Not for Profits, Sustainability - a Donations Opportunity?

Not for Profits and Sustainability - a Donations Opportunity?

Not for profit (NFP) organisations are supported by committed individuals keen to make a difference.

Often there is more charitable work to be undertaken than people to assist in these organisations, with the upcoming Australian Charities and Not of Profits Commission ‘Australian Charities Report’ showing that 50% of charities are entirely volunteer run – an amazing statistic, considering the management, organizational and business skills this cohort must exhibit.

While the remuneration for paid employees may be less when working with a NFP compared with other commercial roles (even after taking into consideration the Fringe Benefits Tax salary sacrificing concessions), the heart and commitment of each volunteer and staff member is the key to any NFP’s success.

While ‘sustainability’ means different things to different people, for a NFP it is not necessarily about environmental metrics. At a very base level, for many charities and NFP’s, their cashflow determines whether they are sustainable as an organization and are able to fund the continuation of the charitable objectives and services of the organization. Donations are the life blood of most charities.

Once the NFP jumps over this basic cashflow hurdle, they can genuinely look to whether they are improving their organisations’ Environmental, Social and Governance (ESG) position, which informs the key metrics most people associate with Sustainability.

For many NFP’s, and for-profit businesses, the 17 Sustainable Development Goals (SDG’s) https://sdgs.un.org/goals  provide a first step on the path towards identifying existing sustainability practices and recognising any gaps and opportunities for improvement under these measures.

Demonstrating a NFP’s sustainability credentials may initially be as simple as looking at what the organisation does everyday. For many NFP’s, their mission may align with a number of the SDG’s, enabling them to easily identify their most important goals, determining where they are now and identifying a target to aim for over a defined future period (for example, 1 year, 2-5 years).

For example, for NFP’s that provide services in the disability sector, when considering health, accessibility and employment prospects for their members and clients, they may align with:

              SDG 3    Ensure health lives and promote well-being for all ages

              SDG 8    Promote sustained, inclusive and sustainable economic growth, full & productive employment and decent work for all

              SDG 11  Make cities and human settlements inclusive, safe, sustainable and resilient              

For their own business sustainability measures, NFP’s may also consider:

              SDG 12  Ensure sustainable production and consumption patterns.             

It is essential that the NFP establishes their base position/results, sets achievable targets for improvement and measures and reports on these, all in consultation with their internal and external stakeholders.

From an environmental perspective, once they have considered their Scope 1 emissions (internally controlled) and Scope 2 emissions (energy use), they can commence collecting data on their Scope 3 emissions, having conversations with customers and suppliers, as well as considering any other emissions created by the organisations activities.

Sustainability reporting doesn’t happen overnight – it is generally a staged process, but the key is to start the process. Each year, as the NFP accumulates data regarding their key metrics, updates their ambitions to improve the organisation’s sustainability practices and refines the engagement and communication with internal and external stakeholders, the management of this key business area will become more robust.

How does a NFP commence their sustainability journey? Following are some suggested steps:

1. Appoint a sustainability champion – ideally a senior manager or executive who is passionate about implementing change within the organisation;
2. Create a sustainability committee, supported by the board and senior management, which includes both internal and external stakeholders who are impacted by the actions of the NFP;
3. Create a forum where internal and external stakeholders can make suggestions, record progress and engage with the organisation’s sustainability journey – maybe a new email address such as sustainability@yourorganisation.com.au to easily facilitate suggestions;
4. Review the United Nations Sustainable Development Goals (SDG’s), understand each goal and identify those that most resonate with your organization’s sustainability focus;
5. Undertake a review of the existing operations of your business and identify activities that already meet any of the SDG’s – sustainability is not just about implementing new initiatives, but also identifying the activities that are part of the organisation’s day to day operations that meet your goals. As part of this review, you may identify where you need to focus the NFP’s efforts – on reducing consumption and energy usage, by reviewing your supply chain to ensure there are no human rights infringements etc;
6. Engage with the sustainability committee and internal and external stakeholders to select the most important SDG’s to your NFP, and identify the activities most relevant for your organization to meet these goals. Ask them for recommendations to improve your performance in these areas;
7. Collect your base line information – for you to be able to measure improvements in your performance, you will need to have a record of activities to date. What information do you already have available from your financial records or other systems used to collect information on the performance of your organization? You may be able to approach some suppliers for historical information, such as waste collected, electricity and fuel usage, water and gas invoices showing usage etc;
8. Consider a software package to collect this comparative information for future use – how can technology further assist you in meeting your goals?;
9. Determine your success measures. For example, if reducing electricity usage is a goal, what % reduction from your baseline will mean you have achieved this?;
10. Identify the additional activities that your organization needs to undertake to meet the goals. For example, if waste reduction is a goal, you could go paperless in your office and remove all staff waste bins, also ensure recycling bins are available and ‘containers for change’ collections for recycling;
11. Plan to successfully implement these changes – you may need to have a communication strategy to advise all staff of the changes that are coming, and ongoing progress, so that they can be ‘on board’ and support the goals;
12. Be transparent about your stage of the journey and ask for stakeholder feedback throughout the process - make improvements to your systems to increase your success;
13. Determine the time frame for measurement and be consistent in this measure from one year to the next. For some metrics it may be useful to use a financial year, as some sustainability results will be associated with annual financial results;
14. Communicate your results – good, bad or indifferent, you should be transparent in communicating your organisations sustainability outcomes. Some results will be communicated frequently to keep the goals top of mind and keep internal and external stakeholders engaged; other results may be measured over a year or more, and can be communicated annual in the NFP’s Annual Report;
15. Do you prepare an Annual Report and separate Sustainability Report, or do you combine the two? It is very important to include some information in the organisations’ Annual Report, to ensure all stakeholders who receive this keep up to date with your sustainability results. Think about your readers and the way that they can easily absorb this information – the use of graphics that resonate may assist, with the key results in bold. Further information may be available on your website;
16. Let your donors and other fundraising supporters know of your journey and ask them to be involved with suggestions, projects etc. Hopefully this will be a trigger to motivate them to contribute towards your success.

For many NFP’s donations, including bequests, may be the only, or a significant, source of revenue to fund their operations. When donors commence reviewing the sustainability progress of NFP’s, it may be that those who are slow to commence this journey, or those who don’t promote the sustainability activities that they are undertaking and their targets for improvement, may be passed over for other more ‘vocal’ NFP’s.

To attract donor funds, an NFP may need to demonstrate what ‘sustainability’ means to them and what they are doing about this. All sustainability claims should be able to be verified with reliable data. ‘Greenwashing’ – inflating sustainability claims – can also occur among NFP’s.

Apart from NFP’s devoting space on their website to document their sustainability journey, progress and targets, including links to base line and subsequent results, there may be information available in their Annual Report. Ideally we will, in future, see the ACNC collecting consistent information from NFP’s regarding their sustainability practices, and having this available to the public on the ACNC website.

Not all NFP are able to provide a tax deduction for donations received. Donations to Deductible Gift Recipients (DGR) are tax deductible to the recipient, and for a donor to be able to claim an income tax deduction for donations, for all amounts over $2, a receipt should be held by the donor. You can search the ACNC website (www.acnc.gov.au ) to determine whether the charity you would like to donate to has DGR status.

As we again approach 30 June, for those with the disposable income and the generosity to consider giving to others, it may be worth considering a little additional homework on the NFP’s that you plan to donate to. If they don’t have a sustainability statement with supporting information on their website, it may be worth an email to ask them where you can access this information.

In the same way that investors have driven change in the financial and business sectors’ attitude to improving sustainability practices, donors may be the catalyst for change in the NFP and charity sector. There may be a significant advantage to those NFP’s who are early adopters and communicate their progress to one and all, as they may receive a larger share of the annual donation pie.