ESG (Environmental, Social, and Governance) is Everywhere. Should It Matter to Nonprofits?

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For Blue Avocado by Jennifer Hawkins on February 13, 2023

Article In Brief:

  • The Problem: More and more corporations are developing environmental, social, and governance (ESG) strategies. As we have seen from past regulatory and reporting changes in the for-profit sector, the increasing focus on ESG will inevitably impact the nonprofit sector as well. The time for preparation and action is now.
  • The Context: Stakeholder demands are influencing organizations to map out how sustainability and broader environmental, social, and governance issues factor into their operations. To ensure nonprofits have public support and resources to meet their goals, sector leaders must be able to show how we are caring for our communities, our workforce, and the planet while we carry out our mission.
  • The Solution: Although there are questions about the true impact of ESG, nonprofits can still learn from the for-profit sector’s efforts on ESG and begin to think about how these corporate strategies can apply to their work as well. Borrowing from the experience of the American Red Cross, the author presents four tips for nonprofits to start thinking about ESG.

What is ESG?

Environmental, Social, and Governance (ESG) is a framework used primarily in the corporate sector to measure sustainability; however, this measurement of sustainability not only relates to the environment but also the ethics of the business. [1]

  • Environmental refers to factors that impact the environment, such as carbon emissions, waste reduction, and a more sustainable supply chain.
  • Social focuses on the organization’s relationship with its stakeholders. It can include issues such as ensuring the diversity, equal opportunity, and non-discrimination of the workforce as well as delivering services equitably, safeguarding workforce health and safety, and increasing the use of diverse suppliers.
  • Governance tracks how well the organization is led through progress in the areas of board diversity, risk management, data responsibility, and compliance and ethics.

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