Understanding the importance of ESG/CSR

Sometimes it feels like the business world is a little bit too full of useful acronyms; B2B, B2C, CRM, KPI, MVP, P&L, ROI, SME… the list goes on and on. And understanding and remembering all of their meanings can be quite a mind boggling experience.

However, in this alphabet soup there are two that I am particularly interested in – CSR and ESG (or to stretch it out Corporate Social Responsibility and Environmental, Social and Governance). They are two terms that have become cornerstones in the understanding of the ethics and impacts of businesses.

Let’s break the terms out of their initials and look a bit closer as what they actually mean:

Corporate Social Responsibility is the self-regulation of an organisation over the positive social impact it is making. By having strong CSR policies and practices it shows the commitment of an organisation to doing good. This can cover a wide range of areas including environmental, economic, ethical and philanthropic responsibility.

Environmental, Social and Governance are three key performance areas for a company to be assessed in. It is most commonly associated with investors, who will include analysis of ESG along with financials, the idea being that the better a company performs in these areas, the better they are to invest in.

ESG has slowly been ascending into greater prominence and a misconception has risen that it has replaced CSR. The similarities between the two are easy to see in the above descriptions, but whilst interrelated they are different. ESG is much more about the measurable outcomes of what the organisation is doing, these outputs are analysed by investors, who will also set out criteria they expect to be met by the organisation. CSR, on the other hand, is more qualitative and company led.

Achieving high standards in both CSR and ESG can be very appealing because not only is social value being created, but it also enhances a company’s reputation to customers and stakeholders, in turn building profit.

There are a few other things of note that showcase the benefit of strong CSR and ESG:

• 42% of the workforce wants to work for an organisation that has a positive impact in the world, a percentage that rises with the youth of the employee
• 90% of employees at a company with a strong sense of purpose say they are more loyal and motivated as a consequence
• People prefer to buy from companies that they believe are doing good
• It shows that the organisation is looking into the future long term

Simply put, being socially responsible is good for business.

The important thing however, is that social good is being done and not just claimed by a business. Ethos has social value at the heart of our organisation and we have a large track record in delivering it too. We are able to support organisations in delivering their ESG and CSR objectives in a way that will be effective for them.