At a Glance
- The focus on Corporate Social Responsibility (CSR) has somewhat declined in recent years as companies have turned their attention to Environmental, Social, and Governance (ESG) issues to meet investors’ needs.
- CSR is aligned with major international standards and norms and has five core dimensions: environmental, social, economic, stakeholder, and voluntary.
- ESG has a broad objective of improving a company’s sustainability performance and risk management and is therefore broader in scope and includes CSR as a component of its evaluation.
The concept of Corporate Social Responsibility (CSR) has been around for decades, long before Environmental, Social, and Governance (ESG) arrived on the scene.
However, emphasis on CSR has somewhat faded from the picture in recent years as companies turned their attention to ESG to meet the needs of investors. But while there may be considerable overlap between the two, it’s important to note that CSR is in fact a component of ESG.
What is CSR?
Over the years CSR has become heavily associated with philanthropy and, as a result, the view that it is something that companies do purely to enhance their brand image has gained plenty of traction. The fact that responsibility for CSR has often been given to the marketing and communications department has only added to that perception.
Making charitable donations, volunteering employees to take part in community initiatives, sponsoring community events, launching awareness campaigns for good causes, and offering internships, are activities that have become associated with CSR.
However, this is an outdated reading of the concept and understates the benefits that a strategic approach to CSR can deliver for both the company and its stakeholders.
While there is no universal definition of CSR, research shows that it has five core dimensions.
- The Environmental Dimension: How business operations impact the environment and taking action to manage it.
- The Social Dimension: How a business impacts society and local communities and interacts with these groups to foster better relations.
- The Economic Dimension: How a business can generate positive economic impacts through its operations.
- The Stakeholder Dimension: How businesses interact with various stakeholders including employees, customers, suppliers and the local community to generate mutual benefits.
- The Voluntary Dimension: How a company goes beyond meeting its legal and regulatory obligations to do good, to embed ethical values in its activities.
There are a number of comprehensive CSR frameworks that further dispel the myth that CSR is purely about charity.
ISO 26000, for example, provides guidance for all organizations – not just corporate entities – that recognize that respect for society and the environment can be a critical factor in business success.
Established through a multi-stakeholder approach, it is aligned with major international standards and norms including the UN Global Compact, the UN Declaration of Human Rights, the International Labour Organization (ILO), the Sustainable Development Goals (SDGs), the Global Reporting Initiative (GRI), OECD Guidelines, and the UN Working Group on Business and Human rights.
It defines social responsibility as the responsibility of an organization for the impacts of its decisions and activities on society and the environment through transparent and ethical behavior that:
- Contributes to sustainable development, including the health and welfare of society
- Takes the expectations of stakeholders into account
- Complies with applicable laws and is consistent with international norms of behavior
- Is integrated throughout the organization and practiced in its relationships.
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CSR v ESG
Anyone familiar with ESG frameworks will recognize clear similarities between the two concepts. However, the key word in CSR is ‘responsibility’.
ESG focuses on managing ESG risks and opportunities as they pertain to a company’s core operations, with the broad aim of enhancing a company’s sustainability performance and risk management. ESG assesses the ability of a company to generate long-term value for stakeholders as well as the resilience of a business. It is broader in scope and encompasses CSR as one component of its evaluation.
Organizations do not operate in a vacuum but within an ecosystem comprising of various stakeholders, and business success depends on the overall health of that ecosystem. In addition, organizations are under more scrutiny than ever from stakeholders and their perception of an organization’s behavior can impact its overall performance.
Therefore, by behaving responsibly and investing in activities that don’t necessarily generate an immediate measurable return, companies can ultimately see a variety of long-term benefits, including:
- Gain a competitive advantage
- Enhance reputation
- Attract and retain employees and customers
- Attract investors, donors, sponsors
- Enhance relationships with other stakeholders including government, the media, suppliers, and local communities
How we can help
Renoir Consulting can support clients to develop a comprehensive CSR strategy, starting with a social materiality assessment to identify their most significant social, environmental, and economic impacts.
We can ensure the CSR strategy is aligned with and complements their ESG strategy as well as with major international standards such as the UN Global Compact, the SDGs, and the UN Working Group on Business and Human rights.
We can design processes that support efficient implementation of the CSR strategy and yield better results.
Finally, we can help monitor and measure the impact of CSR initiatives with a view to enhancing the overall strategy.
Renoir does much more than develop and deliver strategies and roadmaps.
