ESG and CSR: Understanding the Differences and Their Relevance for Sustainable Business Strategy

Amid increasing pressure from regulators, investors, and consumers for more responsible business practices, the terms ESG and CSR are being mentioned more frequently.

However, did you know that although they may seem similar, ESG and CSR actually differ in their approach, objectives, and impact on business performance?

Many companies are still confused about the distinction between ESG and CSR, and even use the two interchangeably.

In fact, a proper understanding can unlock greater strategic opportunities in building a sustainable business.

This article will help you understand what ESG and CSR are, how they differ, and whether ESG can truly replace CSR.

We will also discuss why it is important for modern companies to start adopting an ESG approach and how you can find the right strategic training partner for this transformation.

 

What Is ESG?

In recent years, the concept of ESG (Environmental, Social, and Governance) has gained increasing attention in the global business landscape.

The PwC Global Investor ESG Survey 2024 shows that 94% of investors want companies to disclose ESG information in a format that can be compared globally.

This proves that ESG is not just a passing trend, but has become a key parameter in assessing business sustainability and resilience in the eyes of investors and stakeholders.

It is therefore unsurprising that companies that take ESG implementation seriously tend to demonstrate more stable long-term performance and stronger market reputations.

ESG is a framework used to evaluate the extent to which a company considers environmental, social, and governance aspects in its operational activities.

More broadly, ESG reflects a business approach that is not solely profit-oriented, but also takes into account long-term impacts on the planet and society.

ESG has now become a critical foundation for companies seeking sustainable transformation, particularly in the face of climate change, regulatory pressure, and increasingly ethics-conscious consumers.

1. Environmental

The environmental aspect of ESG refers to how companies manage their impact on ecosystems and the planet.

This includes issues such as carbon emissions, energy use, waste management, natural resource conservation, and biodiversity protection.

Companies that are proactive in this area typically undertake initiatives such as transitioning to renewable energy, adopting environmentally friendly production technologies, and designing products based on circular economy principles.

For example, manufacturing companies may set targets to reduce their carbon footprint by up to 50% within five years through energy efficiency initiatives and the use of recycled raw materials.

These actions not only help mitigate environmental risks, but also improve operational efficiency, reduce long-term costs, and strengthen the company’s reputation as a responsible industry player.

2. Social

The social component of ESG assesses how a company treats its human resources, including employees, local communities, consumers, and supply chains.

Key areas of focus include occupational health and safety, human rights, diversity and inclusion, talent development, and contributions to surrounding communities.

Companies that excel in social aspects tend to enjoy higher employee loyalty and more positive public relationships.

For instance, companies that implement inclusive parental leave policies, digital upskilling programs for employees, or provide access to healthcare services for surrounding communities demonstrate a strong commitment to sustainable social values.

In today’s era of information transparency, companies that neglect social aspects risk facing public pressure that can directly impact brand image and consumer trust.

3. Governance

Governance within ESG emphasizes the importance of integrity in corporate management.

This includes transparency in reporting, independent board structures, strong audit systems, risk management, anti-corruption practices, and compliance with applicable laws and regulations.

Good governance not only reflects professionalism, but also serves as an assurance that the company is managed fairly and ethically.

For example, companies that regularly publish ESG reports verified by third parties, enforce strict internal codes of conduct, and maintain secure and open whistleblowing systems are more likely to earn investor trust.

Strong governance is a critical foundation for accountability and long-term stability, particularly in navigating market uncertainty and legal challenges.

 

What Is CSR?

Corporate Social Responsibility (CSR) has long been the primary approach for companies to demonstrate concern for environmental and social issues.

According to the KPMG Survey of Sustainability Reporting 2024, more than 80% of large global companies still run CSR initiatives as social contributions that are separate from their core business activities.

However, amid the global shift toward long-term sustainability, CSR has come under scrutiny for being less strategic compared to more integrated approaches such as ESG.

Nevertheless, CSR remains relevant, especially for companies at the early stages of their sustainability journey, due to its flexible nature and direct impact on communities.

CSR refers to a company’s voluntary commitment to addressing the social and environmental impacts of its business operations.

Unlike ESG, which integrates sustainability into the core business model, CSR is more commonly manifested through philanthropic activities and standalone social initiatives.

Although CSR does not directly influence business decision-making, it plays an important role in building corporate image, strengthening community relationships, and generating public goodwill.

1. Community Social Programs

One of the most common elements of CSR is social programs aimed at improving the quality of life of surrounding communities.

These may include donation programs, disaster relief, construction of educational facilities, or the provision of free healthcare services.

Such programs are typically conducted periodically and managed by CSR divisions or in collaboration with non-profit organizations.

For example, many FMCG companies in Indonesia actively develop clean water facilities in rural areas or run nutrition programs for children.

While the impact is often local, these initiatives help enhance the company’s reputation as a socially responsible organization and directly support social development.

However, because such programs are rarely linked to core business activities, their long-term impact on business performance is often limited.

2. Environmental Awareness Initiatives

CSR is also commonly implemented through environmentally friendly activities.

These include tree planting, plastic reduction campaigns, recycling programs, and the use of biodegradable packaging.

The objective is to reduce the company’s negative environmental impact while raising environmental awareness among consumers and employees.

For instance, large retail companies may run “Bring Your Own Bag” campaigns and offer incentives to customers who bring reusable shopping bags.

Although these initiatives may be small in scale, they are effective in reinforcing brand values and demonstrating environmental concern.

The challenge is that without integration into core business strategy, such initiatives are often viewed as side projects that are easily abandoned when budgets are tightened.

3. Employee Volunteering

Many companies run CSR programs that involve employees as volunteers in social activities.

These may include beach clean-ups, teaching in underserved areas, or mentoring local MSME entrepreneurs.

In addition to generating direct social impact, such programs help strengthen internal solidarity and enhance employee engagement.

Employee involvement in social activities can also reinforce an inclusive and human-centered corporate culture.

However, these programs are typically episodic and not directly linked to the company’s long-term objectives.

This is one of the reasons why CSR is increasingly seen as needing to evolve into a more comprehensive approach like ESG, which emphasizes the integration of social values across all business functions.

 

Key Differences Between ESG and CSR

Although ESG and CSR are often equated due to their shared focus on sustainability, their approaches differ fundamentally.

Understanding these differences is crucial to ensuring that a company’s sustainability strategy is not merely symbolic, but delivers tangible business impact.

As regulatory and market pressure to adopt sustainable business principles increases, companies can no longer rely solely on CSR as their primary form of social responsibility.

ESG offers a more strategic, measurable, and globally relevant framework.

The following are the key differences between ESG and CSR that you need to understand:

1. Strategic Orientation

CSR is generally voluntary and focused on building corporate reputation.

Many organizations implement CSR programs to enhance public image, such as through donations or social campaigns.

However, these programs are often not directly linked to core strategy or key performance indicators.

In contrast, ESG adopts a far more strategic approach.

ESG is not merely a social project, but a long-term sustainability and risk management framework embedded in business decision-making.

Investors use ESG to assess a company’s resilience to environmental, social, and governance risks that may affect economic value.

2. Measurement and Reporting

One of the main challenges of CSR implementation is the lack of standardized reporting.

Many CSR programs do not have clear success indicators or structured reporting systems.

This makes impact measurement difficult and leaves CSR vulnerable to being perceived as unsustainable goodwill activities.

In contrast, ESG is supported by globally recognized reporting frameworks.

Standards such as GRI (Global Reporting Initiative), SASB (Sustainability Accounting Standards Board), and TCFD (Task Force on Climate-related Financial Disclosures) enable companies to produce sustainability reports that are comparable, verifiable, and externally assessed.

This makes ESG a credible communication tool for investors and regulators.

3. Time Horizon

CSR tends to focus on short-term impact, such as building relationships with local communities or improving public perception of the brand.

While this can be appropriate in certain situations, short-term approaches are often insufficient to address complex sustainability challenges.

ESG, on the other hand, emphasizes long-term sustainability.

By integrating environmental, social, and governance considerations into strategic planning, companies can mitigate future risks, create sustainable value, and ensure long-term business continuity.

4. Stakeholder Scope

CSR programs typically target the general public or local communities as a form of social contribution.

The primary focus is on external impact, often without active involvement from internal stakeholders such as investors or regulators.

ESG, by contrast, considers the interests of all parties within the business ecosystem, including investors, consumers, business partners, regulators, and employees.

This approach requires broader engagement in defining objectives, implementation, and impact evaluation.

 

Comparison Table: ESG vs CSR

Aspect	CSR	ESG
Strategic Orientation	Voluntary, focused on image and goodwill	Strategic, integrated with risk management and business strategy
Measurement & Reporting	No standardized reporting requirements	Follows global standards such as GRI, SASB, TCFD
Time Horizon	Short-term impact	Long-term sustainability
Stakeholders	Focus on the general public	Involves all stakeholders (investors, regulators, employees, etc.)

Understanding these differences will help you design a sustainability strategy that is more focused, measurable, and aligned with global expectations for responsible business.

 

Can ESG Replace CSR?

Many stakeholders ask whether ESG will replace CSR. The answer is: not entirely—but ESG can be seen as an evolution of CSR.

ESG carries forward the spirit of CSR—social and environmental responsibility—while elevating it to a more strategic, measurable, and integrated level.

CSR remains relevant as the foundation of corporate culture and values, but ESG provides a stronger framework for embedding sustainability into business strategy, decision-making, and investor reporting.

ESG transforms sustainability into a source of competitiveness, not just goodwill.

Global companies such as Unilever and Nestlé, as well as Indonesian companies like Bank BCA and Pertamina, have demonstrated how transitioning from CSR to ESG can create real business advantages.

They not only contribute socially, but also improve efficiency, reduce risk, and build long-term reputation.

 

Is It Time for You to Partner Strategically in ESG Implementation?

In a business world increasingly driven by transparency, accountability, and sustainability, developing an ESG strategy is no longer optional—it is essential.

Investors now prefer companies with clear, globally accountable ESG approaches.

This signals that ESG has moved beyond the traditional role of CSR to become a core framework for strategic decision-making.

ESG not only addresses reputational needs, but also creates long-term value by embedding sustainability across the entire business value chain.

If you want to lead your organization toward a more structured, strategic, and impactful sustainability journey, now is the time to equip yourself and your team with the right knowledge and capabilities.

Prasmul-eli presents ESG for Leaders: Lead The Change or Be Left Behind, a program designed for decision-makers who want to turn ESG into a competitive advantage.

Do not merely follow change—lead the transformation.
Register now and become a change leader in the era of sustainable business.