ESG, or "Environmental, Social, and Governance," is quickly emerging as the de facto dataset for assessing a corporation's sustainable and ethical business practices. Examples include a company’s energy consumption, it’s commitment to conserving natural resources, production and handling of waste, accounting controls and processes, and how it avoids conflicts of interest with suppliers.
Investors have discovered a connection between corporations with positive ESG practices and their long-term viability. Consumers and investors alike are becoming increasingly reluctant to invest in businesses they consider unethical or unsustainable. And, as socially-conscious investing grows in popularity, ESG data enables everyone to take a more holistic look at a corporation's operational policies and practices.
But it’s the S in ESG that will be of most interest to CSR departments and corporate foundations. Social refers to the socially-driven activities in which companies engage with society, historically focusing on diversity and inclusion, human rights, and employee well-being. But that definition quickly evolved to include the many ways corporations contribute to society through their giving programs including cash donations, in-kind product donations, and pro-bono services such as volunteerism.
And the definition is being expanded even further.
The Committee for Encouraging Corporate Philanthropy (CECP) just published a study titled “What Counts: The S in ESG” that further extends the definition of Social. CECP believes that corporate philanthropy will evolve to include new types of services and contributions like donations of data, and that recipients of corporate grants will expand to include governments and for-profit social enterprises. In other words, corporations will find new partners and collaborations where their assets can make even more of a social impact.
So, if you’re a corporate grantmaker, now is the time to assess your readiness for the impending deluge of requests to support your company’s ESG efforts. Here’s some questions to help you get started.
- Are you capturing the right data about your grants? ESG reporting will focus on giving at a per-community level and include attributes such as total dollars granted, types of organizations (ie. NTEE classifications), recipient demographics, program or focus areas, and impact made.
- Can you quickly and easily access the data you need? Is your ESG data aggregated from multiple systems, or is it all under one roof? Most foundations take a best-in-class approach towards technology, relying on a variety of applications for different functions. Can your data be easily aggregated with API’s or business intelligence tools? Do you have complete and unfettered access to the data within your grants management system?
- Can your grants system provide data visualizations and summaries based on criteria you define? And can your users access this data on their own, or are they reliant on one or two experts with the technical and program knowledge to do the heavy lifting? Does the technology facilitate self-sufficiency and exploration?
- Is your foundation thinking about collaboration and partnerships beyond the traditional 501(c)(3) nonprofits? While those relationships will remain critical to achieving social impact, new forms of investments and collaborations are emerging. Can your systems support program-related and mission-related investments? And, can you easily collaborate with a wide variety of stakeholders and partners throughout a project’s life cycle?
Corporate giving departments and foundations are destined to take on critical ESG work sooner rather than later. Investors, consumers, and corporate leaders are fast coming to the same conclusion that doing business in an ethical and sustainable way is good for both society and the bottom line. And new ways of working, collaborating, and leveraging data to tell your ESG story are already emerging. Foundations that don’t plan now for these changes will put their corporations at risk of appearing disengaged or unprepared. Now is the time for a technology gut-check to ensure your foundation is ready for the S in ESG.
Fluxx is committed to creating a simpler, smarter, and more effective grantmaking ecosystem for grantmakers and grant seekers. If you’d like to see how Fluxx can help ensure your readiness for ESG, click here to connect with us.