Why ESG is replacing CSR – and what this means to your business

Why ESG is replacing CSR | npower Business Solutions

Corporate Social Responsibility – or CSR – is likely to be a familiar term for anyone working for a large business. But have you heard of ESG?

ESG stands for Environmental, Social and Governance criteria – and is seen as core to the way today’s responsible businesses operate.

That’s why many large companies are starting to embrace ESG in favour of CSR.

Indeed, ex-Unilever boss Paul Polman – credited with helping to change the face of capitalism – has long argued that CSR alone is no longer sufficient in a new era of purpose-led business.

The difference is metrics

In a nutshell, CSR represents a company’s efforts to have a positive impact on its employees, consumers, the environment and wider community. It’s a form of self-regulation that most large companies report on annually.

ESG, on the other hand, measures these activities to arrive at a more precise assessment of a company’s actions.

In particular, ESG looks at how businesses:

  • Respond to climate change
  • Treat their workers
  • Build trust and foster innovation
  • Manage their supply chains

And rather than producing impressive sounding rhetoric, ESG demands metrics.

So environmental programmes that demonstrate kilowatts of energy saved, tonnes of carbon emissions avoided, or gallons of water preserved – with targets for progression year on year.

Key to investment decisions

Evidence of ESG activity is now seen as vital to understanding corporate purpose, strategy and management quality of companies.

In particular, ESG is used as a key assessment marker for investors.

Indeed, a quarter of the world’s professionally-managed investment funds now only invest in companies that demonstrate solid ESG credentials.

But rather than having ESG as an ‘add on’ to business activities, many believe it’s essential to really embed ESG at the very heart of a company, especially when it comes to surviving the low-carbon transition.

Preparing for the future

According to Nigel Topping, the head of the We Mean Business coalition of 889 companies with $17.6trn in market capitalisation: “If these challenges are tucked away and approached solely for compliance reasons, they are not being integrated. And if businesses aren’t incorporating them into financial decisions and long-term planning, then they are not being taken seriously – which leaves the business poorly prepared for the future.”

Our customers often ask us how best to future proof their businesses for a low-carbon world.

The answer’s rarely simple – nor is it the same for any two companies. But there are some clear pointers that act as an excellent starting point.

For example, really understanding how and where your business uses energy via sub-metering and energy monitoring software. That way you can start to assess where it’s being put to good use – and where efficiencies can be made.

The standard for continual improvement

When it comes to then using your energy data to set targets and drive further efficiencies and savings, adopting a system such as ISO 50001 can be really beneficial.

ISO 50001 is considered the gold standard for energy management and provides a framework for implementing greater efficiencies via a process of continual improvement.

Not only can it exempt you from mandatory compliance such as ESOS, it also provides excellent data for ESG reporting purposes.

So even if your company isn’t currently ESG compliant in all areas, you can certainly get ahead of the game from an energy perspective.

To find out more, Get in touch

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