ESG

Evolving Environmental CSR for the 21st Century

Environmental CSR (corporate social responsibility) activities are often the first that spring to mind when we think about the concept of ethical corporate performance. As the idea of a corporate conscience emerged in response to rising customer concerns in the late 1970s, businesses recognised the benefit of undertaking activities to reduce their impact on the environment and promote the wellbeing of communities. The corporate social responsibility (CSR) movement gathered pace.

Half a century later and the world now faces multi-faceted interconnected threats — from escalating climate change and the global health crisis to social injustice and persistent inequality. Increasingly, corporations are judged on how they contribute to mitigating these threats; there is a strong demand from consumers and investors for meaningful, comparative data on how organisations are tackling issues such as climate change through CSR and environmental management.

In this complex ecosystem, is environmental CSR still an effective approach, or do we need a more objective and comprehensive measure of responsible corporate performance?

 

What Is Corporate Social Responsibility?

Corporate Social Responsibility (CSR) is a company’s acknowledgement that it has a duty to act ethically and responsibly towards the society in which it operates. It is recognition that the business’s mandate to exist derives from the community that supports it – whether that is through providing human resources, raw materials, a supply chain or indeed the consumer market for its products. It is based on the premise that a company should conduct its operations without negatively affecting the world and people around it; in fact, it should aim to have a net-positive impact.

Approaches vary widely depending on the size of a business and the industry it is in. Still, common CSR activities include charity support, employee volunteering, adopting ethical procurement policies and, crucially in today’s climate, environmental CSR.

 

What Is Environmental CSR?

Environmental CSR is a programme of actions undertaken by a company to reduce its impact on the planet’s ecosystem and increase its environmental sustainability. Standard environmental CSR activities include:

  • Recycling
  • Waste reduction
  • Reducing water consumption
  • Reducing energy use
  • Reducing plastic consumption
  • Using renewable energy providers
  • Reducing GHG emissions
  • Adopting sustainable transport policies

Any organisation may undertake these activities to improve environmental CSR performance. However, businesses must also look closely at those areas where their particular industry has disproportionately negative environmental effects.

Examples of environmental CSR initiatives in specific industries include Costa Coffee’s reusable cup incentive, which aims to reduce the waste coffee cups generated by the business by offering customers a 25p discount on their drink if they bring a reusable cup.

Similarly, in the printer industry, most major manufacturers run recycling programmes for toner cartridges, which are complex electronic waste. Empty cartridges are disassembled into component materials and added back into the product lifecycle.

In the fashion industry, a pair of jeans can take almost 10,000 litres of water to manufacture, an issue Outland Denim addresses by using innovative technology, including laser equipment, to cut down on the amount of water needed for washing and bleaching by up to 65 per cent.

These are all laudable initiatives and feature prominently in CSR reports of the organisations involved. There is no question that reducing consumption, cutting raw material use and tackling waste are all activities that responsible organisations should undertake. However, the limitation of environmental CSR – and CSR overall – lies in its often subjective, industry-specific nature.

Want to enhance your board’s environmental, social and governance performance? Discover how other UK boards are measuring their ESG efforts.

 

What Are the Limitations of Environmental CSR?

Take the printer industry as an example. How can consumers get the opportunity to compare the performance of a company that is vocal about running the most comprehensive toner recycling programme in the world with a less well-known competitor that has redesigned the printer to eliminate the use of toner cartridges altogether?

Similarly, there are a wealth of environmental standards and management frameworks that organisations can choose to adopt voluntarily. Still, these vary from sector to sector, and meaningful comparisons are difficult to make.

Uncertainty such as this can give rise to the phenomenon of corporate greenwashing, where organisations give a false impression of their environmental CSR credentials by emphasising areas of good or innovative performance while failing to acknowledge aspects where the company has negative impacts.

A further limitation of environmental CSR is that efforts can become siloed within organisations and industries. Without strategic oversight that links environmental activities to social responsibility and corporate governance priorities, the result can be piecemeal, with pockets of improvement in individual companies and industries. Without the accelerator effect, a more holistic, coordinated approach delivers.

 

ESG: the Evolution of Environmental CSR

What has become abundantly clear over the past decade is that individual efforts are not enough to affect change at the scale and speed needed to address the global challenges we face.

In 2015, the UN published its Sustainable Development Goals, a set of 17 goals that together form a “blueprint for peace and prosperity for people and planet”. If businesses worldwide align activities with these goals, they can generate that accelerating effect required to achieve them.

The broad scope of the goals means that environmental activities cannot be pursued in isolation. Many goals are directly associated with the environment, such as responsible consumption and production and climate action, but many are related to social justice, reducing inequalities and building sustainable communities. Businesses and their boards must now look at their activities across environmental, social and governance (ESG) and develop roadmaps to take the organisation forward.

Choosing the right metrics to monitor and manage has been a perpetual challenge in CSR due to a lack of agreement on standards and frameworks. Until recently, the problem extended into the discipline of ESG, with five competing frameworks and numerous independent ESG ratings organisations frequently disagreeing on which metrics really mattered. However, in August 2020, the World Economic Forum’s International Business Committee (IBC), together with the big four accountancy firms, published a set of 21 ESG metrics on which corporations should report to deliver a comprehensive and meaningful picture of their progress towards responsible corporate citizenship.

The metrics align with the SDGs and cover aspects from GHG emissions and water consumption reductions through diversity and inclusion among employees, board composition and the development of skills for the future. Together, they recognise the interdependent nature of business, people and the environment and underline the importance of strong governance and organisational purpose.

There is growing consensus and support for the IBC ESG metrics to monitor corporate progress and make objective comparisons between organisations. As such, it is a valuable exercise for businesses to start benchmarking where they stand on the various metrics. Some may already be monitored as part of the existing environmental CSR programme. Others may require establishing new infrastructure for data collection and reporting.

Monitoring and tracking progress against metrics can be digitally supported through tools such as Diligent’s ESG Solutions. It allows governance professionals critical oversight and access to timely, accurate data on the attainment of ESG goals.

As the corporate world steps up to do its duty in addressing the multi-faceted problems the world faces, it is time to evolve environmental CSR. We should roll it into a broader approach that allows business, investors and consumers to make informed decisions about the businesses they buy from and invest in.

Learn more about what your board can do to tackle environmental, social and governance issues with ESG Solutions.

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