The terms sustainability, ESG, and CSR are often used interchangeably. However, with increasing regulatory focus on corporate responsibility, it’s become more important for companies to understand the differences. In this article, we’ll clarify the definitions of Sustainability vs CSR vs ESG, and to highlight their distinctions.
What does Sustainability mean?
Sustainability is about making sure an organisation can satisfy its current needs, while also ensuring that future generations have the resources they need to meet theirs. This means managing resources and operating in a way that promotes long-term viability and resilience, while minimising negative impacts on the environment, society, and economy. By doing so, a company can ensure that its operations can be ‘sustained’ indefinitely, hence, sustainability.
What CSR mean?
CSR is a business model that emphasises self-regulation and social accountability. It’s all about companies taking responsibility for their actions and the impact they have on various stakeholders, including the public.
CSR can take many forms, such as charitable giving and volunteer programs.
What does ESG mean?
Finally, ESG, which stands for Environmental, Social, and Governance, is a comprehensive approach that investors and companies use to assess a non-financial performance. It includes factors such as how a company handles its environmental impact, its interactions with stakeholders like employees, customers, suppliers, and its governance practices, such as the composition of the board and the compensation of executives.
What is the difference between CSR vs ESG, and Sustainability?
Although sustainability, CSR, and ESG share similarities, they each have a distinct meaning. Sustainability is the overarching concept that companies strive to achieve. It’s the ultimate goal of ensuring that their actions do not harm the ecosystem in which they operate, to ensure their continued and sustained operation.
On the other hand, ESG and CSR focus on different aspects of company operations. ESG is used internally and by investors to assess a company’s performance, and it tends to be more data-driven and detail-oriented. Meanwhile, CSR refers to the voluntary actions that a company takes to improve its social and environmental impact.
These concepts often overlap, for example, in a company’s treatment of its employees. From a CSR standpoint, a company may voluntarily choose to implement employee-friendly policies, like offering flexible work hours and providing comprehensive health benefits. These policies can help enhance employee well-being and contribute positively to society.
Meanwhile, from an ESG perspective, how a company treats its employees can play a critical role in assessing its social performance. Factors such as employee turnover rates, workplace safety, and employee satisfaction surveys can all be used to evaluate a company’s social impact.
Final thoughts
Understanding the distinctions between sustainability vs ESG vs CSR is important, especially in today’s business landscape, where regulations are continually evolving to promote sustainable practices. Using the appropriate terminology can help in comprehending the rules and policies put in place to encourage sustainable behaviours.
Another common misconception comes from the differences between net zero vs carbon neutral.
