Taking Responsibility
ESG and CSR are evolving to guide sustainable and ethical practices that benefit more stakeholders.
From CSR to ESG, and any future mix of letters to come, the real question isn’t about the acronym but, instead, what these initiatives aim to achieve.
Despite some overlapping areas of focus, an organization’s environmental, social and governance (ESG) and corporate social responsibility (CSR) initiatives traditionally evolved as separate endeavors, each with a different scope. Increasingly, ESG has stolen the spotlight as climate change pressures, regulatory requirements and stakeholder demands have intensified the scrutiny over corporate sustainability.
Then and now
“When we initially discussed ESG topics, it was for an audience of investors and related to assessing risks that may not be disclosed within corporate financial statements,” explained Jennifer Forman, an adjunct instructor for the Leeds Executive Education Certificate in ESG Strategy.
“These risks had the potential to affect investments, even if they weren’t showing up in the company’s 10-K or other mandatory disclosures,” she said. For example, these could be human rights risks within a company’s supply chain or climate-related risks for sites located in areas prone to flooding as temperatures rise, she explained.
Meanwhile, CSR efforts were most often associated with voluntary activities related to corporate philanthropy, ethical labor practices, community development projects and other employee and community relations efforts.
Having served in several ESG-related roles, most recently at the global technology company Splunk, Forman has witnessed the rapid changes in CSR and ESG firsthand.
“Over the past few years, the terms have been conflated, and ESG expanded to include traditional CSR activities, especially as companies got better at measuring and disclosing social and environmental metrics,” she said.
Kathryn Wendell, the executive director of the Center for Ethics and Social Responsibility at Leeds, agrees. “The major difference is that ESG entails consistency and accountability in reporting data that didn’t exist under the CSR framework.” As investors became increasingly aware that climate risk is financial risk, they wanted more accurate information.
“Wall Street investors are paying close attention to the so-called ‘Great Wealth Migration,’ when baby boomers will transfer trillions of dollars of wealth to younger generations who want to invest in more environmentally and socially responsible funds and companies.”
Kathryn Wendell, executive director of the Center for Ethics and Social Responsibility
As a result, we have seen the emergence of global ESG frameworks (including SASB, GRI and TCFD), stringent ESG reporting laws in the EU, and the Securities and Exchange Commission rules for disclosing and managing climate-related risks, Wendell noted.
“Wall Street investors are paying close attention to the so-called ‘Great Wealth Migration,’” said Wendell, “when baby boomers will transfer trillions of dollars of wealth to younger generations who want to invest in more environmentally and socially responsible funds and companies.”
ESG backlash
As recently as 2022, we saw the term “ESG” flail amid negative press that became politically charged in the United States, said Forman. At the same time, regulators started cracking down on unsubstantiated corporate “environmentally friendly” claims (known as greenwashing). The upside, Forman believes, is that companies have a heightened focus on transparency and accountability, and they are transitioning to clearer terminology such as “responsible business.”
“The acronym was being tossed around haphazardly and slapped on investment funds to signify adherence to ethical, social and environmentally conscious business practices, but without due diligence,” she said. The pushback has allowed those in the field to refine their goals and priorities and make a clearer case as to how these strategies accelerate long-term growth, providing a strong business case unrelated to politics.
“A key point is that CSR, like ESG, is just good business if it’s planned and implemented strategically,” said Wendell. “By aligning social and environmental initiatives with a business objective, a company can aim to boost profits while contributing to prosperity.”
What comes next
CSR tended to be siloed in a separate department or combined with public policy, legal, or marketing and communications, Wendell noted. “ESG, or sustainability, has become much more integrated into the business.”
“It’s really important to understand how CSR and ESG roll up to the overall business and how CSR/ESG layers into strategy across multiple teams,” said Lauren Roadman, global community relations specialist at Ball Corporation.
“If a company succeeds as a responsible business, ultimately every job will, in some way, be tied to progressing the company’s purpose.”
Jennifer Forman, adjunct instructor for the Leeds Executive Education Certificate in ESG Strategy
The ESG learning landscape
At Leeds, ESG topics are being integrated across the curriculum. For example, Assistant Professor of Accounting Nikki Skinner developed three new ESG reporting classes that “are quite different from traditional accounting classes,” she said. “Because the ESG reporting environment is rapidly evolving, textbooks on the topic would quickly become outdated. So, we spend a lot of time in class discussing current events and the latest research into corporate sustainability.”
Leeds’ Executive Education replaced the CSR in its original program name to its current title of Certificate in ESG Strategy. The program is updated each semester and recently added topics including responsible supply chains, human rights and ethical AI.
“This certificate covers a broader range of topics than the more singularly focused credentials,” Forman said. “We have a comprehensive curriculum that goes beyond environmental sustainability and social impact. It also looks at human rights, policy influence, impact finance, AI ethics and ESG reporting.”
“Sustainability and ESG are such important cross-functional themes that I think we will see more relevant courses and degrees moving forward,” said Wendell.
The future of ESG
“We know now that people want to work for and buy from ethical companies—or at least companies that do as little harm as possible in their pursuit of profit,” said Forman. She noted that according to Forbes, by 2030, 58% of the global workforce will be millennials and Gen Z. “These generations have high expectations. Embedding purpose into a business model becomes a strong competitive advantage as companies compete for talent.”
“Sustainability is now a compliance requirement, whether that’s at the state, federal or international level,” said Rachel Bigby, the senior sustainability manager of U.S. operations at Frutura Produce and former co-lead, with Lauren Roadman, of a Certificate in ESG Strategy alumni group.
“We’re seeing a monumental global shift. Integration with financial reporting and added assurance requirements, coupled with the consolidation of ESG standards happening simultaneously, make for both a disruptive and hugely impactful moment for our field,” she added.
As regulatory oversight increases, Forman cautions there is a downside—“greenhushing”—the reverse of greenwashing. Fines and potential reputational damage are prompting some businesses to avoid publicly releasing sustainability initiatives. “There are certainly more lawyers involved when deciding how companies will share their ESG goals and progress,” Forman said. No matter what, she believes, transparency is crucial.
Kyle Copp, the operations and sustainability manager for the nonprofit Project Angel Heart, completed the ESG Strategy program to gain insights into creating a materiality assessment.
While Copp believes large corporations must lead the way in environmental efforts, he said nonprofits often demonstrate innovation and creativity in getting funding for ESG. “We don’t allow lack of funding to stop us from trying to find grants and making changes to the organization to make us as sustainable as possible. There is always something more you can be doing. Showing that commitment to sustainability shows your commitment to the community.”
Equals Responsible Business
How ESG + CSR
Equals Responsible Business
ESG
Environmental, social and governance initiatives measure, manage and report quantitative data to demonstrate that a company is meeting sustainability commitments and complying with regulatory standards. ESG emphasizes long-term financial value to investors and other stakeholders through such criteria as resource management, carbon emissions, responsible supply chains and corporate governance.
CSR
Rooted in philanthropy, corporate social responsibility initiatives have traditionally been voluntary, with qualitative measurements. CSR guides ethical business practices and policies related to corporate culture, mission and purpose. Focus areas include charitable donations, equity and inclusion, employee volunteering and community engagement.
Responsible business
ESG+CSR goals combine to foster environmental sustainability, ethical business and labor practices, and transparent stakeholder relations that align the business with positive societal outcomes.