Charity, CSR, Sustainability, and ESG — what’s the difference?

Recently, the topic of sustainable development or sustainability has begun to appear increasingly often in communications on the market, but so far not only large corporations and the state, but even some media have paid insufficient attention to it.

In addition to low coverage in this topic, there are difficulties with terminology, which is not easy to understand even for “advanced users”, not to mention a wide audience.

In many, even large companies, such fundamentally different concepts as charity, CSR, Sustainable Development, and ESG are still mixed. It is no coincidence that I have arranged them in this order — this is how, according to many experts, this topic has historically developed.

Let’s start with charity. As a rule, this is an initiative of a company that is not directly related to the business and is often the decision of the founder, top management, or shareholders. This may be support for cultural projects or charitable foundations.

CSR (Corporate Social Responsibility) is the company’s responsibility for solving pressing social and environmental problems in areas directly related to the organization. Such activities are aimed at the implementation of internal and external social programs, which also have a positive effect on the company’s image.

Sustainable development is a more comprehensive term that involves the balanced development of all three aspects: society, ecology, and economy.

When we talk about sustainable development in the context of a business, we mean a company that has integrated these three aspects into its business processes and regulates them with specific principles and policies. The DNA of such companies is not only to minimize the negative impact of their activities but, more importantly, to increase the positive impact of the company’s activities.

A typical example is IKEA, which recently announced an investment to provide its stores with solar energy. What is important: this is the first example of investment in renewable energy sources by a non-energy company. That is, IKEA uses its assets to bring positive impact, and not to minimize its negative impact, as many do.

The last but not least term from our list is ESG (an abbreviation for Environmental, Social, Governance), which, although it is a concept that complements sustainable development, is not a synonym for it. ESG is a company’s sustainability reporting standard that is most commonly associated with risk management.

Therefore, most corporate brands in their dialogue with investors mention this particular term, because it is the most principal factor in the formation of an investment portfolio.

When we talk about a company’s sustainability strategy, we mean an organization’s understanding of how to best use its assets, processes, products, services, and innovations to achieve a sustainable future.

This happens due to the balanced development of all three aspects: society, ecology, and economy. Therefore, the term ESG is used more as a convenient format for dialogue with investors about how a company manages its business in terms of ESG, rather than strategy.

In addition to confusion in terminology, the concept of “sustainable development” has problems with translation or, rather, even with perception by audience, because many perceive the meaning literally — a connection with sustainable growth, and business.

Of course, we can try to find a better option by contacting the best philologists in the country, but, in my opinion, it would be more efficient to direct our efforts to popularize an already accepted and widely used term, so we will use it in the future.

Greenwashing, or what’s wrong with green?

From numerous studies, we know that the topic of sustainable development is especially sensitive to generations Y and Z, and this is already a solvent audience and a source of future talent in companies.

That is why we see so much greenwashing in almost all categories of interest to this audience: communications with “green slogans”, the predominance of green in design layouts, the use of “green lighthouses” in the form of leaves, trees, etc., behind which there are no real changes and concrete actions.

Consumers are already expecting more — according to the global study “Who cares, Who does 2020 Kantar”, 37.3% of respondents believe that brands should lead the way in improving the environmental agenda, while only 20% could give examples of such companies.

A separate topic is when brands fall into the trap of trying to break down their activities into 17 UN Sustainable Development Goals, without delving into their specifics and assuming that it is enough, for example, to have some kind of educational product for children in the portfolio and thus close Goal №5 and add the treasured square to the section “about the company”.

And yet, what’s wrong with green? It’s simple — it’s not about the “green identity”, but how exactly the sustainability agenda is integrated into your business and brand positioning.

How are companies integrating sustainability today?

We studied brands from dissimilar categories and countries and identified three main types of integration:

Type one. The brand is inextricably linked to the theme of sustainable development, and its brand mission coincides with the mission of activities in this direction.

The most striking examples of this type are brands for which the theme of sustainability is native, as for Patagonia, whose mission is based on this theme: “We are in business to save our native land.”

Another example is BP, which integrated the sustainability agenda into the DNA of the brand during its transformation: “Our goal is to reimagine energy for people and our planet. We want to help the world reach net zero and improve people’s lives.”

Type two. The sustainability mission may not be directly related to positioning, but it is organically integrated into values or principles, emotionally reinforcing the overall brand strategy.

For example, Mastercard promises its consumers Connecting Everyone to Priceless Possibilities, while the sustainability mission of Doing well by doing good enriches the brand platform.

These two types of integration make it possible to organically highlight the sustainability agenda in both corporate and product communications.

Type three. Most often found in companies whose mission is focused on rational benefits and is not related to sustainable development.

In this version, the sustainability mission goes as an addition to the brand platform and adds new emotional attributes to the image. Let’s take VTB as an example, whose strategy sounds like “helping people realize their plans by creating better financial solutions.”

In addition, the company has a position on sustainable development, which is as follows: “the result of the work of the group should be not only successful projects and profitable operations, but also a prosperous and harmonious society.” In this type of integration, the sustainable development agenda is more often covered in corporate communications.

The logical question is: which of these three types of integration is better? In fact, everything is individual and depends on the vision, as well as on how the company’s strategy and future are connected with the theme of sustainable development.

“Brand-led” Sustainability approach, or what is a “good brand”?

We start any branding project with a study of the company’s business strategy, ambitions, and objectives — to build a strong sustainable brand, it must be inextricably linked to the company’s business strategy.

“Brand-led” Sustainability is an approach in which the theme of sustainability is part of your brand’s DNA, that is, it is embedded directly in the brand’s mission. In this case, the brand guides and defines all the activities of the company and additionally helps to differentiate in the market.

The concept of “Brand-led” Sustainability can correspond to all three types of integration that I mentioned above, but for brands from approaches 1 and 2, the theme of sustainability is central. In these scenarios, both the portfolio of related initiatives and the overall brand communication all work to support the brand’s mission and sustainability focus.

That is, the deeper the theme is integrated into the brand, the less investment and effort will be required for additional communication of the agenda.

Finding the most appropriate scenario for integrating a theme into a brand and developing a sustainability mission is not an easy task. My main advice is to find a focus. Many brands use loud and rather global wording like “For the future of the planet”, but this can only work if it corresponds to your real actions and capabilities.

However, such a global message often remains only a declaration. Brands talk about the implementation of the UN sustainable development goals, but it is not enough to issue “bio-bags” with a slogan while continuing to print checks and not creating real changes here and now — in society, economy, and ecology.

We meet such a “green sea of ​​monotony” every day. Therefore, a focused promise, its activation in real actions, and only then communication is the way to become a truly “Good brand”.

In conclusion, I would like to note that the topic of sustainable development is global changes in what society and consumers expect from business and not just another trend.

Therefore, for branding, this topic is more than a response to the actual needs of the audience — it is the starting point for the transformation of the brand and the opportunity to differentiate not only by communications but by real actions that bring the brand promise to life.

illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.