Corporate Social Responsibility (CSR) vs. Environmental, Social, and Governance (ESG): What’s the Difference?
By Inshirah Zaib
May 2025
In today’s world, businesses are no longer just about selling products and making money. Companies are increasingly expected to take responsibility for their impact on society and the environment. This is where Corporate Social Responsibility (CSR) and Environmental, Social, and Governance (ESG) come into play. You’ve probably heard both terms said in the news or by your favorite brands, but what exactly do they mean? And how do they differ?
What is CSR (Corporate Social Responsibility)?
A company decides it’s not just going to sit back and make money, but it wants to give back to the community. They might donate money to charity, organize a fundraiser, or launch a campaign to promote mental health awareness. That’s CSR in action.
CSR is about businesses taking responsibility for the social and environmental impacts of their actions. It’s a “nice-to-have” thing for companies that want to be seen as good corporate citizens. Often, CSR is done voluntarily, without the expectation of direct financial return. It’s businesses doing good because they feel it’s the right thing to do.
Take Ben & Jerry’s, for example. The ice cream company is known for its commitment to social causes. They’ve been vocal about issues like climate change, racial justice, and fair trade practices, and they integrate these values into their products. Their CSR initiatives also extend to partnerships with nonprofit organizations, community outreach, and even their support for local farms. Their philosophy is simple: "We use business to make a positive impact on the world." And they do this while simultaneously making killer ice cream!
What is ESG (Environmental, Social, and Governance)?
Now, let’s talk about ESG. This one’s a little more complex and might sound like something straight out of a business class, but hear me out. ESG is a framework used by investors to evaluate a company’s long-term sustainability based on three key areas: environmental, social, and governance.
Environmental: This looks at how a company is addressing climate change, managing waste, conserving energy, and minimizing pollution. Are they making efforts to go green? Are they involved in sustainable practices, like reducing carbon emissions or using renewable energy?
Social: This aspect focuses on the company’s relationships with employees, customers, suppliers, and the broader community. Are they fostering a diverse and inclusive workplace? Do they treat workers fairly and respect human rights? Have they spoken about or supported social justice causes?
Governance: This is all about the company’s internal management structure. Good governance ensures companies are managed responsibly and are held accountable for their actions. Is the company’s management ethical? Does it have transparent practices? Is the company committed to diversity in leadership?
Key Differences Between CSR and ESG
At first glance, CSR and ESG might seem like two sides of the same coin, but they have key differences. The main one? CSR is voluntary, while ESG is formal and investor-driven. CSR focuses on a company’s efforts to improve its reputation, contribute to society, and make the world a better place. It’s about the company’s good deeds, but there’s not necessarily a direct connection to the company’s financial success (though it definitely helps with brand image and customer loyalty). On the other hand, ESG is more of a set of criteria used by investors to assess how well a company is positioned for long-term success, considering environmental, social, and governance factors. ESG ratings can impact stock prices, investor decisions, and a company’s access to capital.
So, while CSR is about the company doing good, ESG is about investors checking if the company is doing good in the long run.
How Can Companies Integrate Both CSR and ESG Into Their Strategies?
Now that we know what CSR and ESG are, let’s talk about how companies can make both frameworks work for them. Many companies are starting to see CSR and ESG as beneficial tools, and integrating both into their business strategy.
One easy way to combine CSR and ESG is by creating a sustainability report that highlights both the social and environmental impacts of a company’s operations (CSR) and shows how they are aligning with ESG criteria for investors. This could include things like reducing carbon emissions (environmental), offering fair wages to employees (social), and implementing transparent leadership practices (governance).
For instance, Unilever is a prime example of a company that blends CSR and ESG. They focus heavily on environmental sustainability, promoting fair trade, and ensuring that their supply chain adheres to ethical standards. They have also committed to reducing their environmental footprint and improving the lives of people in developing countries. Unilever’s approach allows them to not only engage with their customers but also provide a strong case for investors looking for businesses with long-term, sustainable practices.
Real-life Examples of Successful CSR and ESG Programs
Let’s look at a few companies that are leading the charge in CSR and ESG efforts.
Patagonia: This outdoor clothing brand is known for its commitment to environmental sustainability. It donates a percentage of its profits to environmental causes and has even gone as far as to encourage customers not to buy new products, but instead, repair or buy second-hand items. Their business model is built around the idea of reducing consumption, which perfectly aligns with ESG goals.
Microsoft: In terms of ESG, Microsoft knows what's up. The company has pledged to become carbon-negative by 2030, meaning it will remove more carbon from the atmosphere than it emits. They are also investing in renewable energy and have made strides in improving diversity in their workforce. By implementing these initiatives, Microsoft’s ESG strategy is attracting investors who care about sustainable, long-term growth.
Starbucks: Starbucks has built a reputation for both CSR and ESG initiatives. Its CSR efforts include sourcing fair trade coffee and reducing waste through recyclable cups. In terms of ESG, Starbucks focuses on employee benefits, diversity, and community engagement. They have also set ambitious sustainability goals, including reducing carbon emissions in their supply chain.
Conclusion
CSR and ESG are two powerful frameworks that are shaping the future of business. While CSR focuses on the good a company does for society, ESG is all about ensuring a company is making responsible, sustainable decisions that will benefit its investors in the long run. By integrating both into their strategies, companies can create a positive impact on the world, attract customers who care about social and environmental issues, and make themselves more attractive to investors.
In the end, whether you’re a small business trying to make a difference or a giant corporation like Microsoft or Starbucks, combining CSR and ESG initiatives can lead to a healthier planet, better communities, and a brighter future for all. Now, that’s something we can all get behind, right?