Ethical, Social, and Environmental Reporting

For-profits are models for many nonprofit management practices. Donors who are also investors in for-profits often expect the management practices of the for-profits to be adopted by the nonprofits they support through donations.

One area where the corporations are being pressured currently is in the reporting of ethical, social, and environmental activity. It seems that both the public and stockholders want to know that corporations are being transparent about their ethical, social, and environmental activities, their effectiveness, and what is next.

Be warned! If the corporations are under pressure now, your nonprofit will begin to feel the pressure to do the same in the future. Whether that future is days, weeks, or years from now depends on many thing beyond your control. For instance, if a leader at one of the big names in nonprofit services is found to be engaged in unsavory behavior, assume there will be immediate pressure on all nonprofits to show they are proactively doing all that is necessary to prevent such things from happening.

A nonprofit’s mission forces it to be at the leading edge of societal change in at least one area. In many cases, donors assume the nonprofits they support are examples of excellence ethically, socially, and environmentally. If a major donor were to ask the typical nonprofit for proof of their excellence, it is doubtful they could provide compelling evidence. Being able to present evidence helps to ensure the retention of high-value donors. Those donors are an important part of most nonprofits’ sustainability.

Many small nonprofits have a tradition of expecting excellence from their staff and volunteers but have yet to create formal policies which codify their commitment to excellence or standards that define what excellence is and how it is measured. The corporations are being asked to report on how much they spend and the effectiveness of their expenditures. Most nonprofits have yet to start tracking their expenditures or their effectiveness.

Establishing your nonprofit as a leader in all three areas is reasonably easy and probably would pay for its implementation over time. One step in the process would be to create policies. It is possible one or more of your board members could provide you with copies of their employers’ policies with permission to use them. Another step is to create a baseline. Let us use the environment as an example. Asking your janitor to weigh your cans before they are recycled would tell you how much aluminum you are recycling each year. If the janitor also quickly checks the trash for cans that were thrown away you would know the level of effectiveness of recycling. The same for paper. A year from now, hopefully the amount of paper recycled declined because measuring the process raised awareness to a new level. At the same time, the percentage of cans recycled might increase because of the increase in awareness. Both of those would be nice footnotes to your annual report. Neither are mission-centric activities but they will help you retain donors and increase donor generosity. All of which adds to your nonprofit’s sustainability and helps to ensure you will have the growing funds you need to serve the growing demand for your mission.

Next Step:

Create or review your nonprofit’s policies on ethics, social issues, and the environment

Track your nonprofit’s performance in each area and set goals for improvement each year

Report your nonprofit’s performance to your stakeholders

Watch for trends in the corporations and be an early nonprofit adopter

Tracking the changes in corporate behavior is relatively easy. There are usually articles in the news. Your board members who work for corporations are aware of the changes taking place in their offices. Your nonprofit is smaller than most corporations therefore your nonprofit has the agility to change faster than the corporations.

Your nonprofit can be a leader in the areas of ethical, social, and environmental change. Your most socially aware donors will embrace the opportunity to help your nonprofit become a leader and sustain its leadership position.

Take It Further:

Be a leader in all areas for management (leaders do it before they are asked, followers have to be asked to do it)


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