I first heard of the concept of ESG in 2019. As someone who has been living and breathing Corporate Responsibility for years, I was positive that this was just another synonym for CSR. For the past few years, we have seen several changes of names in the field. Everyone got excited from the new buzz words, changing the name of their report and the title with no actual change in content. I wanted to write this post because this time, it's not just semantics. ESG Is a new world, generating new strategic views and new roles in organizations and completing corporate responsibility. Two views – inside-out and outside-in, both essential to every company.
Outside-In and Inside-Out
I’m not the first to view the difference between CSR and ESG as a matter of perspective. Many others have talked about the outside-in and inside-out view of these practices. To demonstrate the differences between ESG and CSR, I have prepared a detailed table .
By and large, CSR - Corporate Social Responsibility includes the responsible business organization with respect to stakeholders (Employees, customers, suppliers, and the public). The business as a responsible member of society in which it operates
ESG is an umbrella term that consists of three key factors, Environment, Social and Governance, that provides investors with means to measure the risks and the impact in these areas of the organization, evaluate companies and make investment decisions.
How Does it Affect us? (Corporate Responsibility Managers)
ESG has upgraded the position of CSR. CSR is not a “Nice to have” anymore. The focus on Environmental, Social and Governance ('ESG') issues in the capital markets has moved strongly from the margins to the mainstream in recent years. The focus is reflected in the amount of capital invested in ESG-oriented investment funds alongside a greater awareness of the need and urgency to intensify efforts to address environmental problems and climate change. In addition, inside the organization, we have new strong partners involved in ESG reporting such as the risk managers and CFOs .
No matter what you call this field, it is evident that ESG and CSR are both very important to companies, and each can have a profound effect on the organization. Taking both views – “inside out” and “outside in” into consideration is vital when building a holistic, relevant and strong business strategy.