The importance of ESG (Environmental, Social and Governance) in the Not for Profit sector

In their role as exemplars, the Not for Profit tend to lead the way in ESG best practices as it is in their own economic, social and environmental interests to do so. There are best practice standards where there is a joint commitment to ensuring all staff, beneficiaries and partners regardless of role, discipline & responsibility learn about climate change, social justice, and sustainability.

Put simply, ESG is a set of principles that enables organisations to optimise their primary activities within a sustainable framework. At one level, ESG may be represented by a carbon desktop (evaluating carbon emissions and putting in place mitigating actions – Scope 1 emissions). Another is the way that staff are valued, treated and supported.

These are not mutually exclusive, but rather inclusive and integral. In this short piece, we wish to raise the awareness and importance of Sustainability & ESG. There are numerous approaches however considering all institutional operations is key. These may include: assessing the organisation’s performance against basic metrics; reviewing current standards and best practices in what social and governance affairs are currently happening; developing an updated set of objectives to include renewed environment, social and governance goals that align with the strategic directions and strengths of the organisation.

Meeting environmental obligations is one of the most urgent challenges facing communities worldwide and the Not for Profit sector should be making similar contributions to positive social transformations relevant to global Sustainable Development Goals (SDGs), including those relevant to gender and social equality.

To manage those transformations successfully, you must ensure you have the right governance settings in place. Essentially, this requires an ESG framework that touches every aspect of the way an organisation is operated and optimised for a sustainable future – economic as well as environmentally, socially and in terms of its governance. We place equal emphasis on the ‘E’, the ‘S’ and the ‘G’ because our experience has demonstrated that the three elements are highly interconnected and mutually beneficial to each other’s objective gains.

Has your organisation created a basic framework that captures all the ESG work you think you do?

We call this an Integrated External Engagement Framework (IEEF); which in turn evaluates performance to create an ESG Plan (ESGP); Ask yourself the question: does your organisation have a robust model for implementing IEEF ESGP solutions with an effective return on investment and communications frameworks? If the answer to this question is ‘no’ then it is most likely that you are not optimising your organisation’s ESG potential, nor realising fully the benefits, including fiscal benefits, that a planned ESG programme can deliver.

Take your establishment’s operations for example. What is its carbon footprint? Does it optimise energy usage? Does it involve travel? If so, by what means? Are resources on line? What equipment is required? Where is that equipment sourced? How are you recording innovation?

Of course, that is only part of your ESG story. What commitments are you making with regards to inclusiveness, gender equality, fair and equal pay, minority groups, interaction with the local community, recognition and reward, whistle-blowing, personal development and the like? Again, how are you generating, applying and recording innovation? Your ESGP will place a framework around all of these components, ensuring that the organisation, framed through an ESG Plan, is simply a better place.

Although for many organisations, ESG will not yet be mandated, that is no reason for not following an ESG programme. In time, every commercial and non-commercial enterprise in the UK will be ESG mandated. Getting ahead now means ESG becomes your organisation’s norm before it becomes an organisational issue.

The starting point for ESG-compliant organisations is to establish a clear ESG vision with equally clear SMART ESG metrics and milestones.

At MHA we term our Sustainability and ESG suite of services ‘Dynamic ESG’. Why? Because ESG is a journey, not simply a single point achievement. As your organisation changes through its ESG commitments, so too will its ability to leverage its ESG programme further for the benefit of the organisation, its staff, its stakeholders, its supply chain and its users.

This article originally appeared in the June edition of Not for Profit eNews.