The language of climate change and sustainability can be confusing. CSR and ESG are terms often used interchangeably, sometimes with no clear understanding of what they mean. Both refer to the role of business to help build a more fair and sustainable world for all people.
CSR: Corporate Social Responsibility
CSR is an acronym for corporate social responsibility. It refers to the strategies and actions a company puts in place as part of its corporate governance structure to ensure it acts ethically and puts the well-being of its employees, customers and society in general at its core.
A well defined and communicated CSR policy can be a rallying point for employees, customers and investors. It can build a strong sense of purpose in the business providing guidelines for how companies and their employees act and live their corporate values.
ESG: Environment, Social, Governance
ESG is an acronym for environmental, social, and governance. The term is usually used in a corporate financial context to provide metrics within which companies act and are measured against for investment purposes. ESG factors provide a measurement of a company’s non-financial impact.
Taking ESG values into consideration orients a company to serve the needs of all stakeholders - not just shareholders. and is understood on the premise that social responsibility can drive shareholder value.
Conclusion:
The term CSR was in usage before ESG and CSR is more of an umbrella term than ESG.
Both terms are similar in that instead of sustainability just being about the environment, they take a broader lens and measurement framework that includes social issues and issues around corporate governance.
They are different in that CSR refers more to the internal corporate policies and culture and ESG is used more as a measurement tool in investing decisions.
