ESG (short for environmental, social and governance) is a hot topic but what is it and do students' unions need an ESG strategy?
ESG is a set of standards used to help stakeholders understand an organisation's wider impact on the world, rather than measuring purely financial performance. ESG is well established in the investment and corporate worlds and we are now seeing it on the rise amongst the charity sector too.
The 'E' stands for environmental and relates to how an organisation interacts with and impacts on its surrounding environment, this includes things such as resource use and waste produced.
The 'S' stands for social and is concerned with how an organisation interacts with its stakeholders (for example its students, staff and trustees), as well as how it contributes to the wider society.
The 'G' stands for governance and relates to how an organisation is run and operates. This includes considerations such as whether your trustees know and understand their legal duties and how you engage with your students to ensure all of your stakeholders are engaged in a meaningful way.
One of the main difficulties with ESG is that there isn't a single framework that every organisation can use. Instead, there are several different elements and sets of standards that could fall under each of the E, S and G limbs, and various different reporting requirements, each of which apply to different sizes and types of organisation. As things stand, most of the compulsory reporting only applies to 'large' organisations and is unlikely to be relevant to most SUs. However, there are several reasons why SUs may want to think about adopting an ESG strategy, and reporting on it, even if there is currently no legal need to do so. These include:
- Reputation – an SU's reputation is a valuable asset and damage to reputation is sufficiently detrimental that the Charity Commission suggests it may warrant making a serious incident report (of course, depending on the nature and severity of the damage). Complying with ESG principles may help to improve an SU's reputation and conversely, ignoring or going against ESG principles may actively damage an SU's reputation.
- Staff and partnerships – a strong response to ESG issues may help an SU to attract staff and other partners as well as increasing the morale of the staff it already has.
- Cost – there may be cost efficiencies associated with some ESG activities, particularly those relating to the environment, for example reducing waste, energy efficiencies and the reduction in the consumption of other resources may actually save you money as well as being beneficial for the environment.
- Funding – If your University has adopted an ESG strategy, there might be pressure on your students' union to do the same thing in order to access funding. Additionally, if your SU receives any other grant funding, adopting an ESG strategy could make it more attractive to funders. We have found that grant givers are paying more and more attention to how charities conduct their work, not just what they do and we expect that organisations will increasingly need to demonstrate their ESG credentials to access pots of funding in the future.
Many SUs will already be carrying out activities which fall under the ESG umbrella but few, if any, appear to currently be reporting on this activity. Taking time to consider what you are already doing from an ESG perspective, where you would like to go with it in the future and then putting this together into a strategy can be a useful and rewarding way of engaging with your stakeholders.
When you are considering ESG factors in relation to your SU's activities it is crucial for your trustees to remember that everything the organisation does must be in furtherance of its charitable purposes for the public benefit and in line with the law and its own governing document. ESG considerations should not be a diversion or distraction from an SU's charitable purposes; instead they should be a way of helping the SU to achieve those purposes, in the most positive way possible. What this looks like will vary on a case by case basis and if in doubt, we would recommend that you take professional advice.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
