Spotlight on: ESG in non-profits
Nonprofits play a vitally important role in the wellbeing of our society. Whether it’s providing mental healthcare, housing the homeless, educating children or planting trees, we rely on nonprofits to make our communities better places to live. Given their already significant impact, do nonprofit organizations still need an ESG sustainability strategy as well? We think they do – and here’s why.
Nonprofits operate within the wider environmental, social and governance pressures faced by all organizations. They are accountable to donors, boards of directors and government funders, so transparency is vital. They employ people, whether paid or volunteers, and so must provide working conditions that meet the needs of the individuals that they support. They have an impact on the planet, and so need to consider their responsibility to minimize the environmental effects of their operations. The sustainability of the organization goes beyond its immediate purpose, and this can be understood and managed most effectively with a tailored strategy.
A more meaningful understanding of your cause
By adopting an ESG strategy, many nonprofits find that they are able to better understand, articulate and deliver on their cause. ESG can connect a nonprofit’s work with its broader community impact.
A number of nonprofits have adopted the United Nations Sustainable Development Goals as a framework for responding to their ESG obligations. A great example is the Prince’s Trust Canada. Their statement of purpose, A National Charity for Canada’s Sustainable Future, guides the organization’s approach from the top down, including its vision, mission and values. The Trust has a particular focus on SDG 8 (decent work and economic growth) and SDG 13 (climate action), integrating these to create employment opportunities for young people and veterans in environmentally sustainable industries. By adopting the SDGs, the Prince’s Trust has been able to embrace its cause more holistically.
Enhanced impact and purpose
In addition to providing operational clarity, adopting an ESG sustainability strategy can enhance a nonprofit’s impact and purpose. Organizations that use ESG as a guiding philosophy meet not only the needs of their particular cause, but also the needs of their stakeholders. For example, viewing a talent management strategy through a social sustainability lens can support decision making around benefits, who you recruit, and the training you provide. This can lead to stronger teams and reduced turnover, which in turn leads to better outcomes for the cause you are working towards. To take another example, focussing on sustainable governance (the ‘G’ in ESG) can provide a stronger sense of direction and role clarity for volunteer boards, equipping them to provide better guidance and oversight for the management team.
Improved partnership opportunities
A significant benefit of adopting an ESG strategy for nonprofits is the enhanced ability to align with potential partners. Corporations looking to support a nonprofit will seek to ensure that their chosen charitable partner aligns with the corporation’s purpose and values. A clearly articulated sustainability strategy can make it much easier to identify points of reciprocity, where both organizations can enhance each other’s goals. The result? More effective and enduring partner relationships.
Nonprofits play a critical role in the functioning of the societies in which they operate. While they may have a singular cause, their impact is much for far reaching, touching everything from employees and volunteers, to vendor and partner relationships, to the local environment and climate. By adopting an ESG framework, nonprofits can ensure that these impacts are as positive as those in their daily operations, enhancing their cause and their ability to contribute to it.
