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How to Choose a Framework Among All ESG Standards
In this article, we’ll give a brief overview of ESG standards, why they are important, and how your company can pick the ESG framework most suited towards your individual goals.
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CSR Meaning: All You Need to Know
Corporate Social Responsibility (CSR) means integrating environmental, social, and economic values into how a business operates. Companies that embrace CSR strive to make a positive impact on society and the environment through sustainable practices. These businesses not only focus on financial success but also track and report their progress on non-financial goals.
The field of CSR has grown to include various standards and practices that guide corporate activities. However, many companies, especially smaller ones, have yet to embrace CSR due to a perceived lack of value in such practices.
This article will help dispel these misconceptions by highlighting the tangible benefits of CSR and providing practical guidance for integrating these practices into business models.
👉 This article defines Corporate Social Responsibility (CSR), explains why businesses can benefit from a CSR strategy, provides examples of successful CSR initiatives, and offers practical tips for implementing best practices.
Article Key Takeaways
- CSR is a way for businesses to benefit their stakeholders and communities through voluntary environmental and social activities. In turn, this raises the perceived brand value of the company.
- Companies pursue CSR to make their brand more attractive to investors, potential employees, and customers, who care about social impact and business longevity alongside short-term profits.
- Companies engaging in CSR activities should remain authentic and transparent about their goals to maintain trust. One way to do this is to integrate CSR activities into the business model for marketing and financial planning.
What is CSR?
Corporate Social Responsibility (CSR) is a business approach that focuses on integrating social, environmental, and economic concerns into a company’s operations and core strategy. It aims to create a positive impact on society while ensuring sustainable business practices.
CSR initiatives often involve activities such as reducing carbon footprints, improving labor policies, engaging in fair trade, and contributing to community development. The progress and impact of these initiatives are usually documented and shared in an annual CSR report, which highlights the company's commitment to social and environmental responsibility.
The primary objective of CSR is to align business operations with broader societal goals, ensuring that the company not only pursues financial success but also contributes positively to the world. This involves setting specific targets, building community partnerships, and improving supplier codes of conduct, all of which help in addressing social and environmental challenges effectively.
Related concepts
Several related terms have roughly the same meaning as CSR:
- Corporate Responsibility (CR): Broadly encompasses a company’s responsibilities to all stakeholders, including social, environmental, and economic aspects.
- Creating Shared Value (CSV): Focuses on creating economic value in a way that also creates value for society by addressing its needs and challenges.
- Corporate Accountability: Highlights a company’s responsibility to be accountable to its stakeholders, ensuring transparency and ethical practices.
- Corporate Citizenship: Reflects the idea that a company should act as a responsible member of the community.
- Corporate sustainability: Emphasises long-term sustainable business practices that benefit the environment and society.
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ESG vs CSR
Corporate Social Responsibility (CSR) and Environmental, Social, and Governance (ESG) both aim to promote sustainable and ethical business practices, but they differ in focus and application. CSR is a broad concept that involves companies taking responsibility for their impact on society and the environment, often through voluntary initiatives and philanthropy. It emphasizes the company’s commitment to positive social and environmental outcomes.
ESG, on the other hand, is a framework used primarily by investors to evaluate a company’s long-term sustainability and risk management practices. ESG criteria focus on quantifiable metrics in three areas: environmental (e.g., carbon emissions), social (e.g., labor practices), and governance (e.g., board diversity). ESG assessments are data-driven and integrated into financial analysis, making them crucial for investment decisions and corporate transparency.
👉 CSR is about the company’s voluntary actions and ethical commitments, ESG provides a structured, data-oriented approach to assessing and improving sustainability and governance practices, often driven by investor expectations.
CSR and Sustainable Development
The concepts of CSR and sustainable development are closely linked. ISO 26000, a widely recognized CSR standard, defines CSR as a business's responsibility for its social and environmental impacts through transparent and ethical behavior that contributes to sustainable development.
The 17 UN Sustainable Development Goals (SDGs) provide a comprehensive framework that aligns with CSR strategies. These goals encompass a wide range of activities, such as eradicating poverty, promoting gender equality, developing sustainable cities and communities, taking climate action, offering free educational services, ensuring clean water access, and protecting biodiversity, both underwater and on land. By integrating these goals into their CSR strategies, businesses can significantly contribute to global sustainable development.
The Development of CSR
CSR has roots that stem from corporate philanthropy and religious charitable giving, which grew popular in the late 1800s. However, the term “corporate social responsibility” wasn't coined until 1953, when economist Howard Bowen wrote about the concept.
Contemporary CSR standards began to take shape in the 1990s within academic circles. By 2000, the Global Reporting Initiative (GRI) standards were established, quickly becoming one of the most widely adopted CSR frameworks. This period saw a significant rise in CSR reporting; between 2000 and 2010, the number of the world's 250 largest corporations producing CSR reports surged from about 1% to over 90%.
Diverse Frameworks
In addition to GRI, numerous other standards and frameworks have been developed, including the UN Global Compact (UNGC), the Sustainable Accounting Standards Board (SASB), the International Sustainability Standards Board (ISSB), and ISO 26000. More on these later!
Adoption by Smaller Businesses
While CSR began with large corporations, many small and medium-sized businesses are now reporting their environmental and social performance, often through certifications like B Corp.
Criticism and Regulation
Some critics argue that CSR can delay or distract from the establishment of regulatory measures for environmental and social issues. However, voluntary CSR reporting has also served as a testing ground for developing related policies. The need for consistency in reporting has led to new governmental regulations, such as the Sustainable Financial Disclosure Regulation (SFDR) in the EU, which includes climate change and human rights reporting requirements.
Types of CSR Practices
Environmental Responsibility
Environmental responsibility focuses on preserving the natural environment. Companies can pursue this by reducing pollution and emissions, recycling materials, replenishing natural resources, or creating eco-friendly product lines. Examples include implementing energy-efficient processes, sustainable sourcing and effective supply chain management, and waste reduction initiatives.
Ethical Responsibility
Ethical responsibility involves fair and ethical treatment of all stakeholders. This includes ensuring fair labor practices, providing equal opportunities regardless of age, race, culture, or sexual orientation, and maintaining transparency with investors. Companies practicing ethical responsibility commit to honesty, integrity, and fairness in their operations.
Philanthropic Responsibility
Philanthropic responsibility involves contributing to the welfare of society. This can be through charitable donations, supporting community projects, encouraging employee volunteerism, or sponsoring events. Companies might align with suppliers and vendors who share their philanthropic values, enhancing their social impact.
Financial Responsibility
Financial responsibility means backing CSR plans with financial investments. This includes funding programs that promote sustainability, diversity, equity, and inclusion (DEI), and social awareness initiatives. Investing in research and development for sustainable products, creating a diverse workforce, and implementing comprehensive CSR strategies are crucial aspects.
CSR encompasses various types, each addressing different aspects of a company's impact on society and the environment. By integrating environmental, ethical, philanthropic, and financial responsibilities, companies can achieve sustainable and meaningful progress.
What are the business advantages of CSR?
Enhanced Business Value
CSR boosts a company's perceived value beyond just financial metrics. By implementing and reporting on CSR initiatives, businesses can drive positive change, improve their reputation, and stand out as leaders in their industry. This commitment to sustainability and social responsibility can attract customers, investors, and partners who prioritize ethical practices.
Attracts Investors
Investors increasingly use CSR data to assess companies for social and environmental risks. Strong CSR performance signals a sustainable, long-term business strategy, which is appealing to investors. According to CECP's 2021 Giving in Numbers report, around 80% of businesses share CSR data with investors, highlighting the growing importance of CSR in financial decision-making.
Improved Brand Image
Customers favor brands that care about social and environmental issues. A 2020 Kantar Purpose study found that brands with a positive impact grew in value by 175% over 12 years, compared to 70% for others.
Brands are beginning to recognize their role as change agents and use CSR as a tool to make an impact. Brands can adjust their operations, advocate for causes, and even lobby the government for social and environmental safeguards. Their financial performance often improves, as a result.
👉 Social media has become a forum where journalists and customers scrutinize and challenge unethical business practices through independent research and boycotts. Businesses need to manage their image in a way that recognizes the demand for socially conscious business strategies.
Strengthened Employer Brand
CSR initiatives help attract and retain employees. A 2021 Deloitte survey found nearly half of millennials (44%) and Gen Z (49%) consider ethics when choosing employers. Companies with strong CSR programs retain employees at a much higher rate, with retention rates 40% better than their competitors. And since losing an employee costs more than 40% of their annual salary according to the Washington Center for Equitable Growth, effective CSR programs can lead to significant cost savings and a more committed, satisfied workforce.
Enhanced Operational Efficiency
Integrating CSR practices can also lead to operational efficiency. Sustainable practices, such as energy conservation and waste reduction, can lower operating costs and increase profitability. Companies that invest in sustainable technologies and processes often see long-term savings and reduced environmental impact.
Fosters Innovation
CSR can drive innovation by encouraging companies to develop new products and services that meet societal needs. This focus on innovation can lead to the creation of new markets and opportunities, providing a competitive edge. Businesses that innovate in response to social and environmental challenges often find new ways to grow and succeed.
Key CSR Frameworks
Global Reporting Initiative (GRI)
The GRI standards are among the most widely used frameworks for sustainability reporting, offering guidelines for reporting on economic, environmental, and social impacts.
UN Global Compact
This voluntary initiative encourages businesses to adopt sustainable and socially responsible policies. It focuses on human rights, labor, environment, and anti-corruption principles.
Sustainable Accounting Standards Board (SASB)
SASB develops sustainability accounting standards that help public corporations disclose material sustainability information to investors.
Integrated Reporting (IR) Framework
The IR framework combines financial and non-financial data to provide a holistic view of an organization's performance, focusing on value creation over time.
ISO 26000
This international standard provides guidance on social responsibility, covering areas like organizational governance, human rights, labor practices, environment, fair operating practices, consumer issues, and community involvement.
CDP (formerly Carbon Disclosure Project)
CDP helps companies and cities disclose their environmental impact, primarily focusing on climate change, water security, and deforestation.
B Corp Certification
B Corps are businesses that meet high standards of social and environmental performance, accountability, and transparency. Certified B Corps are legally required to consider the impact of their decisions on their workers, customers, suppliers, community, and the environment.
Social Accountability International (SAI) and SA8000
SAI is a global standard-setting organization that promotes human rights at work. The SA8000 Standard is a certification for decent workplaces, based on conventions of the International Labour Organization (ILO), international human rights norms, and national labor laws.
👉 These frameworks help businesses align their strategies with global standards for responsible business practices, ensuring comprehensive and transparent CSR efforts.
How can your company implement an effective CSR Policy?
- Assess Current Practices - Begin by evaluating your company's current social, environmental, and economic impacts. Conduct an internal audit to identify strengths, weaknesses, and areas for improvement.
- Define CSR Goals - Set clear, measurable, and achievable CSR objectives that align with your company’s mission and values. Ensure these goals address the key areas of environmental, ethical, philanthropic, and financial responsibility.
- Engage Stakeholders - Involve key stakeholders, including employees, customers, suppliers, and local communities, in the planning process. Gather input to identify relevant issues and gain buy-in for your CSR initiatives.
- Develop a CSR Strategy - Create a detailed CSR strategy that outlines specific initiatives, assigns responsibilities, and establishes timelines and metrics for tracking progress. Ensure the strategy is integrated into your overall business plan.
- Implement Initiatives - Execute your CSR initiatives, making sure all departments and employees understand their roles and responsibilities. Provide necessary training and resources to support the implementation.
- Monitor and Report Progress - Regularly track the progress of your CSR initiatives using established metrics. Publish annual CSR reports to transparently communicate your achievements and areas for improvement to stakeholders.
- Communicate and Promote - Promote your CSR efforts both internally and externally. Use various communication channels, such as social media, press releases, and company newsletters to highlight your commitment and successes.
- Review and Improve - Continuously review your CSR strategy and initiatives. Collect feedback from stakeholders, stay updated on CSR trends and best practices, and make necessary adjustments to improve your CSR efforts.
- Foster a CSR Culture - Encourage a company-wide culture of social responsibility. Recognize and reward employees for their contributions to CSR initiatives and create opportunities for ongoing engagement and education.
- Partner with External Organisations - Collaborate with NGOs, industry groups, and other external organizations to enhance your CSR efforts. Partnerships can provide additional resources, expertise, and credibility to your initiatives.
Mistakes to Avoid When Building Your Company CSR Policy
1. Lack of Genuine Commitment
Avoid treating CSR as a mere PR exercise. Genuine commitment to CSR means integrating it into the core values and operations of your company. Customers and stakeholders can easily detect insincerity, which can damage your reputation.
2. Ignoring Stakeholder Input
Neglecting the perspectives and needs of stakeholders can lead to misaligned CSR initiatives. Engage with employees, customers, suppliers, and the community to ensure your CSR policies address relevant issues and garner support.
3. Setting Unrealistic Goals
Setting overly ambitious or unrealistic CSR goals can lead to failure and disappointment. Establish achievable, measurable objectives that can be progressively scaled as your company’s CSR capabilities grow.
4. Poor Communication
Failing to communicate your CSR efforts effectively can undermine their impact. Transparently share your goals, progress, and challenges with stakeholders through regular updates and reports.
5. Neglecting to Measure Impact
Without measuring the impact of your CSR initiatives, it’s impossible to know what’s working and what isn’t. Use metrics to track progress and adjust your strategies accordingly.
6. Focusing Only on Short-term Gains
CSR is a long-term commitment. Avoid policies that prioritize immediate benefits over sustainable, long-term impact. Consider the enduring effects of your initiatives on the environment, society, and your company’s reputation.
7. Inconsistency in Implementation
Consistency is key to successful CSR. Ensure that your CSR policies are applied uniformly across all departments and operations. Inconsistencies can lead to confusion and reduce the effectiveness of your initiatives.
8. Overlooking Employee Engagement
Your employees are vital to the success of your CSR initiatives. Involve them in the development and implementation of CSR policies to enhance buy-in and participation.
👉 By avoiding these common mistakes, you can build a robust and effective CSR policy that enhances your company's reputation and contributes positively to society.
CSR in Practice
IKEA
IKEA invests significantly in renewable energy projects and uses 83% recycled polyester in its textiles. Additionally, it introduced a plant-based meatball with just 4% of the carbon footprint of its traditional meatball.
LEGO
LEGO is committed to climate change and waste reduction. The company focuses on reducing packaging, using sustainable materials, and investing in renewable energy to minimise its environmental impact.
Johnson & Johnson
Johnson & Johnson supports alternative energy initiatives and clean water and sanitation projects in communities worldwide, showcasing its commitment to global health and sustainability.
In 2020, Google matched 100% of its global electricity use with renewable energy investments. The company also focuses on green building practices for its offices to further reduce its environmental footprint.
Tesco
Tesco, a UK supermarket chain, has reduced its greenhouse gas emissions by 54% since 2015. The company has donated 82% of its unsold food and removed 1 billion pieces of plastic from its packaging, demonstrating its dedication to sustainability and waste reduction.
These examples highlight how leading companies integrate CSR into their operations, benefiting both their business and the broader community.
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How Greenly Can Help Companies with CSR Practices
Waiting for regulatory changes or reputational damage to drive change means missing out on opportunities to lead in your industry. Greenly helps you proactively engage in CSR, positioning your company as a leader in social responsibility and environmental stewardship.
Comprehensive Carbon Management
Greenly offers a range of services to help you effectively manage your carbon footprint:
- Measurement of GHG Emissions: Track Scope 1, 2, and 3 emissions using advanced technology for a comprehensive understanding of your greenhouse gas footprint.
- Custom Action Plans: Develop tailored strategies with our climate experts, focusing on key areas for improvement and implementing effective changes.
Decarbonizing Your Supply Chain
Greenly helps you engage suppliers and transition to low-carbon options, achieving greater transparency and effectively managing Scope 3 emissions. Our sustainable sourcing initiatives build greener partnerships and reduce emissions throughout your supply chain.
Intuitive and Seamless Platform
Our user-friendly platform simplifies the process of calculating and monitoring your carbon footprint. With Greenly, your business can effortlessly manage its environmental impact, meet ESG goals, and enhance sustainability.
The Benefits of Early Adoption
Acting now on CSR prepares you for future regulations and positions your company as a proactive leader in sustainability. Greenly can help you seize these opportunities, transforming your business strategy from reactive to proactive and setting you apart from the competition.
Why Choose Greenly?
Greenly offers comprehensive support for your CSR journey, from carbon measurement and custom action plans to supply chain decarbonization and seamless platform integration. With our help, your business can significantly reduce its environmental impact and implement socially responsible business practices.
Contact Greenly today to start leading the way in CSR and build a greener future for your company.
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