During the Association of Corporate Treasurers’ (ACT’s) Festival of Treasury Transformation, I had the pleasure of joining an esteemed panel of speakers to discuss whether the ESG phoenix will rise from the ashes of the current crisis. ACT policy and technical director James Winterton chaired the panel and asked whether, in the light of the imperative, to make a positive contribution to society and not just deliver profits for shareholders (spoken of by Larry Fink, chief executive of BlackRock, in his letter to global business leaders) the charitable sector can provide some useful lessons for businesses on how to achieve a positive social impact?
My short answer is ‘yes’, but charities do not have a monopoly; there are lessons that can flow in both directions as we all tackle a rapidly changing operating narrative, accelerated by recent history.
Hardwired into the DNA of charities is the legal obligation to deliver public benefit and to act in the public interest. We are a sector that has grown from tackling social injustice. The lens through which we are seen naturally requires us to carefully consider risk and reward because our sustainability has been more deeply connected to our relationships with our stakeholders and the trust and faith they have in our missions.
Over the years, lines between public and charity sectors have blurred. To me this is a good thing. Charities should not be seen as the only entities that can do good just as private enterprise should not be synonymous with wealth extraction. Nor should charity be used to wash away the sins of business. This demand to make a ‘positive social contribution’ applies to every aspect of our lives, and increasingly the focus for all the pillars of the economy is no longer on what we do, but why and how we do it.
Corporate social responsibility programmes have shifted from ‘add on’ to holistic consideration of social impact in the widest sense. The drivers to this ESG maturity lie in changes to the funding mix (from reliance on government grants and philanthropy to a more diversified income base spanning trading, investments, contracting and social investment) and movement in the political and economic landscape. Pressure to be efficient, effective, transparent and accountable increased; charities had to do more with less; and funders looked for ways to recycle funds and invest for impact. ESG considerations shifted from excluding things that run contrary to the mission and cause to the need to consider every aspect of our operations.
Recent past has increased the pace of change. During lockdown the people that mattered the most were the ones who had not traditionally had a platform: the lowest paid, the frontline and key workers. Inequalities in our society have been brought into sharp relief and movements like Black Lives Matter have gained support. People have started to assess what they value.
These tensions apply to all as we strive as a society to find our new normal; as the relationship between the sectors evolves; and as we balance values and value. Just as charity has had to embed its social value and mission into every aspect, so all sectors will be required to shift from overlaying ethical and social considerations to embedding them and challenge our thinking. What are the legacies we leave? What is the wider impact we have?
Charity stakeholders have expanded rapidly, aided by social media and a new generation of politically active citizens. It isn’t just those with whom charity has direct contact who wield influence. A third party who is not a user of our services, a donor to our cause or in any way related to it can have a negative impact on us often – aided by social media. The interest is not limited to our missions either. It can expand to broader issues: where our pension schemes invest, who we employ, where we work and the behaviour, practices and our selection of our supply chains. This impacts what we do, how we assess impact and what we report and disclose.
The charities that do well and are resilient in this changing landscape are the ones that are agile. Those who are able to anticipate where criticism might come from and take steps to remove the problem; who once challenged have an open mind that seeks to understand if they have fallen short of expectations and are willing to rethink choices – those who genuinely strive to balance values and value – who give equal consideration to why, what and how. Business is experiencing these societal shifts, too, and will have to respond. If we get this right as a society, we all benefit.
Caron Bradshaw is chief executive at the Charity Finance Group