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Charities and impact go hand-in-hand – so why should they think about ESG?

18th March 2024 By Luke Cross
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Given that charities have impact at their heart, you may well question why they should be thinking about environmental, social and governance (ESG).

The key to this comes down to understanding what ESG is for, and what it can do for you, your organisation and the people you serve – both internally and externally.

Going back around 20 years to when the term was coined, ESG was about managing risk and driving better business performance, and a way to channel investment towards contributing to the sustainable development of society as a whole.

In recent years it has become part and parcel of the discussions that businesses of all kinds are having with their funders, particularly as regulations in the financial services industry are asking more of the lenders and investors themselves on ESG factors.

Like any other business, charities need to be run well, and so much of what ESG starts with isn’t necessarily about impact – it’s about governance.

ESG is one tool through which you can measure and manage governance issues, along with environmental and social ones.

That means being able to demonstrate performance and progress in ESG areas, some of which you may already do well, others which you are committed to improving.

So where do you start with ESG? We see a number of essential building blocks.

First and foremost, it’s around defining what ESG means to your organisation – what you want to do, and your ESG objectives. It’s then about establishing your ESG priorities – what is it that is material to your business, and of the greatest importance to your stakeholders?

Communicating and engaging people across any organisation is critical, in order to secure ‘buy-in’ at all levels and in establishing who is going to co-own your ESG strategy.

ESG differs from CSR because ESG is unashamedly evidence-based, so ensuring you have data to back up your story is crucial – aligning with a framework that is best suited to your organisation, such as the UN Sustainable Development Goals, as a bare minimum. All of the above should provide the foundations for where you go next – whether that be around strategy, process, systems or reporting. The key to all this isn’t getting everything in place straight off the bat, but getting started on what is both a journey of discovery and improvement.