CEO Blog: Environmental, Social & Governance (ESG)

Preeti Shetty - Upshot CEO

Welcome to our fourth CEO Blog!

We publish these quarterly, with our CEO Preeti Shetty giving her insights into challenges and opportunities in the third sector, deep diving into areas such as impact, digital & tech, sport & non-sport sectors and MEL (Monitoring, Evaluation & Learning) trends. 

In the fourth of these, Preeti talks about the concept of Environmental, Social & Governance (ESG) frameworks, breaking down what each element of it means with examples, as well as detailing how it is transitioning from the corporate world into the third sector. 

The term ESG has been coming up a lot in conversations lately. It's not a new term in the corporate world, it was first coined in 2004, but it seems to be cropping up more and more in the third sector as charities start to look to tap in more deeply to purposeful partnerships with companies and brands. 

So what is ESG? It stands for Environmental, Social & Governance and is a set of standards measuring a business' impact on society, the environment and how transparent and accountable it is. It is a framework that measures how businesses integrate environmental, social and governance practices into operations, as well as their business model, their imapct, and their sustainability. I will break down each of these below... 

The environmental aspect focuses on how the business minimises its impact on the environment. It covers the business's products/services, the supple chain and operations. 

Examples of environmental business practices include: 

  • Reducing energy use and trying to become a net zero organisation
  • Developing greener products and services
  • Switching to zero-waste products or sustainable packaging
  • Reducing carbon emissions
  • Encouraging recycling and managing your waste

The social aspect focuses on how a business impacts wider society and workplace culture. This covers all the ways companies interact with their employees and the communities in which they operate. 

Examples of social and ethical business practices include: 

  • Ensuring products are safe and customer data is secure
  • Preventing abuses within the supply chain, such as labour rights and modern slavery
  • Providing training and supporting health and safety, and wellbeing 
  • Promoting equality in the workforce with diversity and inclusivity policies 
  • Investing in local community projects, including funding and philanthorpy 

This is the area that Upshot could help measure and where we focus our efforts. 

Governance referes to the proccesses of decision-making, reporting and the logistics of running a business. It also looks at the business's ethical behaviours and its transparency with stakeholders about its activities. 

Examples of governance in practice: 

  • Accurate reporting to stakeholders on financial performance, business strategy and operations
  • Ensuring business leaders and managers are accountable for risk and performance management
  • Undertaking business ethically, such as preventing bribery
  • Ensuring diversity in any leadership team and being open about executive pay

So what does this have to do with charities and non-profits? Well charities are no stranger to scrutiny. Donors, stakeholders and service users alike want to know that a charity is operating in their best interests, with funds raised going to directly to help a cause. They also want to know that the charity they support is behaving responsibly. 

As charities, we have long been used to reporting on our social impact and we have some experience reporting on governance but that usually just covers Board make up and accountability. It is becoming increasingly important that we are able to go further and show our progress in all of the above areas. It is equally helpful when we use the same language as those we are looking to partner with, especially if they are familiar with the term ESG. 

Charities and non-profits often don't have a lot of control over supply chains and infrastructure they use but there are still many metrics that can be used to show you understand what ESG means to you. The current spotlight on ESG means that now is a key moment for charities and other organisations to consider their role in pushing for change to show how you can support the private sector in meeting their ESG ambitions. 

But important to note, charities who want to make use of ESG frameworks to work more closely with businesses need to make sure they have their own house in order. Make sure you pay the living wage, embed equality, diversity and inclusion in recruitment and organisational culture, and trying to tackle your own carbon footprint in whatever way you can. These are all inherently important, but also allow the charity sector to carve out a position from which it can lead and support others. 

Finally, how can we help? Well, we are the people that you already hopefully come to for your social impact. We are looking at ways to support on the governance and environmental impact but we have some brilliant partners who are experts in these areas that we can signpost you to. 

Look out for more information on this, as we will soon be incorporating how to build ESG metrics into your organisation as part of our More than a System workshops and services.