ESG, CSR, and Sustainability: Taming the Alphabet Soup Without Losing Your Shirt

Introduction

In today's business environment, terms like Corporate Social Responsibility (CSR), Environmental, Social, and Governance (ESG), and sustainability are often used interchangeably. This conflation creates confusion for companies trying to communicate their initiatives effectively and for stakeholders attempting to understand corporate commitments.

This article aims to clarify these three core concepts, trace their historical evolution, and provide guidance on using the right terminology for the right context, especially in light of recent politicization of certain terms.

The Evolution of Corporate Responsibility Terminology

CSR: The Traditional Approach

Corporate Social Responsibility emerged in the 1950s, with Howard Bowen's "Social Responsibilities of the Businessman" often cited as the seminal work that formalized the concept (Carroll, 1999). CSR represented the idea that businesses have obligations to society beyond profit-making.

For decades, CSR encompassed multiple dimensions including environmental responsibility, social welfare, ethical business practices, and community engagement. As Crane and Matten (2016) note in their definitive "Business Ethics" textbook, CSR historically operated as a separate function from core business operations, often housed within communications or public affairs departments.

The materiality concept—identifying which issues are most significant to stakeholders—was present in CSR, though less formalized than in later frameworks. According to Porter and Kramer's influential Harvard Business Review article (2006), CSR initiatives frequently lacked strategic integration with business operations, limiting their effectiveness and sustainability.

Sustainability: The Systems View

While CSR focused on corporate responsibility, sustainability emerged from environmental science, highlighted by the Brundtland Commission's famous 1987 definition: "development that meets the needs of the present without compromising the ability of future generations to meet their own needs."

Unlike CSR's corporate-centric view, sustainability took a systems perspective. As noted by sustainability scholar John Elkington (1997), who coined the "triple bottom line" concept, sustainability represented a fundamental reimagining of business within ecological and social systems.

Research from MIT Sloan's Sustainability Initiative indicates that companies embracing sustainability typically integrate these considerations into their core business strategy rather than treating them as add-on initiatives (Whelan & Fink, 2016).

ESG: The Investment Lens

ESG emerged in the 2000s, prominently featured in the United Nations' "Who Cares Wins" report (2004), which established the groundwork for the Principles for Responsible Investment (PRI). ESG was specifically designed as an investment framework, focusing on financially material environmental, social, and governance factors.

According to research from NYU Stern's Center for Sustainable Business, ESG represents a more rigorous, metrics-driven approach that helps investors assess risks and opportunities not captured by traditional financial analysis (Serafeim, 2020). The ESG framework also formalized materiality assessment, with organizations like the ISSB (IFRS Foundation) developing industry-specific standards for material issues.

Distinguishing the Concepts

While these terms overlap, they represent distinct approaches:

CSR emphasizes corporate ethics and responsibility through specific programs and initiatives. As Porter and Kramer observe, CSR often represents "a hodgepodge of uncoordinated activities disconnected from the company's strategy" that neither meaningfully impact society nor strengthen the company's long-term competitiveness.
Sustainability focuses on long-term business viability within environmental and social systems. Research from Eccles and Klimenko (Harvard Business Review, 2019) shows that truly sustainable business models require fundamental operational changes, not just initiatives.
ESG provides a reporting and evaluation framework designed primarily for investors. According to McKinsey's global survey on sustainability (2020), companies with high ESG ratings statistically outperform peers, demonstrating the financial relevance of these factors.

The Politicization of Terminology

Recent years have seen a politicization of certain terms, particularly ESG. As documented by Deloitte's ESG Executive Survey (2023), this has led many companies to adjust their communications while maintaining substantive commitments.

The backlash against ESG has complex roots, as analyzed by scholars at Oxford University's Smith School of Enterprise and the Environment. Some objections focus on perceived overreach by financial institutions, while others stem from broader political polarization (Caldecott, 2022).

Strategic Communication Guidance

For effective communication about corporate responsibility initiatives, consider:

Know your audience: Different stakeholders respond differently to terminology. Research from Boston Consulting Group shows that investors generally prefer ESG language, employees respond to purpose-driven messaging, and customers engage with concrete impact statements (BCG, 2022).
Focus on specificity: Rather than broad labels, communicate specific commitments and outcomes. MIT research indicates that specific claims generate more trust than general statements about being "sustainable" or "responsible" (Hoffman, 2021).
Align language with strategy: If your initiatives are primarily philanthropic, CSR may be appropriate. If you're focusing on fundamental business model changes, sustainability is more accurate. For investor communications, ESG frameworks remain valuable despite political headwinds.
Consider neutrality: Terms like "responsible business," "long-term value," and "resilience" often resonate across political divides. World Economic Forum research demonstrates that outcome-focused language generally avoids political pitfalls (WEF, 2022).

The Emerging Term: Impact

Now that we've clarified the distinctions between CSR, sustainability, and ESG, it's important to introduce a newer term that's gaining traction in the corporate responsibility landscape: Impact.

"Impact" has emerged as a framing device focusing on measurable outcomes rather than processes or compliance. The Global Impact Investing Network defines impact as "investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return."

Research from the Impact Management Project shows that impact language shifts the conversation from risk mitigation to value creation—a subtle but significant reframing that appeals across political divides (Impact Management Project, 2018).

What distinguishes "impact" from earlier terminology is its emphasis on measurable outcomes and positive contributions. The World Economic Forum's research on stakeholder capitalism (2020) indicates that impact language resonates with a broader audience than specialized ESG or CSR terminology.

As companies navigate the increasingly politicized terrain of corporate responsibility, "impact" offers a potential way forward that emphasizes results over frameworks, appealing to stakeholders across the political spectrum.

The concepts of CSR, sustainability, ESG, and now impact represent different approaches to understanding the relationship between business and society. Rather than a linear evolution where each term replaces the previous one, these concepts have developed in parallel, with overlapping purposes but distinct focuses.

By understanding these distinctions, companies can communicate more effectively and navigate an increasingly complex landscape. Rather than abandoning established frameworks in response to political pressure, businesses would do well to focus on clarity, specificity, and outcomes—using the right terms for the right contexts while maintaining substantive commitments to responsible business practices.

References

Carroll, A. B. (1999). Corporate social responsibility: Evolution of a definitional construct. Business & Society, 38(3), 268-295.

Crane, A., & Matten, D. (2016). Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press.

Elkington, J. (1997). Cannibals with forks: The triple bottom line of 21st century business. Capstone.

Porter, M. E., & Kramer, M. R. (2006). Strategy and society: The link between competitive advantage and corporate social responsibility. Harvard Business Review, 84(12), 78-92.

Whelan, T., & Fink, C. (2016). The comprehensive business case for sustainability. Harvard Business Review, 21, 2016.

United Nations Global Compact. (2004). Who Cares Wins: Connecting financial markets to a changing world.

Serafeim, G. (2020). Social-impact efforts that create real value. Harvard Business Review, 98(5), 38-48.

Impact Management Project. (2018). A guide to classifying the impact of an investment.

Eccles, R. G., & Klimenko, S. (2019). The investor revolution. Harvard Business Review, 97(3), 106-116.

McKinsey & Company. (2020). The ESG premium: New perspectives on value and performance.

World Economic Forum. (2020). Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation.

Deloitte. (2023). ESG Executive Survey: Navigating the evolving ESG landscape.

Caldecott, B. (2022). The anti-ESG backlash and its implications. Oxford Sustainable Finance Group, Smith School of Enterprise and the Environment.

Boston Consulting Group. (2022). The ESG communications divide: Effective stakeholder messaging.

Hoffman, A. J. (2021). Business, society, and the environment in the age of sustainability. Business & Society, 60(1), 7-29.

World Economic Forum. (2022). Stakeholder Capitalism Metrics Initiative: 2022 Progress Report.

ESG, CSR, and Sustainability: Taming the Alphabet Soup Without Losing Your Shirt—Or Your Impact