From PR to Performance: How ESG and CSR Play Different Roles in Business Success

I was recently at an event with some ESG and Sustainability “leaders” who shard the view that ESG was CSR evolved or CSR 2.0. Of course, I was the lone standout strongly dissenting from this opinion.

Don’t get me wrong, I love CSR (Corporate Social Responsibility) and working with teams to enhance and optimize their strategy to ensure they are making true impact, as it has a significant role to play in a company’s marketing and employee engagement. And CSR teams are fun to work with. If you’re not clear on what I’m talking about, CSR is your company’s fun-run. The photo-ops. The day off for employees to volunteer. The company branding on the 5k walk t-shirts. The “we-care” page showing smiling employees wearing branded tees helping people in your community on your website. And there’s nothing wrong with that. CSR is important when done well.

But let’s not confuse it with ESG, Environmental/Social/Governance strategy.

If you think ESG is just CSR 2.0, you’re doing ESG wrong, and possibly putting your business at risk.

CSR has roots that trace back to the 1950s. One of the earliest mentions was by economist Howard Bowen in 1953, in Social Responsibilities of the Businessman, where he argued that large corporations have responsibilities beyond just making profits.

In the decades that followed, especially in the 1970s and 80s, CSR became a way for companies to show goodwill. The goal? Build brand image, keep employees happy, and avoid public backlash. And often, it worked. CSR was never meant to transform a business. It was meant to polish it.

By the early 2000s, CSR had become the default way companies signaled virtue. But it stayed surface-level. You could pump toxic sludge into a river on Monday and sponsor a local arts festival on Friday. There were no rules. Just vibes.

However, Environmental, Social, and Governance (ESG) criteria didn’t emerge from PR. It came from investment strategy. The term “ESG” first appeared in a 2004 report commissioned by the UN titled Who Cares Wins. It was a call to integrate environmental, social, and governance factors into financial markets, not because it looked good, but because it made financial sense.

ESG isn’t about donating to a cause. It’s about how your business runs. How many resources you waste. Whether your supply chain is stable. If your governance protects shareholder value. If your data privacy practices can survive a subpoena. It’s based on actual data, solid decision-making and continuous improvement. ESG is risk management and long-term strategy rolled into one.

And the market’s paying attention. A 2023 PwC report found that over 80% of institutional investors believe ESG factors are important in investment decision-making. BlackRock, State Street, and Vanguard have all leaned heavily into ESG for the simple reason that not focusing on ESG is bad business.

And let’s talk about the “E” in ESG, environmental impact, because it’s no longer optional.

Climate risk is now seen as financial risk. EU regulators are mandating corporate climate disclosures. Several US states are also moving in this direction. Insurers are pulling out of markets where wildfires, floods, or extreme heat are driving losses. If your business hasn’t stress-tested its climate vulnerabilities, you’re not managing risk, you’re flying blind.

A McKinsey report found that companies with strong climate strategies have a 21% higher valuation premium compared to peers with weak or no climate plans. Meanwhile, energy-efficient operations and circular design aren't just good for the planet, they cut costs and boost margins.

Even in the challenging environment we (in the US) are in today, the International Sustainability Standards Board (ISSB) standards that form the basis of a consistent sustainability disclosure framework have been adopted or are being adopted in over 35 countries from Australia to Pakistan to Canada to Ghana. Attention to ESG continues to move forward, despite the dissention from some powers that be.

Even though its continually proven that a strong and authentic ESG strategy optimizes a business, many companies still think ESG is just a checkbox. Here’s what it looks like when it’s done right:

• Ørsted (formerly Danish Oil and Natural Gas) transitioned from fossil fuels to renewables over a decade. Despite exiting its core fossil fuel business, Ørsted's operating profit nearly doubled between 2007 and 2020, with 98% of that profit coming from renewables.

• Patagonia, long seen as an ESG gold standard, continues to grow profitably while embedding sustainability in every layer of its supply chain and culture. When it converted to a trust to fight climate change, customers and talent responded positively—cementing its brand loyalty and resilience.

• PepsiCo saved $60 million annually by reducing water and energy use across its manufacturing operations—an ESG move with direct bottom-line impact.

• UPS aggressively invested in fleet electrification, fuel efficiency, route optimization AI, and emissions transparency which helped save over $400 million in fuel costs while cutting millions of metric tons of CO₂, improving both operating margins and ESG ratings, which in turn improved their attractiveness to institutional investors.

Don’t get me wrong, CSR still matters.

• Employees love it. CSR improves morale and retention, especially among younger workers who want to feel that their company has a purpose.

• Communities appreciate it. Local giving and volunteering build goodwill and soften the blow when your trucks clog traffic or your new office park changes the skyline.

• It’s a PR win. There's no shame in showing you care, as long as it’s not trying to cover up known negative issues (child labor, chemical spills or discrimination) or be a substitute for real change.

But CSR should NEVER be mistaken for ESG. When companies confuse the two, or worse, pretend their CSR efforts are ESG. That’s not just lazy, it’s dangerous. You risk regulatory scrutiny, greenwashing accusations, and shareholder backlash.

You don’t “do ESG” by planting trees. You do it by redesigning your operations to cut emissions. You don’t check the “S” box by sponsoring a diversity panel. You do it by closing your pay equity gap and auditing your hiring process.

The smart play is to do both, but know the difference.

Again, CSR is culture. ESG is strategy. Done right, they reinforce each other. CSR builds trust. ESG builds resilience.

But confuse the two, and your ESG becomes a hollow shell, just another marketing campaign in disguise. And in today’s business climate, that’s not going to fly. Regulators are circling. Investors are watching. Consumers are getting smarter and companies are getting fined for greenwashing. For real!

· Coca-Cola (2024): Coca-Cola faced a US$ 5M penalty for representing itself as “sustainable and environmentally friendly”, as it was found that a substantial amount of its packaging material was not recyclable. Inquiries revealed that the company is one of the largest contributors to plastic pollution.

· H&M (2024) H&M was fined US$ 3M for using the term “conscious”. The fast-fashion industry is well known for its environmental impact, resulting in some degree of greenwashing, but H&M falsely claimed that some of its products were “eco-friendly”, when it was not the case: 90% of its marketing claims were false. The company has agreed to improve its supply-chain processes and to be transparent in its disclosures, especially those relating to the use of sustainable materials.

· BP (2024) BP was fined US$15M for misleading comments about its green energy funding. Despite the company's strong green energy pledges, a sizeable amount of its funding went to fossil fuel initiatives. In addition to calling for more transparency on how it allocated its investments between fossil fuels and green energy, the penalty sought to hold it responsible for deceiving stakeholders.

· Nestlé (2024) Nestlé faced a US$7M penalty for making false representations about the ethical source of palm oil, a crucial component of several products. Even though the business claimed to acquire palm oil ethically, audits found serious flaws in its supply-chain procedures. In an effort to correct this misunderstanding, Nestlé was fined and forced to enhance its sustainability procedures and pledge to report on its sourcing processes in a more open manner.

If you’re a business leader, don’t ditch CSR, but don’t pretend it’s your ESG strategy. Build your ESG strategy like your future depends on it, because it does. And if you can make people feel good by creating a powerful CSR program as well, why not? That’s just smart leadership.