Sustainability, ESG & CSR. What's the Difference & Why Does It Matter?

Hello and welcome to our brand new show Green About Media. The significance of the impact that media plays on the environment, let alone the rest of the corporate world has become undeniable. Profit and greed driven exploitation of our planets resources has played a critical role in the, quite serious situation we find ourselves in today. The upshot of this is that it may very well be that same creature, that corporate beast and ironically even that greed, that could start to dig us out of this hole that we have all in one way or another, been complicit in digging for ourselves.

Now I myself am no expert, although I am very keen to learn, and as such have employed the experience and expertise of sustainable development expert Ara Almada who you’ll be hearing from throughout the course of this series.

Together, we are going to help you understand and contextualise the specifics around this all-important topic. We are going to look at the problems but also the potential solutions so that you are better informed. Understanding the activities that organisations, who you engage with and support through buying their products or using their services, and how they handle the broader topic of sustainability is a crucial step in making the informed decisions, that can actually end up shaping the world. 

So with no ado’s further, in this episode we are going to look at the difference between ESG, CSR & Sustainability.

Environmental, Social & Governance, Corporate Social Responsibility & Sustainability. These are terms that we have heard bounce around in the commercial and political space for years now. And it seems the more they do, the more they collide. Being used as covers or blame, their individual meaning get muddled and murky. And this at a time  when their importance and sheer magnitude of impact is reaching a crescendo.

So what do these terms actually mean? What did they mean then and what do they mean now? What’s the difference and why does it even matter?

It’s a good question and the way to think about it is that ‘sustainability’ is an overall concept, whereas ESG and CSR are terms used to describe specific business models. ‘Sustainability’ is a slightly fluffy word or nowadays thrown about to fit the narrative of the times, whereas ESG and CSR are clear-cut corporate terms that do, nevertheless, involve sustainability in their DNA.

Sustainability itself doesn’t really have a universal definition. An often quoted and synonymous definition is that sustainability serves to “meet the needs of the present without compromising the ability of future generations to meet their own needs.” I would say a no-frills sustainability meaning would be ‘doing the right thing by the future of the planet, our home’.

Sustainability, sustaining our way of life, our future, the air we breath and the food we eat. Ensuring we put ourselves as a species in the position where we can sustain, where we can keep on going. It means a lot of different things and is quite simple all at once…

While we can reach for a neat definition, True sustainability is about a profound transformation of habits, behaviours and understanding, and not a token soundbite. We’ve reached a critical point where people, businesses and governments HAVE to change. We have to discover and rediscover ways to do things in partnership with nature — rather than apart from it.

Science and innovation throughout history more often that not has been instigated or at least supported by watching nature. How nature solves problems, how it combines structures and processes in synergistic ways that produce little to no waste or lost energy. Unfortunately, over the decades the processes we use to run our planet have tended away from the synergistic, and toward the profitable. 

I’m not talking about an urge to live in a forest, eat berries all day, and dance barefoot around fires. The solution is not to discard civilization.

Sustainability is a conscious decision to live in harmony with everyone and everything else. It requires a mature culture that addresses the debacle of selfish profiteering.

Now over the last decade plenty of businesses have been getting son the bandwagon. Changing their branding colours, using the word green or sustainable in the promotion of their products and services. Sometimes these efforts are, in large or small ways, making a difference. But more often than not we have seen it simply become another marketing strategy aimed at making themselves look good. But unless real thought, effort, research and money is put into these endeavours, they just come up short. 

In the business world, it’s becoming increasingly clear that when a balance between the three pillars of sustainability – environmental, economic, and social – occurs, only then can so-called sustainability exist. And this commitment serves to sharpen the definition of sustainability in itself.

With that in mind, many companies are taking strides to improve their communities and the world beyond. Sometimes these are serious, oftentimes more superficial. But either way, these shifts have led to an increased focus on Corporate Social Responsibility (CSR) and ESG - Environmental Social Governance. 

Here are those terms again. Are they the same thing?

The answer is, no. Still, these terms are covered under the same sustainability umbrella.

So what’s the difference?

In short, CSR and ESG are different frameworks that companies use, to assess their sustainability objectives.

Corporate Social Responsibility (CSR) defines the activities companies maintain to have a greater global positive impact. The activities in a CSR strategy include lowering the business’s carbon footprint, corporate volunteering, improving labor practices, and engaging in charity. 

Companies can report their efforts to buyers and other stakeholders by developing a CSR model. This model reaches beyond social and environmental help, it also positively impacts business reputation. 

CSR is no longer just admirable business practice, it’s a demand. People are more socially and environmentally conscious than ever before. A recent study by Business Wire revealed that more than a third of consumers globally are prepared to pay more for sustainable products.

Ok so that’s CSR, what about ESG?

ESG is the acronym for environment, social, and governance. Combined, all 3 criteria form a structure to evaluate a company’s long-term sustainability performance. It’s similar to CSR but, more measurable.

E…

Environmental criteria refer to an organization’s environmental impact(s) and risk management practices. This includes greenhouse gas emissions, air quality, energy management, waste management, ecological impacts, supply chain management, climate change impacts.

S…

The Social pillar refers to the company’s relationship with both internal and external stakeholders. For example labor practices, employee health and safety, employee engagement, diversity and inclusion, human rights, customer privacy, data security, selling practices.

And G…

Governance refers to how a company is led and managed. This includes business ethics, competitive behavior, management of legal and regulatory environment, systemic risk, and business model resilience.

While environmental and social awareness plays a significant role, financial performance remains a key purpose of ESG. The reason for this is simple: when a company’s ESG score goes up, its capital costs reduce and the company valuation improves. In other words, ESG performance is becoming a sort of sustainability credit rating for companies and their investors.

So in short, CSR practices are usually self-regulated and can have a lot of variation. It is a more qualitative measure and can be challenging to define. ESG, on the other hand, provides investors with a measure they can use to decide which companies to invest in.

Both CSR and ESG can be used by businesses simultaneously. CSR may provide an internal framework for the company to communicate with employees, while ESG provides measurable goals. 

I would say ESG goes beyond CSR to demonstrate positive impact with data.

Ok. So now we know the difference between the two. The self-regulated and more internally focused CSR, and the measurable, deliverable ESG. But what do Organisations actually need to do in order to incorporate these practices into their everyday operations?

To incorporate CSR practices, businesses can consider the company culture, its impact on the environment, and its relationship with the local communities and can educate employees on how they can be part of the solution.

To incorporate ESG, the business can conduct a materiality assessment, collect insights from stakeholders, set long-term goals and develop a measurable roadmap and KPIs, and report on progress. 

So now we’re getting somewhere. That just about wraps up the basic difference between CSR and ESG. But why does it even matter?

Companies know they need to adapt and embrace sustainability for profit, purpose and survival.

Plus benefits are multifold: it’s about lower cost of capital, improved financial performance, enhanced brand and competitive advantage, customer loyalty, improved risk management, foster innovation, attract, engage and retain employees. 

Sustainability matters because we all care about the future. We are part of the natural world and dependent on the use of natural resources to sustain our business and activities. So whether it is about sustaining resources, sustaining the economic viability of our businesses, or sustaining our current enjoyment and relationship with the natural environment, sustainability is central to any long-term engagement. We must strive to meet the needs of today without compromising the needs of future generations.

So thats an introduction to CSR ESG and Sustainability. In the next episode of Green About Media we will be looking at Climate Change & the Carbon challenge. 

On top of that we would love to hear from you. Tell us what you want to know about, what aspect of this topic you think is important for people to hear, or just drop a note to say G’Day, we always love hearing from our listeners. You can email the show on podcast@the-digital-distillery.com or google the digital distillery and find the contact form on our website. There’s also links to our social platforms in the show notes.

A big thank you to Ara for this one, she really knows her stuff on this topic and I’m really looking forward to continue to learn from her as we work on this new series. 

We will be bringing out a new episode every two weeks so until then, think about and look into how the companies you engage with are treating the topic of sustainability, and don’t be afraid to speak up an ask if they aren’t putting forward enough information. It may well be your voice that pushes them into the realisation that its just not cutting it anymore and they have to do better.

That’s it for now and until next time on Green About Media