Environmental, Social and Governance (ESG) should be a major consideration for most organisations, and this is also true for the charity sector.
The concept allows charities to demonstrate their commitment to responsible practices and deliver long-term sustainable value. For example, by having a good ESG score and making their approach to sustainability clear, charities will be more likely to attract supporters and donors.
However, with the abundance of challenges that the sector is facing, prioritising sustainability can be a challenge for charities - and one that they simply do not have the time or resources to tackle.
After all, is it better for a charity to invest as much as possible in delivering its core objectives, or should it sacrifice a little efficiency in favour of sustainability?
Earlier this year, the Kreston UK Charities Report revealed that most charities will not be focusing more on ESG/sustainability in 2024. 40% of respondents said they will not be focusing more on sustainability, compared to 32% who said they will be.
What’s more, 28% of respondents stated this was not applicable to them, suggesting they do not have any processes or strategies in place to increase their sustainability.
With sustainability generally being seen as a priority among the public and other sectors, it’s surprising that so few charities will be focusing on sustainability this year. But is this a reflection of the other pressures charities are facing - such as funding shortages and pressures on income streams - which mean that sustainability is not a priority at present?
There are many benefits that charities can see as a result of implementing sustainable initiatives into their strategies, including attracting ESG-conscious donors, volunteers and trustees.
In today’s society, where the younger generation places such a heavy focus on sustainability, we’re seeing trends that suggest people won’t even interact with companies that are seen as unsustainable. So for charities, shouting about their green credentials can be a great way to show they align with the public’s values.
Charities can also benefit from better operational efficiency by implementing green initiatives. For example, by reducing waste and improving the energy efficiency of offices or charity shops, they can save money which can then be reinvested back into the charity to ensure they can continue providing vital services.
We all know that charities need reliable streams of income, and pressures on income streams are one of the biggest challenges in the sector, but charities can tackle this by promoting their sustainability. Lots of corporate organisations are turning to ESG investing to boost their own ESG scores, where they partner with and invest in conscientious charities that represent their values. So by promoting their sustainable initiatives, charities can attract like-minded investors and secure reliable sources of funding.
Whilst implementing sustainability seems like an obvious benefit for charities, it’s important to consider that it isn’t without its challenges.
As charities are often operating with limited resources, it can be very difficult to have the time and money to invest in sustainability. What’s more, when it comes to measuring the results of their efforts, it can be a complex process that requires the help of someone with ESG experience.
Charities need to be able to strike the right balance between adopting sustainability and continuing to provide their services. If too much time and money is put into making the charity more sustainable, then resources can be diverted away from their primary charitable work.
Sustainability doesn’t just relate to environmental matters - charities also need to make sure that they’re financially sustainable and this takes a lot of forward planning.
One element of this is strategy. By having a strategic plan in place that’s designed around the impact a charity wants to make, it will have clarity about what it’s trying to achieve and how it will do it. This can then be followed by business planning, which outlines objectives and activities, as well as what’s needed to achieve them.
Cost control is also key and, as charities grow, cost structures become more complex and challenging to manage. To ensure financial sustainability, there is a need to plan for regular costs and balance these with regular income.
If income is reduced, costs will need to be reduced too.
Cash flow is often a big challenge for charities too, so having a detailed financial plan will make cash flow management and cost control much easier.
A good place for charities to start when developing a sustainability strategy is the United Nations’ 17 Sustainable Development Goals.
Many charities, both across the UK and across the globe, are driven by these goals, which include things such as no poverty, zero hunger, gender equality and climate action.
By implementing a strategy that is based around these goals, charities can ensure they’re not only improving their own sustainability but also contributing to improving global sustainability.
If your charity is looking for expert advice, or you’d like to find out more about how we can support, get in touch with our charities team or seek advice from our sustainability champion, Sally-Anne Hurn.
