The volume of environmental, social and governance (ESG) reporting has increased significantly in the private sector over the past few years, and the same expectation is now extending to charities. Charities are built on the principle of providing a public benefit – should this extend as far as ESG reporting?
To help understand how charities are currently reporting on their ESG performance, we have examined areas of ESG that are commonly disclosed in the annual reports and websites of 114 charities across England, Wales and Scotland.
The aim of this report is to look at how charities are communicating their engagement with ESG matters. This report can be used as a benchmarking tool to assess where your charity sits in terms of ESG reporting compared to others in the market.
23 per cent of charities did include a section referencing activity that falls under the ESG umbrella. These sections covered a range of topics demonstrating the breadth of opportunity for charities to engage with ESG.
In England and Wales 98 per cent of charities stated in their annual report that their organisation met public benefit requirements. There are two aspects of public benefit: the ‘public aspect’ and the ‘benefit aspect’. Recognition of ‘doing no harm’ fits firmly under the ‘public aspect’ and is directly linked to ESG considerations.
Just over a third of charities referenced a charity code. This indicates the emerging best practice, particularly for medium and larger sized charities. The Charity Governance Code is one example of codes/mechanisms that indirectly encourages charities to think about their approach to ESG.
Our Real Economy report found that 86 per cent of middle market business leaders were using ESG measures to evaluate their own business’s performance. What perhaps was more important was that 75 per cent were using ESG measures to evaluate other business’s performance. There is a growing expectation that organisations provide information on their ESG activity. Charities need to stay abreast of these expectations and start comprehensively reporting on ESG metrics.