We begin this blog with the basic definitions and a brief description of each of the 4 terms that are used by companies regularly as a part of their annual business reporting cycles.
The four terms are Corporate Social Responsibility (CSR), Environmental, Social and Governance (ESG), Impact and Sustainability.
Definition and brief description
CSR or Corporate Social Responsibility is more of a general framework for sustainability activities that are used by companies. CSR is no longer considered merely a good business practice but rather, is expected from all big companies. In many countries, the top companies may even be mandated to spend a percentage of annual income on CSR activities. CSR Reports focus more on the organisation’s commitment as a corporate social citizen and its responsibilities towards society and the environment
Organisations must develop a CSR model and report on CSR activities in a transparent manner, backed with numbers and images. Some of the CSR activities undertaken by a company may be:
Reducing carbon footprint
Investing in environmentally conscious businesses
Volunteering for social or environmental causes
Contributing and engaging with charitable projects and NGOs
ESG or Environment, Social, and Governance is more like a rating of your company’s commitment to sustainability. When all three aspects, Environment, Social, and Governance are incorporated, this would allow a potential investor or stakeholder to evaluate a company's sustainability performance. ESG ratings of big companies may be done by rating agencies such as S&P, which is data-driven.
It is significant to note that when ESG ratings are being evaluated, financial performance is taken into consideration unlike with CSR where usually the only financial figure mentioned is the amount being spent.
ESG Reports are generally more suitable for publicly-listed companies because they can receive capital investments.
Impact Reporting is a type of corporate report that help convey to stakeholders, investors, customers, and the general public, the tangible benefits of actions to address a specific issue or problem. The issue being discussed in an impact report may have positive or negative connotations for the company. While enhancing stakeholder engagement, the process of releasing an impact report would require taking feedback and suggestions from stakeholders.
Impact reports help build trust, enhance accountability, mitigate risks and better understand stakeholders, thereby allowing the business to improve services. In other use cases, NGOs are encouraged to release an Impact report annually or periodically to give a data-driven view of the organization’s activities and how they helped the environment or society in general.
An impact report would generally cover the following:
The Need – The issue or problem that the company faces and needs to address
The Activity – The specific actions taken to address the issue
The Outcomes – The results of the actions taken
The Evidence – This is the proof to show stakeholders the results that were achieved
Lessons – This would be about the lessons learnt from the entire process and to help further improve.
Sustainability Reporting is quite similar to CSR or ESG reporting except that sustainability is a broader term. While an ESG report is generally more data-driven and specific to the environment, society and governance, a sustainability report can be more of a holistic look at activities undertaken by an organisation and may even include aspects of ESG, CSR and innovation or R&D that can help improve the long-term growth potential of the company. As of 2019, 90% of S&P 500 Index companies publish sustainability reports.
CSR activities may be disclosed as a part of an integrated annual report, while sustainability reporting is usually a separate report. While sustainability reports may show data such as costs for energy consumption or money saved, they do not include financial data / economic performance in the annual report.
Sustainability reports are not mandated, unlike annual reports for example, and the company isn't restricted to a particular time of the year and can be published at any time, unlike annual reports that are generally published in time for the company’s AGM.
Sustainability, CSR, ESG and Impact – all sides of the same coin? While it can seem that way, it is pertinent to note that sustainability is more of a vague term while CSR and ESG are more corporate-specific. However, it is important to note that Impact, CSR, and ESG reports all have the essence of sustainability in it.
Designing and creating content for all these reports can be stressful and complicated. Further, it is imperative to not miss the opportunity to convey your sustainability, ESG or CSR message transparently and clearly. To make this process easier, many corporations reach out to design agencies that specialised in the conceptualisation, design and content creation of these reports as per world-acknowledge standards such as GRI, SASB, etc. One such agency is Report Yak. With years of experience creating award-winning reports (check out our work here), Report Yak has the right combination of competence to ensure that your company’s next report has the impact that you want.