In brief
To distinguish between Corporate Social Responsibility (CSR) and Environmental Social Governance (ESG), it is helpful to view CSR as a qualitative approach that is motivated by internal considerations and commitments of a corporation, while ESG is a quantitative approach that is driven by external requirements such as international frameworks and standards.
In other words, CSR is focused on a company’s ethical and moral obligations to society and the environment, while ESG is a more holistic approach that considers a company’s impact on its stakeholders, including shareholders, employees, and the wider community.
Although the two concepts may appear similar at first glance, they have distinct definitions and address different aspects of a company. They are both related to responsible business practices, but they have different focuses.
The following table highlights a number of key differences. It is important to note that the two concepts are not in conflict as both seek to set goals for and report on positive impact It is important to consider each approach individually when utilizing them.
| Corporate Social Responsibility (CSR) | Environment, Social, Governance (ESG) |
|---|---|
| Broader, more vague scope & reporting | Specific scope & reporting |
| Focus on accountability | Focus on tracking and measuring |
| Generally qualitative | Generally quantitative |
| Projects are relatively individualized | Trend towards a more unified approach (ex. standardized metrics) |
| Stakeholder-based approach | Risk- and/or performance-based approach |
CSR in practice
Corporate Social Responsibility (CSR) is a concept in business management that refers to the responsibility of corporations to benefit the society they exist within.
It involves voluntary initiatives that aim to create positive social and environmental value, beyond what is legally required, in addition to generating economic profit. It is often associated with philanthropy, community involvement, and sustainability.
CSR commitments serve as benchmarks for preventing and/or mitigating social or environmental harm, positive social value and company culture. CSR commitments tend to be goal-focused and highly variable as each corporation will choose commitments that align with their corporate values.
CSR is about accountability and self-regulation. CSR practices often involve addressing issues related to the triple bottom line: economic, environmental, and social performance.
ESG in practice
ESG, on the other hand, is a framework for evaluating a company’s performance in three specific areas: environmental, social, and governance.
ESG factors consider how a company’s operations impact the environment, how it treats its employees and stakeholders, and how it is governed and managed.
ESG policies are led by specific criteria based on select standardized frameworks and regulations that allow for project comparison through ESG scores and ratings.
ESG metrics evaluate sustainability efforts, placing a strong emphasis on data-driven reporting. These reports are used by investors to assess a company’s long-term financial performance and risk management.
Sources:
- Investopedia. “CSR vs ESG: What’s the Difference?” (https://www.investopedia.com/terms/c/csr-vs-esg.asp)
- Harvard Business Review. “The Problem with Mixing ESG and CSR” (https://hbr.org/2021/07/the-problem-with-mixing-esg-and-csr)
- Forbes. “ESG vs. CSR: What’s The Difference And Why Does It Matter?” (https://www.forbes.com/sites/forbesfinancecouncil/2021/06/08/esg-vs-csr-whats-the-difference-and-why-does-it-matter/?sh=5e5a5a5f5c5c)
- Corporate Citizenship. “ESG vs CSR: What’s the Difference?” (https://corporate-citizenship.com/2019/11/28/esg-vs-csr-whats-the-difference/)
- BMO Global Asset Management. “ESG vs. CSR: What’s the Difference?” (https://www.bmo.com/global/sustainable-investing/esg-vs-csr-whats-the-difference)
