When we speak with companies and charities the phrase that keeps coming up is Environment, Social and Governance (ESG). It’s an important topic that isn’t going to go away, and it has the potential to be one of the most significant developments for corporate-charity partnerships in decades.
We start this blog with a definition of ESG and explain how it differs from Corporate Social Responsibility (CSR). We then share why it is important and we finish with recommendations on how companies and charities can seize the opportunity.
Definition of ESG
We like this definition from PwC, “ESG Is more than ticking boxes. It’s about making a difference – for your business and our world. Creating sustained outcomes that drive value and fuel growth, whilst strengthening our environment and societies.” So ESG is more than just targets and reporting, it’s a new way of running a business.
It’s also worth explaining what we mean by Governance (the G in ESG). As Forbes says, “it’s an internal structure of carefully planned rules, regulations, practices and processes – all of which have a direct correlation to how a company is managed and run.” Governance is about how a company interacts with its stakeholders, how it makes decisions and it’s also about accountability.
How does it differ from CSR?
CSR first started to emerge in the early 2000s. It usually looks like a policy that is shared on a company’s website. In our experience CSR is often bolted onto the side of a business. Also, the contributions made to society and the environment are often quite piecemeal. Indeed, it can be argued that CSR has failed to deliver for companies, for charities, for society and our planet.
ESG by contrast is more about delivery. It’s about making a positive impact on the environment and society and measuring it. Crucially it is also located at the strategic centre of a company.
Why is it important for corporate-charity partnerships?
In January 2022 the UK parliament passed laws that mean that ESG reporting is now mandatory for UK registered companies with over 500 employees and an annual revenue of more than £500million.
ESG isn’t just important for large companies, it’s also important for companies that seek to do business with them.
The reason why ESG is so important for corporate-charity partnerships is that these relationships provide the greatest opportunity for a company to make a positive contribution to the environment and society. Indeed, in our Hidden Opportunities research companies said that delivering ESG goals was the most important value they wanted from charity partnerships.
How can companies and charities seize the ESG opportunity
We recommend that companies and charities seize the ESG opportunity by building partnerships together based on shared purpose. Driving towards purpose is crucial, because it increases the likelihood of the partnership delivering strategic aims for both organisations.
We also recommend that both organisations take time to share and clarify their objectives from the start. It is very hard to deliverer goals that are not clearly defined from the start.
Lastly, we recommend that the company and the charity agree how they will measure the impact of the partnership. This should include the impact on the environment and society, but also the impact on the company’s and charity’s core objectives. The latter is crucial to justify continued investment in these partnerships.
ESG is an exciting and significant development for corporate-charity partnerships. It’s vital that both companies embrace it and seize this opportunity to build more ambitious, long-term partnerships that change our world.