It is becoming increasingly important for organizations to incorporate sustainable practices into their organization. Stakeholders, shareholders, consumers, and employees care more that organizations they are affiliated with align with their values. Communities in which organizations operate are more concerned about social license. But what can an organization do, and where should they start?
On the forefront of sustainability are the terms Environmental, Social, and Governance (ESG) and Corporate Social Responsibility (CSR). It may seem as though ESG and CSR are interchangeable, however there are distinct differences between the two. Broadly speaking, CSR can be described as quantitative and ESG can be described as qualitative. CSR generally focuses on reporting internally, while ESG builds on the internal foundation developed through CSR and produces measurable goals that can be shared with investors, stakeholders, shareholders, etc.
When addressing CSR or developing a CSR strategy an organization is focusing on social, environmental, and economic concerns directly relating to their organization. The United Nations Industrial Development Organization defines CSR as:
“Corporate Social Responsibility (CSR) is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. CSR is generally understood as being the way through which a company achieves a balance of economic, environmental and social imperatives (“Triple-Bottom-Line-Approach”), while at the same time addressing the expectations of shareholders and stakeholders.”
CSR is addressed by looking at internal policies and practices and determining company values. A CSR strategy is self-regulated, creates internal accountability, and generally does not include quantitative measures. Some examples of CSR initiatives that an organization can implement include:
-> Community involvement or volunteering
-> Helping employees advance their careers
-> Participating in fair trade agreements
-> Donating products or services
-> Measuring the organizations carbon footprint
CSR is seen as the starting point for an organization that sets them on a path leading to data-driven change.
As RHTLaw Asia describes, “while CSR aims to make a business accountable, ESG criteria make such business’ efforts measurable.”. The primary intent of ESG is to assist investors in making decisions about the risks of a particular organization using quantitative results. There are numerous frameworks and standards that provide ESG metrics which act as the quantitative indicators for ESG.
Some examples of quantitative metrics that organizations can measure include:
-> Greenhouse gas emissions
-> Climate risk
-> Percentage of underrepresented populations on the Board of Directors
-> Pay equity
-> Anti-corruption policies addressing the entire supply chain
Some examples of EGS frameworks and standards include:
-> The Global Reporting Initiative (GRI)
-> The Sustainability Accounting Standards Board (SASB)
-> International Integrated Reporting Council (IIRC)
-> The Workforce Disclosure Initiative (WDI)
-> The Task Force on Climate-Related Financial Disclosures (TCFD)
-> The Climate Disclosure Standards Board (CDSB)
Whether your organization is just beginning to incorporate sustainability into your business practices and want to develop a CSR Strategy, or you’re looking to take the next step and begin down the path of data-driven change OCI can help. We want to ensure that your organization’s sustainability initiatives align not only with your internal values, but the values of your stakeholders, shareholders, consumers, and surrounding communities.
Written by: Jessica Lockyer