Recognising the growing importance of environmental, social and governance (ESG) considerations, the revised Charities SORP introduces a dedicated sustainability section within trustees’ reports, providing greater transparency on how charities are responding to these issues.

For tier 3 charities (where reported income is over £15 million), trustees are now required to report how the charity responds to and manages environmental, social and governance matters. Charities that fall in tier 1 and 2 are not required to include the same disclosure, but may still choose to report on these areas, where doing so helps tell a clearer story about their purpose, impact and stewardship.

Rather than requiring a standardised set of ESG metrics, the SORP acknowledges that a meaningful approach to sustainability will look different for every charity. The issues most relevant to a grant-making foundation may be very different from those facing an international development charity, care provider, school, arts organisation or environmental charity. The key focus should be ensuring that disclosures are relevant, balanced and connected to the charity’s purpose.

The first year of reporting will be easier if trustees start early. This article covers:

• What trustees should focus on

• Defining what ESG means for your charity

• ESG topics charities may need to consider

• Using frameworks to benchmark and monitor progress

• Preparing for the new disclosure

What should trustees focus on?

Trustees should start with the issues that matter most to the charity and its stakeholders. That means thinking about where the charity has the greatest impact, where it faces the greatest risks and where it already holds reliable information. The disclosure should help a reader understand the charity better, rather than simply list policies or statistics.

Defining what ESG means for your charity

Before trustees decide what to report, they need to agree what environmental, social and governance mean for their charity. Without that shared understanding, ESG reporting can quickly become too broad, too generic or too focused on measures that are easy to collect rather than issues that matter.

A useful approach is to start each part of the disclosure with context. Buzzacott’s own ESG report does this by introducing the firm’s overall approach, then setting out what environmental, social and governance considerations mean in practice before describing the progress made. For charities, the same principle applies. The trustees’ report should not assume the reader knows why a particular ESG issue is important. It should explain the link between the issue, the charity’s purpose and the decisions trustees are making.

• Environmental might mean reducing carbon emissions, managing buildings responsibly, considering travel, protecting biodiversity or helping communities respond to climate change.

• Social might mean the charity’s impact on beneficiaries, staff, volunteers, partners, suppliers and the wider communities it serves.

• Governance might mean how trustees oversee ESG risks, use information, make decisions, manage conflicts and hold the charity accountable.

ESG issues often overlap so this definition stage also helps trustees avoid reporting in silos. For example, an international charity’s environmental decisions about travel may also affect programme quality, staff wellbeing, partner relationships and safeguarding. A charity that owns property may need to consider energy efficiency, financial resilience, service continuity and accessibility together. Good reporting recognises these connections and explains the judgements made.

ESG topics charities may need to consider

The topics that matter most will depend on the charity’s purpose, activities, stakeholders and risk profile. The table below gives examples of areas trustees may want to consider when deciding what ESG means for their charity and what information would be useful to report.

Using frameworks to benchmark and monitor progress

You do not need to turn the trustees’ annual report into a technical ESG report. But some charities may find it helpful to use recognised frameworks, standards or methods to bring structure to their ESG reporting. These tools can support consistency, benchmarking and year-on-year monitoring, but they should only be used where they add value and help trustees explain the charity’s approach more clearly.

Some of these tools are formal reporting standards, some are global reference frameworks, and others are practical methods for assessing stakeholder priorities, impact or performance. Most charities will not need to adopt any one framework in full, the important point is to choose an approach that helps trustees report clearly and credibly.

The right framework will depend on the charity’s size, activities and reporting maturity. For many charities, the most useful approach will be to start by identifying stakeholder priorities, mapping existing information to the areas that matter most and then using one or more frameworks as a benchmark rather than a rigid template.

How to prepare for the new disclosure

The first year of reporting will be easier if trustees start early. Many charities already hold useful information, but it may sit across different teams, systems, reports and publications. Some may also produce more detailed ESG, sustainability or impact reporting but these are likely too comprehensive to include in the trustees’ annual report. The challenge is often not creating a new ESG strategy from scratch, but identifying what is relevant, checking whether the data is reliable, and deciding what should be summarised in the trustees’ report and what can be signposted elsewhere.

Our suggested key steps:

• Agree what matters to stakeholders by considering the charity’s purpose, strategy, principal risks and stakeholder expectations

• Map existing information such as impact reports, risk registers, people data, travel records, safeguarding reports, procurement policies and investment reports

• Assess data quality before including figures in the trustees’ report, especially where information has not previously been reported externally

• Choose meaningful measures rather than defaulting to generic metrics that do not reflect the charity’s activities

• Decide what to summarise or signpost by keeping the trustees’ report focused on the key ESG matters, while directing readers to separate reports where fuller detail is available

• Connect ESG to the wider annual report where relevant, for example through reserves, investment policy, property strategy, funding risks or future plans

What makes a good ESG disclosure?

Good ESG reporting should be specific enough to be useful, but not so technical that it becomes difficult to read. It should explain what the charity is doing, why it matters and what the trustees plan to do next. A short, honest explanation is usually more valuable than a long list of policies.

• Use plain English and avoid unexplained acronyms

• Explain the relevance of each ESG topic to the charity’s purpose

• Include a small number of meaningful measures where reliable data is available

• Bring the reporting to life with infographics, examples, case studies and images, or stakeholder feedback

• Be clear about areas still in development and the steps trustees plan to take

Next steps

The revised SORP will make ESG reporting a more visible part of the trustees’ annual report. The opportunity is wider than compliance. If done well, ESG reporting can help trustees explain how the charity lives its values, manages risk and delivers long-term benefit for the people and communities it exists to serve. The best place to start is with a focused discussion at board and management level about what matters most, what information is already available and what the trustees want readers to understand from the annual report.