Beyond Profit: Navigating CSR vs ESG
In recent years, two acronyms have risen to prominence: CSR (Corporate Social Responsibility) and ESG (Environmental, Social, and Governance). These concepts have evolved not just as buzzwords but also frameworks guiding how companies operate within the broader societal and environmental context. There are many opinions around CSR and ESG, and 2024 marks a year where the “ESG is dead” expression is showing up more prominently - but before I opine on that, let’s go over the meaning of these two similar yet different concepts that are easily confused.
The concept of CSR emerged in the mid-20th century, focusing on a company's responsibility towards society beyond its shareholders. ESG, on the other hand, gained prominence in the early 21st century, offering a more structured way to evaluate the sustainability and ethical impact of investments. The common thread between the rise of CSR and ESG is the growing realization that businesses play a crucial role in addressing global challenges such as climate change, social inequality, and corporate governance.
Though often used interchangeably, CSR and ESG encapsulate distinct aspects of a company's approach to sustainability and ethical operations:
CSR (Corporate Social Responsibility) focuses on a company's self-imposed commitment to contribute positively to society. It encompasses a broad range of activities, from environmental conservation efforts to community engagement programs. CSR is about a company's direct actions to promote social good, beyond what is legally required.
ESG (Environmental, Social, and Governance), on the other hand, provides a framework for evaluating the impacts of a company's operations and governance practices on the environment, society, and how it is managed. ESG criteria are increasingly used by investors to assess potential risks and opportunities associated with sustainability issues.
Despite their differences, CSR and ESG overlap in their mutual goal of fostering a more sustainable and equitable global economy. Both concepts emphasize the importance of going beyond financial performance to include social and environmental considerations in business decision-making. They underscore the idea that long-term profitability is inseparable from sustainable practices. However, ESG has not been without its controversies, particularly around greenwashing – the practice of making misleading claims about a company's environmental efforts. Critics argue that some companies use ESG ratings as a marketing tool rather than a genuine commitment to sustainability. This skepticism highlights the need for transparency, rigorous standards, and accountability in ESG reporting.
At Rise Together Ventures, we champion the broader conversation around for-profit enterprises as a force for good. We are grateful for the increase in attention towards these terms; RTV likely wouldn’t exist today had these concepts not come to prominence over the past ten years. However, while we appreciate the nuances of terminology, our focus lies in tangible impact rather than labels. We generally refer to our startups' impact initiatives as CSR, driven by a conviction in the power of clear, actionable steps over mere rhetoric. And by offering non-dilutive capital to our portfolio companies we empower changemakers to create real and measurable value through their “.org” initiatives, fostering a culture of genuine contribution over greenwashing.