The evolution of responsible business
The evolution of responsible business has led to the emergence of new business imperatives. Image: Unsplash/seanpollock
- Environmental, Social, Governance (ESG) has evolved via philanthropy and then corporate social responsibility (CSR), says a director of ESG.
- But the three are subtly different, he says, and gives an explainer on each.
- 96% of G250 companies currently report on sustainability or ESG matters.
- But the term will likely change in the future, to reflect our changing times.
During my two decades with a career in responsible business, I have seen it evolve from philanthropy to corporate social responsibility (CSR), and nowadays, what is more commonly known as Environmental, Social, Governance (ESG).
Some might argue that these are all just trending buzzwords for the same thing, but I think they’re all subtly different from each other, and it’s worth understanding where they come from to help inform your career direction. I’ve worked across the spectrum of responsible business, so here is a glimpse at the evolution and what I’ve learned along the way.
Where it all began: The philanthropic movement
When you think about philanthropy, Bill Gates, Warren Buffett, MacKenzie Scott, or a similar figure may come to mind. These are individuals who have amassed great fortune through business and decided to give some of it back to society. What they do forms a critical part of civil society. And through philanthropic work — often delivered and funded through foundations, trusts and NGOs — there remain plenty of job opportunities.
We can actually trace the concept as far back as the Victorian era, where companies such as the Carnegies, Cadbury’s, or the Tatas had owners that were philanthropically minded and concerned with their contribution to communities. But this type of philanthropy has started to fade in the modern era.
Community engagement through CSR
Next was CSR, which had its genesis in philanthropy, but is less paternalistic and focuses more on how a company engages and contributes back to the wellbeing of the communities in which it operates. Beyond simply caring for its employees, companies started looking for a benefit back to itself. Often, the motivator is reputation building, increasing its customer base or creating a talent pipeline.
“The movement from CSR to ESG reframes responsible business practices from a reputation building exercise to creating opportunities for business success.“
While I was at the BBC, we developed a range of CSR initiatives which included making our campus buildings more accessible to local communities, supporting citizen journalism, organizing employee volunteering and ensuring the corporation became less London-centric.
CSR remains an important component of being a responsible company and for many it can often be the starting point for a career. But the evolution of CSR to ESG presents significant and step-change. The movement from CSR to ESG reframes responsible business practices from a reputation building exercise to creating opportunities for business success including financial reward, long-term adaptation, market differentiation and others. This change is also a chance for new faces to jump into the career.
Reaching every part of a company with ESG
Many aspects of CSR and responsible business have become hygiene factors, basic table stakes requirements that without a company is likely to get called out but having them isn’t winning it any merits. Regulatory demands together with greater awareness amongst stakeholders such as customers, employees, suppliers, investors and public bodies have led businesses to realize they must take action and consider how to mitigate risk while driving value for stakeholders, society and the planet.
According to KPMG’s 2022 Survey of Sustainability Reporting, 96 percent of G250 companies report on sustainability or ESG matters. It’s clear that we are seeing the emergence of ESG as a business imperative. ESG takes a holistic approach to doing business. It’s about embedding responsible practice into a company’s strategy, operations, products and culture. It focuses not only on minimizing risk but also maximizing opportunities. In contrast, CSR is often managed and delivered by a dedicated team and rarely has a direct impact on a company's product/service or even business strategy. The focus is primarily on community engagement, environmental impact of offices and factories, and responsible employment practices.
“I have no doubt that something else will replace ESG in the future and I propose we ought to see this as a dynamic and iterative process where the changing is for the better."
ESG also signals to investors and other stakeholders that a company is taking these aspects seriously by measuring quantitatively, actually making changes in business processes and viewing the entire business through a responsible business lens. Put more simply, ESG is a set of commitments that deliver on a company’s purpose.
For example, at HubSpot, we believe that purpose is more than a buzzword — it powers everything that we do and is at the center of our ESG work. Establishing our clear purpose of building a company future generations would be proud of helps us navigate which initiatives stack up to our goals and ensure that we prioritize what matters most to our stakeholders and also where we can have the greatest impact.
More change is coming, and that’s a good thing
While some may find all this rather bureaucratic, especially with increasing regulation and compliance coming into force across most geographies, I see it as an opportunity. It means that wanting to build a career in responsible business isn’t restricted to the ESG department. You can now pursue careers in ethical marketing, sustainable design, carbon-friendly coding, carbon accounting or even circular economy engineering. ESG is part of everything.
The evolution over the past several years has transformed a once small philanthropy or CSR team to a management discipline where responsible business is prioritized across the entire company. Consequently, this expertise is needed now more than ever, and presents great opportunities for those seeking a purpose-led career.
All this said, we shouldn’t get too hung up on terminology. I have no doubt that something else will replace ESG in the future and I propose we ought to see this as a dynamic and iterative process where the changing is for the better.
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