How to avoid ESG controversy

The bar is high for charities and non-profits to do what’s right. Having impact in the environmental, social, and governance (ESG) space is no exception.

 

Charities have been entangled across a number of ESG controversies, which harms their purpose, reputation and overall trust. Looking at some of the lessons learned, we suggest how to avoid criticism altogether.

 

 

ESG and financial scrutiny  

 

There’s the financial side which plays a pivotal role on ESG stance. With a substantial amount of monies set aside for investing, many charities make good financial decisions. However, returns aren’t always the bottom line.

 

Considering the cases of Church Commissioners of England and the Wellcome Trust, it’s generally better to confess non-alignment with ESG and rectify the situation, over ploughing ahead with non-ESG activities.

 

In 2021, the £10.3 billion endowment Church and Commissioners of England ditched oil and gas majors from its portfolio. Since, Church Commissioners have been selling off stocks in major oil companies including BP, Shell, Exxon Mobil because they don’t align with the Paris Climate Agreement. This active change in strategy is being seen as ahead of the pack.

 

Not all organisations are forthcoming. Published in a major medical journal The BMJ, the Wellcome Trust has been criticised falling foul of ESG. The endowment’s investments appear to harm the trust’s purpose, since fossil fuels are known to deteriorate human health.

 

Speaking to The BMJ, Robin Stott, from the UK Health Alliance on Climate Change says: “It worries me that Wellcome may be engaging in this kind of rather covert or oblique way of supporting the fossil fuel industries.”

 

 

Communicating the strategy

 

With so many different viewpoints on which ESG topics to address, having an overarching framework makes sense.

 

Getting ESG right is more than a box ticking exercise. To start, most charities are engaging with stakeholders, beneficiaries, and audiences to gauge what the priorities are. For example, Marie Curie’s dialogue with beneficiaries resulted in making sure that looking after nature is top of mind in their operations.

 

Others have followed suit and vocally communicated ESG policies.

 

The Florence Nightingale Foundation’s (FNF) ESG statement starts by outlining what each of the ESG letters means for the organisation and then maps out the five-year plan.

 

The ambition is to link up the foundation’s activities with select UN Sustainable Development Goals (SDGs). The charity iterates their five-year commitments, followed by how each of one falls under the SDGs.

 

The kicker is at the end of the statement. The FNF includes a table of actions, progress, and linkage to each SDG, showing audiences exactly what is being achieved.

 

Civil Society puts forward a compelling case to beef up on ESG. They found that organisations that really drove home ESG actions attracted more donations. Particularly, they noticed a spike in generosity for the Royal Shakespeare Company once the charity parted ways with BP.

 

Speaking to Civil Society, Hobby Dean from Sage Intacct summarises: “Lots of organisations, donors, funders and individuals, in general, are now contributing to organisations that have more of an ESG agenda. So it’s important that you think about the environment.”

 

 

Being transparent on ESG

 

Transparency and authenticity through communications on ESG builds donor trust. Issuing an impact report and announcing progress helps deflect criticism.

 

The importance of being transparent is paramount. RSM UK in the report ‘The rise of ESG – what does it mean for the charities sector?’ suggests that ESG is a driving factor to keeping stakeholders and donors onside.

 

Setting expectations, they also note that not all organisations have a standalone impact or ESG report. But, there is a link between larger charities and reporting on ESG – the larger the charity the more emphasis on it.

 

The lesson from the report is clear. ESG transparency helps retain donors and becomes more important as organisations grow.

 

 

Talking about ESG on social media

 

Active engagement on social media platforms is a valuable strategy for ESG communication and industry alignment. Use media outlets to not only showcase impact, but to call out issues in the wider sector.

 

Charities can also avoid greenwashing by making sure all communications about ESG are truthful, transparent, and substantiated.