CSR, ESG, Net Zero: Decoding The Confusing Lingo Of Socially Ethical Organizations

Businesses and organizations can have major impacts on the communities they serve across the globe. Building a business and brand that is known for creating positive change is an essential element of the modern economy. Each year, millions of consumers (approximately 55%) report that they are more likely to do business with companies that have positive social and environmental impacts.

For business leaders, it can be difficult to know where to start. There are numerous programs, approaches and methodologies to building a socially responsible and sustainable business. Every day, fancy acronyms are thrown around boardrooms and shareholder meetings with little thought as to what they actually mean. Building a successful strategy begins with defining these terms and understanding where businesses can make the most impact on their communities.

CSR, ESG And Net Zero: What’s The Difference?

Of the three most common terms, corporate social responsibility (CSR) is the oldest. This concept dates back to the 1970s when the Committee for Economic Development asked businesses to create a social contract to balance business objectives while considering the impact of the business on their local communities. In general, CSR refers to a company’s commitment to intentionally design their business operations around making positive social, environmental and ethical impacts on society. The biggest challenge with CSR is that the goals tend to be mostly symbolic in nature. Little to no accountability was provided to ensure that corporations were following through on their commitments.

In the mid-2000s, the concept of environmental, social and governance (ESG) metrics emerged to replace the outdated and mostly ineffective CSR. The difference was that ESG provided a clear framework that specifically focused on the three namesake areas rather than companies deciding on their own what they felt benefited society. Not only is the focus standardized, but companies can be measured and compared to one another through systems such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB). With these rankings in place, ESG has helped drive investment decisions for investors and stakeholders looking for companies that carry lower risk profiles.

Unlike CSR and ESG, which provide overarching methodologies and accountability for socially responsible business practices, net zero focuses directly on the environmental impact of the business as it relates to climate change. When reached, net-zero status means that a company has eliminated the greenhouse gases that are emitted as a direct result of their company’s business operations through carefully executed, science-based initiatives such as investing in renewable energy, energy efficiency measures and offsetting emissions through carbon credits.

Why Net Zero And What To Do About It?

While the scope of net zero is relatively narrow compared to broad concepts like ESG and CSR, it is one of the most urgent and impactful efforts that an organization can make in the grand scheme of socially beneficial activities. According to scientists at NASA, the current trajectory places global temperatures on track to increase by 4.5 to 8 degrees Fahrenheit by the year 2100. This is expected to have devastating impacts on the economy and the well-being of billions of people across the globe. Fortunately, there are several simple steps that most organizations can take today to begin working toward net zero.

1. Conduct A Carbon Footprint Assessment And Set Goals

It’s important for every business to have a good understanding of how much carbon and greenhouse gases their organization produces. There are a few different types of emissions including direct (referred to as Scope 1) and indirect (referred to as Scope 2 and 3) sources. You may need support from a sustainability expert to guide you through the process of recording and calculating your carbon footprint.

By having a quantifiable starting point, businesses can set science-based goals that align with their business objectives. For example, businesses that operate large fleets of vehicles may want to focus on reducing their fossil fuel consumption while a tech company may need to consider the energy usage of their server farms. It’s critical for these goals to be cascaded across the organization so that employees and other stakeholders can support and participate in the initiatives.

2. Invest In Energy Efficiency And Renewable Energy

Energy efficiency and renewable energy are key components of a successful net-zero strategy. Companies can naturally opt to replace aging equipment with better, more sustainable versions over time or can aggressively pursue a full replacement of high-energy assets. Even simple changes like using energy-efficient light bulbs, optimizing HVAC systems or adjusting thermostats can help.

Since fossil fuels generate significant amounts of carbon dioxide compared to green alternatives, focusing on renewable energy can drastically reduce your carbon footprint. It’s probably not possible to eliminate 100% of your greenhouse gas emissions, so the remaining balance can be offset by purchasing carbon credits that go toward reducing greenhouse gas emissions elsewhere through highly reputable organizations.

3. Monitor Progress And Expand To Other Environmental Causes

Measuring your organization’s performance toward net zero is essential to ensure that you are making progress and focusing on the right solutions. Establishing key performance indicators (KPIs) is a great way to have a benchmark to measure and report on emission reduction projects. Periodically revisiting your initial assessment can help you better understand what additional opportunities exist to further reduce your carbon footprint.

Net zero is relatively straightforward, making it the perfect launching point for other eco-friendly goals and objectives. Once you are well on your way to net zero, you can leverage the same strategy toward other environmentally friendly initiatives such as clean water reduction, eliminating waste in your manufacturing facilities or making your supply chain more sustainable. Net zero is a great first step toward building a trustworthy and reputable brand that is both profitable and makes a positive impact on the world.

Article Credits: Forbes