What is Corporate Social Responsibility?
Corporate Social Responsibility (CSR) is how companies describe their efforts to operate in an ethical and socially responsible way. In the past, this mostly referred to philanthropic and volunteering activities, but now refers more to specific business activities and how these should be carried out 'sustainably'. This means how their long-term impacts can be taken into account, not only on the bottom line, but also on people and on the planet itself.
What is the difference between CSR and sustainability?
CSR is about companies giving away money, or ‘giving back’, through volunteering or philanthropy, whereas sustainability is about how companies make that money in the first place. It’s about integrating Environmental, Social and governance considerations into everyday business decisions.
If a bank were to align its portfolio to the Paris agreement and commit to Net Zero, this would be a Sustainability activity. If bank employees were to volunteer for a day to clean up a beach or plant some trees, then this could be a CSR activity.
While CSR is an activity which usually runs in parallel to a business, Sustainability has its place at the very core of the business; it is a strategic approach. Sustainability is about delivering business in a way that maximises not only commercial, but also social and environmental performance.
Understand the key sustainability trends in financial service industry
Financial institutions are at the heart of the transition to a low carbon economy and they will continue to experience increasing pressure to demonstrate resilience to climate change. Biodiversity loss and the use of natural resources will affect and are affected by financial institutions and should understandably also be addressed as part of a sustainability strategy.
The global pandemic has brought the well-being of people to the heart of business. Ensuring that employees are well looked after, not only from a remuneration perspective, but also from a mental health and overall wellbeing point of view is key. The 'black lives matter' movement has reminded everyone the importance of the Diversity & Inclusion agenda, and how the definition of 'diverse' goes far beyond traditional gender diversity to also include ethnicity, age, sexuality, disability and background to name a few.
The use of digital technology in financial services offers many opportunities for financial inclusion, accessibility and growth, but it does also expose institutions to cyber security and data privacy risks, fraud and scams. Both the positive and negative aspects of this must be carefully thought about. Financial crime is another theme that will likely appear in most materiality matrices in the sector.
