) and Environmental Social Governance (ESG) is to think of CSR as driven by considerations and commitments internal to a corporation, and ESG as driven by external requirements, such as international frameworks and standards.
At first glance they can seem synonymous, but they are not. They each have specific meanings and different aspects of a company to consider.
Differentiating CSR and ESG
What is CSR
CSR stands for Corporate Social Responsibility.
- CSR is centered on the idea that businesses have a responsibility to benefit the society that they exist within—a broader view than the one that says businesses’ only responsibility is to produce economic profit.
- CSR is about accountability and self-regulation; these elements can be incorporated through internal processes such as communication between management and employees.
- CSR commitments serve as benchmarks for preventing and/or mitigating social or environmental harm, adding positive social value, and as indicators of company culture.
- CSR commitments tend to be goal-focused and highly variable, as each corporation will choose commitments that align with their values and overall mission.
What is ESG
However, while CSR and ESG have some key differences (see table below), it is important to note that the two concepts are not in conflict: both seek to set goals for and report on how businesses and organisations are responding to different dimensions of societal well-being and sustainability.
CSR vs ESG key differences
A Brief History of CSR
The origins of CSR
CSR ideology and approaches have significantly evolved over the past few decades.
The idea of CSR began in the mid-20th century, with the landmark book Social Responsibilities of the Businessman by Howard Bowen widely considered as the beginning of CSR ideology.
In the decades between 1950-70, attitudes towards CSR were shifting as the concept became more widely accepted–aided by the Committee for Economic Development’s introduction of a ‘social contract’ between businesses and society–and practical applications were developed.
The 1980s also saw an increase in CSR operationalisation and its role as a decision-making process. However, during this time period, CSR was primarily focused on philanthropy and little else.
CSR ideology in the late 20th to early 21st century became more globalised, as multinational corporations began to face increased reputational risk and increased pressure for social responsibility from both their home and host countries. This environment and need for greater awareness of social impact helped institutionalise CSR and bring the discussion of CSR compliance into the mainstream.
Governmental organisations such as the European Commission (EC) also encouraged the implementation of CSR through actions like passing the European Business Declaration against Social Exclusion and launching the European Business Network for Social Cohesion one year later.
Key concepts such as Carroll’s Pyramid of Corporate Social Responsibility, Burke and Logsdon’s five dimensions of strategic CSR for achieving both business objectives and positive impact, and Elkington’s concept of the Triple Bottom Line were all introduced during this period.
The rise of CSR
CSR grew in influence in the 2000-2010s, when it began being incorporated into policy.
In 2001, the European Commission (EC) introduced a Green Paper called Promoting a European framework for Corporate Social Responsibility that constituted the first step towards the 2002 European Strategy on CSR adopted.
The EC also sponsored a number of CSR conferences and launched a “European Roadmap for Business” discussing CSR objectives for the next few years. This time period also saw the development of standards and frameworks: the idea of the ISO 26000 was first proposed in 2002.
The 2010s introduced the concept of creating shared value (CSV), developed by Heslin & Ochoa and Porter & Kramer.
CSV–which Porter & Kramer explained as practices that simultaneously enhance a company’s competitiveness and advance economic and social conditions in its surrounding communities–has a lot of overlap with CSR and added to the case for increased attention on corporations’ impact.
Moreover, key events such as the Rana Plaza tragedy in 2013 led to more widespread awareness of issues like human rights and ethical manufacturing that fall under the purview of CSR.
Rana Plaza led to the creation of France’s Duty of Care law, which also gained traction in other European countries.
The 2015 United Nations Climate Change Conference (COP21) was another key moment pushing the development of CSR, as COP21 produced a new commitment to the environment and net zero emissions.
More recently (since 2020), sustainability and the idea of regeneration of resources are becoming more prevalent in the field of CSR.
Moreover, one important distinction with modern CSR is the focus on accountability and creating positive impact for the whole value chain; CSR does not stop at simply limiting negative impacts–the goal is to create positive outcomes as well.
As consumers align their investments with their values and become increasingly vocal in demanding that corporations adhere to a moral standard of social and environmental responsibility, the field of CSR and ESG will likely continue to grow and expand.
No company can prosper nowadays if it is not involved in the community and the people around.
Companies need to take an active role in the community, beyond just making a profit. The positive benefits of this attempt include the company’s expansion and durability of its success.
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