As the concept of sustainability is becoming mainstream, customers and investors are expecting sustainable transformation in how business operates. Now, it is very common for companies to have strategies of Corporate Social Responsibility (CSR) and Environmental, Social, and Governance (ESG). CSR and ESG are similar since both serve as roadmaps for businesses to give back to the society and environment, but are still different.

What Is CSR?

CSR reflects a company’s values and policies that address socio-environmental issues. Thus, the focus of CSR activities is the company’s internally-defined impact vision. CSR is not mandated or regulated by external bodies. You may have seen charities initiated by companies, tree planting activities done by a company’s employees - these are examples of CSR.

What Is ESG, and How Is It Different from CSR?

ESG is a set of criteria used to measure a company’s operational impact. ESG considers more specific aspects such as the company’s carbon footprint, water consumption, fair labor practices, and internal corruption. So, CSR is more focused on contributing externally, while ESG emphasizes on maintaining good internal governance and minimizing negative externalities imposed by the company’s business activities.

Secondly, CSR is more qualitative while ESG is more quantitatively assessed. Usually, companies set ESG targets in numbers, such as reducing emissions by 30% and filling 40% of total employee positions with female workers. CSR activities might overlap with ESG strategies, especially for the social part. However, when composing an impact report, the impacts of these CSR activities must be converted into numbers. Stating that our company plants mangrove with local farmers is not enough - we should be able to quantify the impact of that activity, such as how much carbon is absorbed by the planted trees, or how much this program increases farmers’ income.

ESG is widely used by investors to make decisions; they prefer to invest in companies with good ESG performance. There are some ESG rating organizations, such as S&P Global, that analyze various companies’ management of ESG risks, opportunities, and impacts and give them scores on a scale of 0-100.

An example of ESG practices focusing on the environmental pillar is forest carbon offsetting. Not only does it abate your company’s emissions, reforestation or afforestation projects can preserve biodiversity and increase the livelihoods of surrounding communities. Visit our page to find out how your company can take action.