How do CSR, ESG and purpose make sense for your business? Rania Laing, CEO and founder of Purposeful Innovators, provides clarity on overlapping terminology and shares advice for organisations looking to investigate their current impact and begin their journey towards sustainability.  

This article is part of a Spotlight EMEA series on how brands can shift the sustainability conversation. Read more

The concept of sustainability has evolved over time, with different models and approaches being proposed to address the environmental, social, and economic challenges facing our world. Understanding the distinction between them is crucial when researching how each model can help deliver on your organisation's strategic promises and establish a legacy that can withstand change and future challenges.

Back in 1994, John Elkington first coined the term “The Triple Bottom Line” (TBL). Elkington’s framework considers three key areas of sustainable development: environmental, social, and economic. The model measures the success of an organisation not only in terms of financial profit, but also in terms of its impact on people and the planet and is also referred to as the 3Ps model.

Following on from Elkington’s work, Andrew Savitz and Karl Weber expanded on the TBL framework in 2006 by adding a fourth "P" for purpose. They emphasised the importance of aligning a company's values and mission with its sustainability goals introducing the notion that businesses need to have a purpose, aside from making money.

ESG (Environmental, Social, and Governance) as an investment approach has gained traction over recent years with many investors recognising the importance of sustainability in long-term financial success. It primarily considers a company's performance in these areas when evaluating potential investments. ESG is frequently described as everything that is not on a company’s balance sheet.

While ESG and purpose sound the same, there are some fundamental differences between them. ESG factors cover a set of criteria used to evaluate a company's impact on the environment, society, and its governance structure. Environmental factors include a company's impact on climate change, natural resources, and pollution. Social factors include how a company treats its employees, customers, suppliers, and the communities in which it operates. Governance factors include a company's leadership structure, transparency, and accountability. ESG is concerned with managing and reducing challenges that may pose a risk to the organisation, like climate change, human rights and adherence to laws and regulations. It can be seen as a way to defend and protect an organisation in how it addresses new internal and external standards and regulation. Companies like Tesla may score highly for environment and governance but be criticised for their poor treatment of workers.

On the other hand, purpose is the company's fundamental reason for being and defines what it wants to achieve beyond financial performance. Where ESG is protective, purpose is the company’s driving force towards a better tomorrow. Purpose is where there are ideals and promises made, the raison d’être of the business that translates to the brand. Purpose is the fundamental reason why the business was ever established, and it guides all the strategic decisions and actions of the organisation. Purpose is expressed as a mission statement, a set of values, or a vision for the future. Truly purpose-led organisations, like Patagonia, are established with their policies, processes, supplier management, HR and management systems built specifically to deliver their environmental and social purpose. Not to be confused with the more short-term purpose-driven marketing approach.

Like organisation purpose and ESG, Corporate Social Responsibility (CSR) goes beyond just making profits for shareholders; it considers the business operations impact and involves the responsibility of a business to contribute to sustainable development by delivering economic, social, and environmental benefits for all stakeholders. These can include employees, customers, suppliers, and the environment. CSR refers to a company's commitment to being socially responsible and ethical in its business practices. This includes things like giving back to the community, being environmentally conscious, and treating employees fairly. CSR is often seen as a way for companies to build goodwill and trust with their customers and stakeholders. Where purpose is the ‘why’, CSR is the ‘how’. Ben & Jerry’s ice cream has a strong commitment to social responsibility by sourcing fair trade ingredients and supporting local communities.

Which brings us to sustainable development which refers to meeting the needs of the present without compromising the ability of future generations to meet their own needs. It is a holistic approach to managing change and transformation. Simply put, if you cannot continue doing something then it is unsustainable. The sustainable transformation process can directly support ESG and CSR strategies as well as be aligned with a company’s purpose.

In 2015, the United Nations Sustainable Development Goals (SDGs) established a set of 17 goals to guide global sustainable development efforts. These goals cover a wide range of issues, from poverty and hunger to climate action and responsible consumption and production and improve both human and planetary health. While half of the SDGs reduce harm, the other half are concerned with creating and innovating solutions. The UN provides impact measurement and management guidelines to encourage companies to support the SDGs.

Environmental sustainability is a key component of sustainable development. Climate change has a direct impact on social issues faced by communities which affect the financial viability of the business. By adopting a systemic approach to understanding sustainability models, businesses can take early action to become more responsible and more sustainable in the long term. Unsustainable practices have a direct impact on an organisation’s key macro factors as per their PESTLE (Political, Economic, Social, Technological, Legal and Environmental) analysis. By realising and taking account of the impact of their business operations, organisations can adopt more responsible and sustainable practices that positively impact their stakeholder communities and delivers the economic sustainability that is crucial for long-term business success.

In 2006, the B Corp movement was established to set standards and build an international network of companies that benefit the planet, society and communities. Incorporating some of the most rigorous evaluation methods as well as the UN SDGs into their standards, assessments and tools, B Corp has since become one of the most respected certifying bodies for organisations who wish to prove that they are doing good.

Pangaia is one company that authentically exemplifies all aspects of sustainable transformation. With their organisation purpose built to deliver their strategies for innovation, planet, people, materials/systems and giving back, they are innovating for sole purpose of establishing life in harmony with the planet. Despite being first launched in 2018, Pangaia achieved their B Corp certification in 2022.

Frameworks like the UN SDGs and B Corp Labs provide a solid starting point for organisations who are looking to investigate their current impact and begin their own journey towards sustainability. Sustainability consultancies may also have their own proprietary models that are used to audit client businesses. Getting a clear perspective on the organisation in relation to the goals or standards will set the direction and transformation priorities that will be best for the company. Ultimately, by integrating these frameworks into a multi-dimensional approach, organisations can achieve sustainable transformation that supports their business during transitions and enable them to continue to deliver long-term customer value, promote future-focused thinking and reduce risks associated with environmental and social issues which will be impacting their customers and market.