Predict & Influence Muses - Series 019: CSR, ESG & Sustainability – same same but different?

Very often, when we engage with the PLCs (public listed companies) on their ESG/Sustainability data efforts, especially for those established large companies, the common comments/complaints that we learnt from the board members or senior management team are often. “What’s new here? We have been doing Corporate Social Responsibility exercises year in year out. Visiting orphanages, cleaning up a famous beach near our office, donating to some good causes etc. What’s the difference between what we have done and reported to this “Sustainability Reporting” mandated by the exchanges?”

Well, there are similarities, but they are differences as well. In this series of Muses, I will try to distill the possible misconception and how each of these “hot” themes (though CSR is no longer too hot, I believe) links to, or different than one another.

First off, the mother of all, Sustainability. In general, sustainability is a balanced, long-term view and approach to the company in economic, social and environmental aspects. Sustainability is being viewed from interdependency among economic, social, and environmental factors, not just from a current or short-term perspective, but meeting the needs of future generations. To do that, sustainable systems (or ecosystems) and practices need to be created, and the aims would include minimising harm to the environment, promote social equity, and while supporting economic development.

In the organisational activities, the sustainability initiatives should include focus to reduce carbon emissions, conserving natural resources (especially for property, constructions and plantation companies), promoting social equity, investing and using renewable energy. Sustainability typically applied to all organisations, including businesses and governments, as well as individuals like you and me.

Next, ESG. ESG stands for Environmental, Social, and Governance. It is a framework used to evaluate the sustainability and ethical impact of an organisation's operations. ESG concerns on how an organisation's operations impact the environment, how it treats its employees and stakeholders, and how it is governed. The term ESG though is more aligned with companies/businesses, rather than NGO or governments. Thus, for investors, ESG investing seeks to invest in companies that are more sustainable, ethical, and socially responsible.

Environmental factors considered in ESG analysis can include a company's carbon footprint, energy use, waste management, and water consumption. Social factors can include labor practices, community engagement, diversity and inclusion, and human rights. Governance factors can include board composition, executive compensation, and shareholder rights.

ESG investing seeks to promote companies that have a positive impact on society and the environment, while avoiding companies that have a negative impact.

Finally, CSR. Corporate Social Responsibility (CSR) refers to an organisation's voluntary action to improve its impact on society and the environment. CSR can include philanthropy, volunteering, ethical business practices, and sustainability initiatives. CSR is typically viewed as a way for organisations to give back to society and demonstrate their commitment to ethical and sustainable practices.

CSR initiatives can include donating money to charities, supporting employee volunteering, reducing carbon emissions, and promoting sustainable business practices. CSR can also involve developing ethical business practices that promote social equity and reduce negative impacts on the environment.

Overall, sustainability is a broader concept that encompasses ESG and CSR. ESG focuses on evaluating a company's sustainability performance, while CSR refers to a company's voluntary actions to improve its sustainability and social impact. Sustainability considers the interdependence of economic, social, and environmental factors and seeks to balance them to achieve long-term well-being. Hence, stock exchanges like SGX and Bursa Malaysia named this as “Sustainability Reporting” as a form of mandatory reporting for the listed companies, though many indicators needed are formed based on the ESG concept for the investment community.?