CSR & ESG

What does it mean

CSR (Corporate Social Responsibility) and ESG (Environmental, Social, and Governance) are both concepts related to business ethics and sustainability, with differences in approach and focus between them. The main difference is that while CSR activities are purely voluntary, ESG is formally regulated by the EU and will be mandatory for business entities from next year.

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Corporate Social Responsibility (CSR)

CSR concerns the responsibility of companies and business entities for their impacts on society and the environment. It is a broad concept that includes voluntary activities beyond legal obligations with the aim of contributing to sustainable development. 

CSR is often understood as a voluntary activity where companies undertake initiatives that improve social or environmental well-being and focus on a wide range of activities including philanthropy, volunteer programs, ethical behavior, and support for community projects.

CSR reports are often voluntary and may not be standardized. Companies can share their CSR activities through various channels without a uniform structure. These are purely voluntary activities by which companies demonstrate that they are aware of their social responsibility.

Environmental, Social, and Governance (ESG)

The acronym ESG is used to evaluate and describe how businesses manage risks and opportunities associated with environmental, social, and governance factors. ESG criteria are increasingly integrated into investment decisions and are regulated. ESG is often understood as a set of standardized metrics and criteria that are important for investors and other stakeholders in assessing the performance and risks of companies.

ESG specifically focuses on three main areas:

• Environmental: Resource management, emission reduction, sustainable practices.
• Social: Working conditions, human rights, community relations.
• Governance: Corporate ethics, transparency, board composition, compliance.
  
  ESG reports are often part of financial reports and are standardized according to international standards such as GRI (Global Reporting Initiative), SASB (Sustainability Accounting Standards Board), or TCFD (Task Force on Climate-related Financial Disclosures). ESG reporting is increasingly demanded by investors and regulatory authorities.

Main differences between CSR and ESG

• Approach and commitment: CSR is often voluntary and focused on a broad spectrum of activities, while ESG is more structured, focused on specific areas, and often part of formal investment criteria.
• Focus and scope: CSR may include various initiatives that may not always be measurable or standardized, while ESG focuses on measurable criteria that are important for assessing the performance of companies.
• Reporting and transparency: ESG reporting is more standardized and required by investors and regulatory authorities in the EU, while CSR reporting is often less formal and voluntary.

Essentially, while CSR represents a broader approach to corporate responsibility towards society and the environment, ESG provides a specific framework and metrics for evaluating and reporting this responsibility, often with an emphasis on the financial and investment perspective. Thus, we can say that CSR is part of ESG.

The factor that links both of these initiatives is the social responsibility for what we leave behind. And in what condition it will be left for future generations. More and more people, customers, and employees reflect on ESG activities, and according to them, they choose a product when shopping, or their employer. This is especially typical for Generation Z.

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