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From CSR to ESG: from pie-in-the-sky goodwill to a compelling belief in sustainability

In the business world, it is increasingly accepted and even required by EU legislation that there is life beyond profit, and that companies must not only take action on CSR through specific programmes, but also have a sustainability (ESG) strategy. What does this thinking mean in terms of organisational culture and practice? And why CSR/ESG is not a fad, writes HR expert Tamás István Papp.

ESG, CSR, fenntarthatóság-

Back in the summer of 2019, on the "eve" of the Covid-19 crash, the Business Roundtable of top US business leaders effectively challenged the decades-old economic paradigm that a company's responsibility is solely to its shareholders/owners - short-term, growth-driven and profit-maximising. At the time, that statement seemed more like a marketing communications PR blitz on the markets, but it seems that since then, partly and presumably in no small part due to the pandemic, something has started to change and CSR thinking is increasingly being translated into ESG strategy, i.e. companies, companies, institutions and work communities are starting to act not only in the interests of their investors, but also in the interests of their employees, their natural and social environment and even their suppliers, in order to ensure their long-term sustainability and viability.



This was also the conclusion reached in the midst of the economic crisis caused by the Crown Crisis by, among others, Fidelity Investment, one of the world's largest asset managers and financial investment groups, which came to this noble conclusion not as a result of some divine epiphany, of course, but as a result of their 'in-house' research, that of their 2,689 companies, the best ESG-rated companies performed 3.8% better than the benchmark index, while the lowest-rated companies performed 7.8% worse (ESG ratings are a measure of the perception of sustainability-related activities, the practice of environmental impact assessment in the organisation, the management of social issues, the decision-making mechanisms of top management, etc.).

).

But last December (with a delay of about half a decade, since the EU did it already in 2021...) the Hungarian Parliament also adopted the Hungarian ESG legislation to promote sustainable, environmentally conscious, socially and socially responsible corporate governance. It is true that the law, which has been in force in Hungary since January this year, is still only a framework legislation and is being continuously updated with detailed rules, but large companies already have reporting obligations this year on their sustainability risks and related corporate practices, results and performance.



Well, well, many may ask, but what the heck is CSR or ESG, and what does either have to do with HR anyway?



I don't want to sound like someone who preaches condescending sermons or preaching(p)olations from Olympic heights, but if one is a haredi, it has nothing to do directly or indirectly with CSR ('Ccorporate Ssocial Responsibility'), or ESG ('Environmental-Ssocial-Governance'), then presumably your employer is not very close to the concept of corporate responsibility, the idea of long-term sustainability, and thus sustainable management, economic operation, and even sound, competitive (including labour) market practices, because successful CSR or ESG can only be truly achieved through the internal culture of the working community of an organisation that is committed to it, which is, needless to say, an HR area.



At the same time, in all walks of life, be it economic, culinary, manufacturing, medical, human resource management, IT, political, sociological, or even scientific and fantastic, we somehow like to throw around three-letter acronyms: ABS, VAT, BPR, CEO, CIA, CRM, DNS, EHS, EVA, FBI, FTE, SME, KPI, LSD, MRI, MTA, NAV, SCI(-fi), SAP, SLA, TÉR, VBK, STB., and the vast, highly diverse and increasingly fashionable subject of liability is no exception. But while CSR was in the spotlight - with a not-so-PR flavour - in the run-up to the 2007-2010 crisis, during and after the pandemic, so were such strengthening themes as 'reduced and/or flexible working hours', 'digital switchover', the 'gig economy', 'hybrid working', 'home office employment', 'skills-based work organisation', 'fear of artificial intelligence', 'platform working', or 'teleworking', the triple acronym ESG is increasingly dominating, ensuring continuity but also indicating some shifting and broadening of focus in the overlapping but also large common intersection of these two three-letter acronyms (CSR/ESG).



Both CSR and ESG are about social responsibility, corporate sustainability, and ethical (to whomever that means in business...) focuses on business practices, but while CSR focuses primarily on the direct social impact of corporate activities, and on initiating and managing it, and seeks to ensure that companies, enterprises, institutions, work communities have a positive impact on society, and not least that this is reflected in their communication with stakeholders (creating a positive image of the CSR actor), for example



- donations;



- benefiting;



- charitable activities;



- volunteer work, mostly social or environmental (e.g.: forestry)



resultantly, the scope of ESG is much broader and includes, moreover in a more or less objectively measurable framework, the environmental, social and governance potential impacts of virtually all core business processes and activities - including of course HR (!) - together with the sustainability of business performance and its risks, as (to list the harer practices I have seen, experienced and operated in practice here):



- (tobacco)smoke-free working environment;



- reducing the ecological footprint of the workplace;



- family/maternity/health-friendly workplace;



-- DEI (oops, another three-letter word) approach: Diversity-Equity-Inclusion;



- Dual (vocational) training - both at secondary and tertiary level;



---- health and occupational health (e.g.: regular annual screening, organisation of health days, purchase and installation of defibrillators);



- equality of opportunity, including the preparation of an equal opportunities plan;

-equality of opportunity

-- implementation of waste reduction programmes (e-signature sheet, e-leave registration and authorisation, e-salary, etc.);



- creation of professional (covered!) bicycle storage facilities inside fences;



- consistent operation of two-way internal communication channels;



- using environmentally friendly office supplies - and mondju toilet paper - even if they are more expensive;



- encourage public transport and/or cycling and/or e- scooters to work;



--Promoting employment for people with disabilities (not forgetting accessibility!!!);



- mental health and psychosomatic assessments;



- workplace risk assessment: strict but high level of work (co)protection (e.g.: internal first aid training);



--work-life balance initiatives (this could include, for example, flexible/short-time working and/or teleworking options);



- employer engagement-enhancement towards their employees;



- participation (inclusive decision-making);



- positive discrimination;



- selective waste collection and recycling;



- establishment or provision of a company nursery/childcare;



- water and energy efficiency measures, reduction of consumption, switch to renewable/alternative energy use;



- introducing well-being programmes;



- green ergonomics;



As a result, such an eye on sustainability and self-responsibility, pursuing CSR/ESG strategies and practices (even if they don't spell it out in three letters...), are more likely to build working communities, run organisations and lead businesses to success that are not only more robust, resilient or even flexible in times of crisis, but also more 'viable' - if there is such a thing in today's fast-moving world - in the normal course of business.



In conclusion, CSR/ESG is not some kind of gentlemanly fad or a luxury for the richest multinationals, but, beyond being a now regulated obligation, it is also an unavoidable long-term survival, or rather sustainability strategy, driven by social and economic challenges never seen before, or at least not since (see, (e.g. successive economic crises, business crises), and the search for and application of new - and in some cases truly unprecedented - business-economic-management solutions - based on the deep conviction and proactive attitude of the staff!



Well, if it's still a question, that's where HR comes in, because you just have to somehow steer (governance!) that working company, sorry, working community, towards the latter, right...



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