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Sustainability learning exercise

Brain circuits

Are you leveraging on the synergies between CSR and ESG?

Published 30 March 2021 in Brain circuits • 2 min read

Why care about aligning CRS and ESG?

ESG has more momentum today that CSR, and is driving action forcefully, driven largely by investors. Bloomberg Intelligence has predicted ESG assets are on track to exceed $53 trillion over the next four years. Investors are now more able and willing to act in this area, because COVID-19 has proven how risky it is not to be prepared for potential future huge disruptions such as climate change.

Let’s backtrack. Corporate Social Responsibility (CSR) is a framework to help companies be socially accountable — to themselves, its stakeholders and the public. 

ESG means using Environmental, Social and Governance standards to evaluate companies and countries on how far-advanced they are with sustainability. ESG includes an emerging accounting standard and came about because social change, advances in technology, and the ability to prove ROI elevated issues of environmental, social and governance.

How can we be clear about the difference? CSR aims to make a business accountable, whereas ESG criteria make its efforts measurable and thus comparable. Another distinction is that CSR has been in the making for 50 years, whereas ESG is more recent.

But what questions should you be asking if you want to be sure that you, as a leader, are not neglecting the one nor the other in your company strategy?

Ask yourself these four questions:

Are you measuring ESG performance in a way that makes it possible to compare your company’s performance – and indeed its improvements – against its competitors?

ESG is standardized. Even though there are many bodies doing it, they are converging and now the EU has its criteria too. CSR has traditionally been more closely connected to business narratives.

Are investors able to understand your improvements?

What’s behind your C02 footprint information and are you delivering on your promises? Where people used to buy stories, now we are held to account for what we do (by analysts, investors, and other observers) through transparent reporting.

Are you embedding your sustainability efforts into all your business functions?

In the past, sustainability was typically managed by a small team. Now everyone needs to be involved, from finance and operations to marketing, HR and digital.

Do you have a future-looking strategy for sustainability and an ongoing measurement of ESG performance that is aligned?

A sustainability strategy should be aspirational and ESG should be a measurement of performance to compare to others.

Further reading: The Investor Revolution: Shareholders are getting serious about sustainability. Robert Eccles and Svetlana Klimenko, Harvard Business Review, May–June 2019

Authors

Knut Hanaaes - IMD Professor

Knut Haanaes

Lundin Chair Professor of Sustainability at IMD

He was until recently the Dean of the Global Leadership Institute at the World Economic Forum. At IMD he teaches in many of the key programs, including the MBA, EMBA and other executive programs. He is Program Co-Director of the Leading Sustainable Business Transformation program. His research interests are related to strategy, digital transformation and sustainability.

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