Traditionally, corporate social responsibility (CSR) has been about doing good for good’s sake. It has focused on social accountability and community engagement offering qualitative evidence of the positive impact a company can have on the world. Investors, regulators, industry-leading manufacturers, non-governmental organizations (NGOs), and the public are now pressuring companies for quantifiable evidence of this positive impact.
Enter environmental, social, and governance (ESG), which examines the hard numbers and material effects of a company’s activities on the ecosystem, people, and on the business itself.
For complex manufacturers specifically, it has become imperative to move from CSR to ESG.
Companies have often used the terms ESG, CSR, and sustainability interchangeably.
ESG has become mainstream, and it is used almost exclusively by those who evaluate a company’s efforts to improve its impact on society, the environment, and its employees (institutional investors and regulators). Companies title external reports on these matters “ESG reporting.”
In contrast, CSR refers to organizational efforts to make the world a better place.
Corporate philanthropic work, community involvement, environmental programs, and employee well-being programs all fall under the CSR umbrella.
Another difference between ESG and CSR has to do with accountability. ESG goes beyond CSR to demonstrate positive impact with data.
The two main reasons for companies to adopt ESG practices today are transparency and accountability. Transparency demonstrates a company’s openness and honesty. Even when a business is not meeting its ESG goals as its leaders had intended, transparency means it must still reveal that data to build trust. Accountability follows transparency. This value ensures that companies take responsibility for what transparency has uncovered. There are four groups holding companies accountable on their transparency and accountability efforts:
Investors Regulations Industry peers NGO/public scrutiny.
Facing pressure from investors and regulators, many complex manufacturers are now considering creating an ESG program. A successful ESG program is built on the following five steps:
- Review your pressures
- Create your prioritization matrix
- Ensure you have the right tools in place
-Develop a workflow and timeline
- Review and correct
Here’s how you may proceed:
- See deeper into your supply chain to reduce your risk and grow your business
- Work smarter to manage data efficiently and cost-effectively
- Grow better to take advantage of new opportunities
Source :web article