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Posted 5th January 2024

Roman Semiokhin – The Differences and Similarities Between CSR and ESG

Serial investor and philanthropist Roman Semiokhin is an experienced entrepreneur with an in-depth understanding of the tech industry. In Cyprus, Mr Semiokhin has harnessed the latest research and state-of-the-art technology in his mission to create an innovative educational institution equipped to deliver engaging and effective learning. This article will provide an overview of corporate social […]

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roman semiokhin – the differences and similarities between csr and esg.


Roman Semiokhin – The Differences and Similarities Between CSR and ESG

Serial investor and philanthropist Roman Semiokhin is an experienced entrepreneur with an in-depth understanding of the tech industry. In Cyprus, Mr Semiokhin has harnessed the latest research and state-of-the-art technology in his mission to create an innovative educational institution equipped to deliver engaging and effective learning.

This article will provide an overview of corporate social responsibility (CSR) and environment, social and governance (ESG), exploring the key differences and similarities between them and why both are integral components for forward-looking companies in 2023.

ESG is an umbrella term that sets criteria for evaluating a company’s impact on society. When evaluating investments, many investors look at more than just a business’s traditional financial metrics, also paying attention to its ESG rating. Most modern companies produce an annual impact report, highlighting their ESG ratings. This helps the company’s leaders, investors, employees and customers to understand what impact corporate decisions are having on society.

CSR, on the other hand, focuses on a company’s internally-defined social impact vision, which defines its policies, practices and values that address social, economic and environmental issues. Often, the various facets are condensed into a single corporate purpose statement. Rather than being regulated or mandated by external bodies, CSR requires leadership, management and employees to develop these principles together, each holding themselves internally accountable for them. These principles should be embedded in the company culture, driving decisions regarding community investment, volunteering and giving programmes.

Both ESG and CSR help to inform the general public about a company’s values and goals. ESG helps investors to gauge which companies align with their principles and ethics. CSR practices are self-regulated and can have a lot of variation, making them more challenging to define. ESG and CSR are often used by businesses simultaneously. ESG provides measurable goals and solid numbers, while CSR establishes internal frameworks for companies to communicate with employees and drive awareness.

Conducting a materiality assessment is an excellent starting point for incorporating ESG, collecting valuable insights from stakeholders; establishing goals; conducting a gap analysis; developing a measurable roadmap; and reporting on progress.

Meanwhile, to incorporate CSR practices, businesses needs to consider their company culture and its impact on the environment, as well as their relationship with the local community, identifying ways to educate employees on how they can be part of the solution.

ESG is an effective means of highlighting the ethics of a business to the outside world. Organisations that signal that they are using actionable ESG criteria send the world a strong message that they have a robust long-term vision, presenting themselves as a viable opportunity for investors. In addition, ESG programmes can also create significant cost savings, for example by reducing waste and attracting a higher calibre of talent. Essentially, ESG defines a company’s ethics in terms of people and the planet. While in the past the focus may have been primarily on profits, in recent years there has been an increased emphasis on sustainability, with many investors actively seeking out enterprises with a strong ESG rating.

CSR is not only about the external impact of corporate policies but also the internal, helping employees to feel empowered and encouraging them to embrace diversity and do good in the world. This can go a long way in terms of boosting employee morale, which in turn has a positive impact on talent retention.

ESG tends to focus on specific things, such as carbon emissions, waste management, water usage, diversity and inclusion, executive pay, fair labour practices, internal corruption and lobbying. ESG provides metrics that can potentially instil confidence in investors, as well as the broader market. Meanwhile, CSR can be used to build awareness among staff and the wider community, highlighting goals within a business.

Businesses seeking to develop their own CSR strategies should look at examples of strident CSR initiatives such as those implemented by Panasonic, IKEA and Patagonia, developing their own CSR strategies to replicate some of those sustainable measures.

The acronyms ESG and CSR constantly pop up in the media, interwoven with news stories about sustainability, stakeholder capitalism and socially responsible investing. It is easy to conflate the two terms, though in truth they are very different methods of measuring the same thing: an organisation’s impact on society.

Put simply, ESG is an external assessment of a company’s impact on society, while CSR initiatives demonstrate its internal culture and policies. However, as with other aspects of social impact, things are not always black and white and the two sometimes overlap.

The principal difference between ESG and CSR is that while ESG reflects a business’s external impact, CSR is an internal framework created to fulfil a corporate purpose. It is crucial for social impact professionals to understand the difference between ESG and CSR so they can help companies to live up to their values, ensuring they make a positive impact on society.

For more information about CSR and ESG, visit Roman Semiokhin’s website: https://romansemiokhin.com

Categories: Business Advice, News


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