CSR, ESG, Sustainability, RV, SV – the alphabet of responsible strategies

CSR, Sustainable Development, ESG - many organisations often use these terms as synonyms, but in fact, they express a fundamentally different corporate responsibility approach.

In the 21st century, the term ‘sustainable’ has been influencing all spheres of life. Having evolved from innovation to the mainstream, sustainability is slowly becoming the primary indicator of the economic transformation. New concepts have recently been developed, such as Responsible Financing, Sustainable Financing, Circular Economy or Regenerative Value Creation (RVC). Companies that do not follow the idea of sustainable development meet with stakeholders and investors’ resistance. However, how a particular company describes its business responsibility practices is not only a matter of academic discussion but also a strategic choice.

The Vision

CSR – is often used to create a report based on the last 12 months and previous years. It includes projects implemented during the reporting period and a positive image in the press. Unfortunately, without being linked to a strategic approach to business, with increasingly vigilant clients and watchdogs, it leads to the risk of being accused of greenwashing.

Sustainable Development – the core vision here is neutrality, which means taking care of the environment and creating the right conditions for the development of society or business. Access to all resources and their sustainable management will meet the needs of future generations. The idea of Sustainable Development is rooted in the concept of Profit, Planet and People. (Elkington’s Triple Bottom Line concept).

Key stakeholders

CSR – key stakeholders are opinion leaders such as media, employees, politicians, local communities and consumers. CSR’s main idea is focused on ‘giving back’ to society, which is often associated with philanthropy and additional costs.

Sustainable Development – everyone in a company’s value chain is a key stakeholder, starting from suppliers to consumers and investors. It refers to the CSV (Creating Shared Value) approach (Porter&Kramer), emphasizing that only integration of Sustainable Development issues into the business model allows the creation of new business opportunities, which directly translate into the economic success.

Who’s in charge?

CSR – is often managed under PR/PA/IR.

Sustainable Development – as a strategy crucial for business development, it remains under the responsibility of management, often supported by marketing, which often watches over the development of new products and solutions.

Special features

CSR – affects business compliance with the regulations and expectations, and as a result, it strengthens a company’s position in developed markets.

Sustainable Development – in the business model, sustainable development manifests as reducing the consumption of raw materials, improving the supply chain, developing markets, defining goals for specific areas, modifying the business model or offering products according to the adopted guidelines.

Effects

CSR – a better image of the company, favourable publications and a favourable opinion of customers. If it’s not consistent with the applied strategy or operations, it can lead to greenwashing.

Sustainable Development– the implementation of the Sustainable Development strategy increases a company’s valuation and creates new opportunities.

 

To simplify, it can be assumed that CSR evolved from philanthropy, while the concept of Sustainable Development gained popularity after realising the limitations of CSR. In contrast, the idea of Regenerative Value Creation (RVC) can be considered as the next level of initiation. Regenerative Value Creation (RVC) which aims to combine economic success with the impact of regeneration of the Planet and People. In short: not only are they harmless, but they also contribute to the reconstruction of Earths’ boundaries and ecosystem. RVC, as one of the newest concepts, goes far beyond CSR and ESG business models and focuses mainly on a positive impact on the economy. RVC can transform the cost of a positive impact on investments, which will allow the generation of specific business value by creating a more attractive company in the market for stakeholders and investors.

Where is ESG in all of this?

ESG (Environmental, Social, Governance) is a concept which first appeared in the early 2000s. ESG is described as factors, which are the basis of ratings and decisions during the investment processes. Environmental, Social and Corporate governance aspects can directly affect a company’s future behaviour, stability, and financial results. Environmental factors may include preventing climate change, implementing a circular economy, reducing water consumption, and reducing greenhouse gas emissions. Besides, the Social aspects can be considered investments, eliminating inequalities related to sexual orientation or national origin and primarily focusing on customer needs. The last component of ESG is Governance aspects, which refers to an organisation’s structure and ensures its transparency and openness. ESG factors play a considerable role in motivating the company to integrate sustainability with strategic management.

Taking one step further…

The most accurate summary of the evolution and differences between approaches to corporate responsibility as well as a complete definition of sustainable development is provided by Paolo Taticchi and Melisse Demartini in their latest book “Corporate Sustainability in Practice” (2020):

‘Corporate Sustainability is an integral approach to business aimed at enhancing competitive positioning and profitability through the sustained creation of shared value, co-creation practices with stakeholders and integration of ESG factors in decision- making’.

Would you like to discuss this article? Contact the author:

Marta Lesiewska

Marta Lesiewska

Would you like to discuss this article?Contact the author:

Marta Lesiewska
Marta Lesiewska

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