In a prior blog post (“Does my nonprofit board need an ESG Committee?”), we established that Nonprofit Corporations are not required to have an ESG initiative.  On the other hand, a spirited discussion about how your enterprise addresses environmental, social and governance issues might be a helpful conversation and could lead to meaningful change.  Alternatively, it could distract directors from more important issues or even lead to unnecessary conflict (see the prior Blog, “One reason for nonprofits NOT to engage in ESG discussions.”).  While most ESG initiatives begin with a broad look at many aspects of ESG, critical discussions should focus on only the most significant topics.  Remember, the scarcest resource you are working with is the directors’ time.  If ESG does not lead you to important board discussions, you have probably wasted a lot of people’s effort.

How an ESG initiative can miss the mark.

A recent ESG initiative at a private golf club offers a good example.  When the Environmental discussion came up, attention was initially focused on the significant amount of chemicals spread over the course and the use of on-course sprinkler systems in a region that had experienced drought in several prior years.  The Committee heard from the head greenskeeper, who assured them that, in his professional judgment, the club was doing everything it could to limit the use of chemicals and irrigation.  Satisfied with that response, the committee moved on to what they perceived was the second most pressing environmental issue – the use of plastic tees.  (Tees, usually wooden or plastic, are those little pegs the golf ball is placed on before it is struck from the “teeing ground.”)   In short order, the club banned the use of plastic tees in favor of biodegradable wooden ones.  Most players were unhappy about the change, the rule was difficult to enforce, but some members were greatly pleased that the club had taken this “important” step to save the environment.  The same week, signs had to be posted around the pond in front of the 13th Green warning people not to come in contact with its green brackish water. The point of this “almost” true story is this: if an ESG initiative prompts your board to have meaningful conversations on important issues, then great. But if all you end up talking about is plastic tees, you would have been better off using your board’s time elsewhere.

Boards need to focus their ESG discussions on big, broad policy issues and avoid spending time on
minor operational matters that will only bring limited incremental change.

Boards need to focus their ESG discussions on big, broad policy issues and avoid spending time on minor operational matters that will only bring limited incremental change.

OK – you are going for it – you are doing an ESG project, and you want it to have a meaningful impact.  Here is a suggestion – make it an ESG-C initiative.  Nonprofits don’t have shareholders, but at some level, they are accountable to the community they serve.  In addition to conversations about Environmental, Social and Governance issues, talk about how your agency serves its community.  That conversation is best split into discussions responding to three questions: what is our community? What are the needs of that community? And how can we better address those needs? 

The first and most challenging question that must be addressed is, “Who is the community you serve?”  This question is challenging because the answer may not be as simple as it seems. 

“We are a nursing home; we serve our patients.” 

“We are the Little League baseball program in our town, our players are our community.”

“We are a regional opera company, anyone who buys a ticket is our audience and our community.”

These answers are good, but incomplete.

In developing programs, it’s important for an agency to consider not only the specific individuals who are the current recipients of its service (patients, players and paying customers) but also a broader group of people who are or who could be impacted by its services.  So it’s not just the patient; it’s the patient’s family.  It’s not just the people we serve, but it’s those who need our services but don’t currently receive them.   It’s not just those who need our services now but those who will need them in the future. 

But in only including those who can directly benefit from our services in our “community,” we are failing to consider two other large constituencies.  First, a community includes not only those who are served but those who serve – employees, volunteers and donors.   Second, your nonprofit may have a significant economic impact in your city, town or village or the neighborhood in which it sits.  This broad economic impact means that your community may include many people who don’t directly receive your services.

Understanding the full breadth of an agency’s community can lead to the creation of new programs supporting a much larger group of participants.  Many local Little Leagues have expanded their impact by using their fields for programs targeting younger children (Tee-Ball) and youth with health conditions that make playing in the regular program impossible (Challenger Divisions).  Nursing Homes in neighborhoods with many non-English speakers have created ESL (English as a Second Language) programs that support staff recruitment and benefit the broader community.  And Opera Companies recognized that the best way of developing the next generation of patrons is to create imaginative in-school visitation programs.

Pressing problems within your community may pose a greater immediate risk than global warming.  Many communities are suffering the impact of drugs.  Others are struggling with accepting an influx of new immigrants, the closure of a major employer or a recent weather disaster. Looking at the total needs of your newly defined community, you may discern a critical new role for your agency.

But in an ESG-C process, how do you discover the needs of this greater community?  Luckily, most of this work is already done for you; you just need to find the right place to ask.  County planning boards, chambers of commerce, community councils, local United Ways, and even local hospitals may all have published materials identifying community needs.  Calls to those agencies and community leaders should produce useful information.  With a good list of the “needs,” the question for your agency becomes, “How can we help?”

Every few years, there is a call to abandon the phrase “nonprofit” in favor of “community benefit organization.”  Some nonprofits can be so focused on what they see as their primary mission – delivering health care, running youth sports programs, and providing first-rate cultural events – they miss the bigger picture of what is happening in their extended community.  Those organizations do that at some risk since not addressing their community’s greater needs will eventually impact their agency adversely.

So, whether it’s part of an ESG-C initiative or a separate in-depth discussion, make sure your board has conversations about its role in achieving this “greater good” for your community.