We are in an era that needs companies responsibly connected to our world more than companies that pursue mere profit. In that process, CSR (Corporate Social Responsibility) and ESG (Environment, Social, Governance) have gained prominence and are frequently mentioned, but as they are used similarly, they are often confused. The conflation of the two concepts does not stop at a simple misunderstanding of terminology. Failing to distinguish between them can lead to mistaking social contribution campaigns for sustainable management strategies, causing confusion in judging substantive performance. So what is the difference between the two terms? Let us confirm the concepts of CSR and ESG through two case studies.
CSR Completed Through Participation, Going Beyond One-Way Efforts
Coca-Cola has long faced criticism surrounding issues directly tied to its business structure. The point that approximately 150 liters of water are required, directly and indirectly, to produce a single 500ml bottle of beverage demonstrates that Coca-Cola’s water use issue falls within the domain of structural responsibility. Such issues surfaced as social conflict in the Plachimada region of India in the early 2000s. As agricultural damage including drinking water shortages caused by the factory’s excessive groundwater extraction came under scrutiny, the factory was eventually shut down in 2004.
Subsequently, Coca-Cola shifted its CSR strategy in the direction of strengthening its responsibility for water use. From 2007, it pursued the ‘Water Replenishment Project,’ aiming to return the total amount of water used in its global production processes to local communities. In South Korea as well, Coca-Cola has been carrying out water resource restoration activities since 2017, including dredging agricultural reservoirs, improving waterways, and forest cultivation, centered on areas with high water stress. In this way, CSR refers to activities in which companies voluntarily practice social responsibility — such as environmental protection and contribution to local communities — going beyond the mere pursuit of profit.
[Coca-Cola Wonderful Campaign © Coca-Cola Korea]
The specific methods and character of CSR have been undergoing repeated change in response to the demands of the era and society and the corporate environment. Whereas past CSR had a strong character of one-way corporate social contribution such as donations and sponsorship, recent CSR is expanding in the direction of directly supplementing and resolving the social and environmental impacts arising from corporate activities, as in the Coca-Cola case.
Coca-Cola’s ‘Wonderful (ON THE PL) Campaign,’ which began in 2020, is a case of participatory CSR designed so that consumers directly take part in the resource circulation process. It demonstrates the expanded direction of CSR in that it created a resource circulation structure through the proper segregation and collection of transparent PET bottles and led behavioral change by extending corporate responsibility to the participation of consumers and local communities.
Ultimately, CSR can be said to be the philosophical foundation for companies to practice responsible management in the long term, going beyond simply doing ‘good deeds’ for society. Through CSR, companies can build brand trust, instill pride and motivation in their members, and lay the foundation for sustainable management.
ESG: The Final Button for Sustainable Management
ESG is, literally, a standard for comprehensively judging the sustainability of a company by reflecting Environmental, Social, and Governance factors across management. If CSR is the philosophical foundation of the responsibility a company pursues, ESG can be seen as the concrete tool through which such philosophy is connected to actual management activities, decision-making, and evaluation indicators.
McDonald’s Korea is counted among the companies actively practicing ESG management under the slogan ‘What’s Good for the World Is Good for McDonald’s.’ The ‘Taste of Korea’ project utilizing domestic ingredients created a win-win structure through collaboration with local farms and contributed to promoting the value of regional specialties. Kim Hee-soo, the county governor of Jindo-gun which participated with the ‘Jindo Green Onion Burger,’ revealed that “if McDonald’s chose it, it is trustworthy,” and that purchase inquiries about various agricultural products have since continued. McDonald’s projects together with Korean farms were estimated to have created approximately KRW 61.7 billion in social and economic value from 2021 to 2024.
[McDonald’s Taste of Korea Project © McDonald’s Korea]
In this way, social responsibility activities no longer remain at the level of describing a company’s attitude. ESG, which was previously classified as non-financial performance, is now directly connected to corporate value and financial performance, and operates as a standard for investment and regulation. Accordingly, ESG has established itself as an obligation rather than an option, and the trend of its utilization as a core indicator of corporate growth is becoming clear.
In the end, while CSR presents the direction of the responsibilities and obligations that companies hold toward society, ESG functions as the standard for measuring and evaluating whether such responsibilities are actually leading to management activities and performance. When the two concepts are understood as existing in an organic relationship and utilized in the right places, companies can solidly practice sustainable management. Furthermore, it is companies that achieve a balanced integration of these two elements that will be able to position themselves as trusted future enterprises in the changing environment.
by Editor N