Why is this relevant for charities?
Social change is core to charities mission and what they excel at, and this gives them an opportunity to be leaders in ESG. 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, influencing other organisations and sectors, which can improve social outcomes across the country.
“Ultimately, civil society has this role to be guardians of what is best in this economy, and a more just vision of the economy.”
Their own activities
Firstly, charities should first look to ensure that their own performance is up to scratch. As far as they can, they should reduce their environmental footprint and pursue better employment practices. This is both to bring about better outcomes, and to model what best practice looks like for other organisations.
Secondly, charities should identify ESG topics where their organisation has expertise and which is aligned with their mission, and bring this expertise to conversations with businesses and the investment sector. This expertise is valuable, and common complaints from those who do not invest in social programmes is that data and evidence is often about the social aspects of ESG.
What companies and charities should be reporting on, and how they should be reporting, is an area of debate in the ESG space. However, it is vital that accountability moves beyond simple financial measures. One promising move is the effort to make reporting more consistent through the likes of the International Sustainability Standards Board. However, the focus on reporting is disproportionate when compared to the amount of discussion that concrete actions get. It can also encourage a tick-box approach, where investors are immediately thinking ‘how can we look like we’re achieving the S’ rather than thinking more holistically about avoiding social harms in all their forms. Thoughtful reporting can of course spur thoughtful action, but you cannot have reporting in the absence of action.
If charities have assets, they can use them to achieve their mission by investing them at the ambitious end of the responsible investment spectrum. This should also apply to staff pensions and can be communicated as part of an employment offer to make the charity sector a more attractive place to work.
Charities can also bring their voice to debates at the AGMs of the companies they are invested in, co-file shareholder proposals, and finally speak up in policy forums or with parliamentarians and regulators who make the rules for financial institutions.
How they can influence businesses to consider social concerns
The charity sector is smaller than some, but has great influence and a key role to play in challenging other, bigger actors to do the right thing. ESG is a key framework which civil society can use to do this.
Companies are trying to balance the need to create profits with the desire to achieve social ends and to do so sustainably. Much of the focus is on getting companies to do ‘the right thing’, but there has been less of a focus on convincing companies that their bottom line will be affected in the long-term if they do not. One good example of this is how a good ESG strategy can support a company to attract and retain talent.
This focus on avoiding damage to the bottom line can also help tackle unrealistic expectations around what level of profit can be attained in the short term whilst pursuing ESG investments. It is not realistic to expect the best market returns consistently from ESG investments, and this can lead to best practice being undermined by those seeking higher returns. Seeing ESG instead as something to protect returns over the long-term could lead to better buy-in.
Where can charities look for inspiration?
There are many innovative examples of charities pushing companies to live up to their ESG commitments. One example was the Shareholder Commons, an NGO in the US which was concerned about the potential of antimicrobial resistance to make antibiotics ineffective. As battery farms are one of the most common uses of antibiotics around the world, the Shareholder Commons presented a shareholder proposal at McDonald’s annual stakeholder meeting to study and disclose the external environmental and public health costs of its meat supply chain.
Similarly, the Behind the Barcode Campaign was a successful movement to bring greater focus to companies supply chains and global footprint by Oxfam, grading different supermarkets practices on human rights and labour exploitation grounds.
Boots has had a successful 12 year partnership with Macmillan Cancer Support which has informed some of the company’s products and services and also contributed to training 4200 pharmacists to understand more about how to support people with a cancer diagnosis.
Another example from ShareAction’s experience is the living wage work, which is a partnership with the Living Wage Group. When the partnership began in 2010 there were two accredited living wage employers in the FTSE 100, now there are over 50. This has come about through the efforts of collaborating groups of investors writing to companies to push them to pay their workers a fairer salary. AGM questions have been a vital tool in this campaign, and AGMs are an underused occasion generally for those trying to influence companies. In ShareAction’s experience, questions at AGMs are very effective, particularly when asked politely. ShareAction has recently put forward a shareholder resolution at Sainsbury’s to become an accredited Living Wage employer, which will be voted on in the coming months. Another example is ShareAction’s work with Tesco to tackle obesity, which you can read more about here.