How to get ESG right in 2024

Environment, Social, and Governance (ESG) refers to standards surrounding an organisation’s environmental and social impacts and risks, including in relation to how the organisation is governed. It can include a range of issues:

 

• “Environment” includes energy use, waste production and management, resource needs, carbon emissions, deforestation, and understanding how severe weather and other climate risks will impact your organisation
• “Social” includes all relationships involved in the organisation as well as its reputation amongst people, communities, and other institutions it has contact with – including beneficiary needs, labour relations, employee wellbeing, human rights, and diversity, equality, and inclusion (EDI)
• “Governance” refers to the internal system adopted by the organisation to make effective decisions, operate lawfully, and meet the needs of its external stakeholders. This can include board diversity, executive pay, ethical investments, proactive (rather than reactive) decision-making, and transparency and dialogue with regulators

Following an increase in ESG reporting in the business world, it is increasingly expected that the charity sector will follow suit.

 

Research by accounting firm RSM describes a range of potential benefits to ESG reporting, from demonstrating value and responsibility funders, to contributing to requirements for bid proposals, helping attract the best talent and retention of staff, providing partnership opportunities, driving improvements in operational efficiencies, and building understanding of wider stakeholder needs.

 

The Charity Commission has also stated that charities provide a “wider benefit to society through their broad role…as distinct to their specific impacts on individuals”, warning charities against “mistakenly overlooking or even undermining [their] wider public benefit function…while focusing on the services [they] deliver”.

 

 

Problems with ESG in 2023

 

To provide help with ESG reporting, there are a range of frameworks available, often established by NGOs and governments. However regulation around E.S.G. reporting is, in 2023, still in its early stages, meaning there are no universally accepted standards for success.

 

At worst, this can make ESG reporting feel like an overwhelming and directionless task: in the private sector, EcoOnline found that 50% of business professionals regarded E.S.G. as a “box-ticking exercise”. Meanwhile, existing frameworks are often focused on investors, thus not explicitly addressing the reporting requirements of charities.

 

So, we at Charity Digital want to know: how can charities meaningfully address, and report upon, their wider environmental and social impact?

 

 

Recognise our unique position as charities

 

ESG is about understanding your organisation in context of the wider world, including its environmental and social impacts – and how the organisation’s governance makes decisions regarding the environment, society, and the law.

 

While private sector companies are having to develop a “new mindset” to help environmental and social issues in their work, charities are already one step ahead. As Amy Moore, Sustainability Manager at Marie Curie, stated in our 2023 ESG conference panel, charities are uniquely placed to embrace ESG because they are already purpose-driven by nature: “It’s our bread and butter”.

 

As part of their public benefit, charities are also legally required to ensure that harm resulting from their purpose (to people, property, or the environment) does not outweigh the benefits.

 

 

Listen to stakeholders and tackle connected issues

 

Although some charities may prefer not to use the term “ESG” to frame their reporting, the concept can still be useful for understanding the interconnectedness of different issues, and give the opportunity to tackle multiple areas at once, while listening to stakeholder priorities.

 

For example, Marie Curie’s beneficiaries communicated to the charity the importance of enjoying nature at the end of life and leaving behind a healthy planet for their loved ones. Because of this, the charity decided to take environmental action such as committing to reduce their carbon emissions to zero by 2050.

 

Another example is In Kind Direct, a charity which distributes customer products from manufacturers, retailers, and brands to other charitable organisations. Small charities told In Kind that it was hard to receive goods on wooden pallets, and In Kind also realised that using wooden pallets created higher emissions. So they made the decision to halve their use of the pallets.

 

Charities can use in-person interactions, informal feedback, surveys, and beneficiary feedback mechanisms to gauge priorities.

 

At our 2023 ESG panel, Charlotte Walshe, Partnerships and Impact Director at In Kind Direct, highlighted that charities are already employing frameworks that have synergy under the broader ESG umbrella. These include the Charity Governance Code, the UN Sustainable Development Goals, and EDI.

 

By focusing on stakeholder needs, tackling interconnected issues, and employing existing frameworks and standards used in the charity sector, charities can work towards a positive overall impact upon society and the environment.

 

 

Collaborate across teams

 

Sitting down with other teams in the charity can mean that interconnected issues are revealed and that actions are considered from a variety of angles. On our ESG panel, Moore recommended establishing existing areas of impact with other teams before identifying manageable steps for moving forward.

 

Panellists advised that donor buy-in and staff wellbeing were good ways to open up the conversation with other teams and communicate the value of ESG for your charity. As you see progress, it’s also a great idea to report on what has been achieved to keep the team inspired.

 

On our panel, Walshe recommended taking action as soon as possible rather than waiting for the perfect strategy to be written. Whether it’s reducing printing, switching to fairtrade tea and coffee in the office, or encouraging staff to use public transport, taking small steps can get the ball rolling.

 

But the ultimate goal should be for ESG to be integrated into all decision making, from ensuring the sustainability of new suppliers to striving for equality in your recruitment processes.

 

 

Learn from others

 

While R.S.M. found that out of 114 charity reports and websites, zero included a section specifically labelled “ESG”, 23% did include a section referencing an activity that falls under the E.S.G. umbrella. For example, it is a legal requirement for charities who have a £36 million turnover from business activities to issue an annual modern slavery statement.

 

Nick Sladden and Carys Tetlaw from RSM advise looking at how other charities are “meaningfully reporting on ESG, or relevant topics with an ESG-like approach – for example towards managing climate change in operations, or diversity pay gaps”.

 

Some examples of charity ESG policies and statements are Cancer Research U.K. and Place2Be.

 

Charities such as Barnardo’s, The Prince’s Trust, and Great Ormand Street Hospital have released reports on diversity pay gaps. We have also compiled a list of environmental policies, statements, templates, and strategies, which may be useful to writing your own. Our interview with Charlotte Walshe also highlights how digital tools are being used to streamline work around ESG.

 

 

Report to all stakeholders, and then keep going

 

Remember to report your policies and achievements to all stakeholders so they can see the great work you’re doing to have a more positive environmental and social impact. This can be in an annual report which is accessible on your website for service users, staff, supporters, and the public.

 

But recognise that the good work doesn’t end there. What can you do next to maximise your positive impact through the lens of ESG?