For any organisation to be sustainable and to thrive it is always important to read the winds of change. By keeping an open eye to changes, one can better identify threats and opportunities. A wind of change we have observed in recent times is a significant increase in interest in impact reporting. Becoming great at this should be of significant interest to the boards and management of all charities and NFPs.
It is also interesting to look at trends from different sectors to see what may be coming or where useful intersections may lie.
A powerful thought
We recently heard a very powerful saying: Donor’s want to give to organisations that meet needs. Not to organisations that have needs.
These two sentences sum up beautifully the need to be clear on what your organisation’s impact is. No longer does it cut it to just be able to say your organisation does good work. You must be able to demonstrate how your good work actually makes a difference, and what difference it has made. How it contributes to the outcomes your organisation exists for, and the outcomes that resonate with your donors. Ideally those two things are the same!
Thinking about impact and outcomes can positively help organisations change the way they see the world and their organisations place in it. ‘A clear understanding of your raison d’étre (reason for being), your North Star, also helps hugely with focus.
If you are a registered charity in New Zealand, you also now have a legislated requirement to think about your organisation’s impact thanks to the requirement for Service Performance reporting. Depending upon the size of your charity (i.e. if you are a tier 3 or 4 reporting entity) this is a reporting requirement you are already grappling with. Or alternatively, if you are a large charity (i.e. tier 1 or 2 reporting entity) then you will have to prepare these in future as they become mandatory from 2021.
But quite aside from what the legislation requires you to do, in our experience, successful organisations already appreciate the importance and power of reporting their impacts in a way that resonates with their stakeholders. Quite simply; because this is what ensures they continue to have stakeholder support.
Trends in other sectors
Often similar winds of change blow through different sectors at different times. As such it can be highly instructional to look at other sectors, such as the Government sector, or to the For-Profit corporate sector, to see what may possibly be coming your way. As well as seeing possible future trends, there are usually valuable insights to be gained from the lessons learned by others who may have already walked down that path.
However, at other times, we see similar trends occurring at the same time. As regards impact measurement and reporting, and taking a more holistic view of organisations generally and hence their wider impacts, now is one of those times.
The Government's Wellbeing Focus
Our new government in New Zealand has laid down a challenge to The Treasury who have previously been very economic and fiscal in their focus. As noted on The Treasury’s website:
Budget 2019: The Wellbeing Budget, will broaden the Budget's focus beyond economic and fiscal policy by using the Treasury's Living Standards Framework to inform the Government's investment priorities and funding decisions. The Government will measure and report against a broader set of indicators to show a more rounded measure of success, as a country and as a Government. This will be supported by Budget processes that facilitate evidence-based decisions and deliver the Government's objectives in a cost-effective way. The Wellbeing Budget represents an important step towards embedding wellbeing in New Zealand's public policy.
What this means is gaining a better understanding of the broader impacts of economic and fiscal policy decisions. Considering broader impacts and then using this more holistic view to feed into, hopefully, better policy setting and decision-making.
For-Profit Sector’s Integrated Reporting & Extended External Reporting
Two of the biggest trends we are currently seeing in the For-Profit corporate accounting world, both internationally and in New Zealand, are Integrated Reporting and Extended External Reporting. There are varying definitions for these and some people can get overly hung up on the technical distinctions in terms. However, in essence they are the result of corporate organisations waking up to the fact that just producing financial information is only telling part of their organisation’s story.
While for-profit corporates exist with a primary focus to provide financial returns for their owners, many are increasingly focused on their longer-term sustainability. Many people interpret the word sustainability to just relate to environmental matters. However, in this context the definition of sustainability is much broader than just environmental and relates to such matters including the sustainability of the business model, by looking at all aspects of the organisation and its interactions with the environment, the business community it operates within and as a part of, and the wider community and societal impacts.
As such they are seeking to provide their financial investors with a more rounded or holistic view of the impacts of their organisation to engender ongoing stakeholder support. Interestingly it is not just financial investors that are the audience for this information. Increasingly the concept of social licence, or licence to operate is seen as critical to an organisation’s success.
Recent adverse international examples of the impact of social licence include Uber’s toxic culture creating a massive backlash against that company, and Facebook’s credibility being damaged by how the data it collects is being used. Both of these examples have resulted in consumers, suppliers and governments all taking a negative interest in them which has led to damaging their business model and adversely impacting their net worth. Some shareholders such as large fund managers have also pulled out due to concerns of not wanting to be seen to be involved in what may be unethical or socially unacceptable practices.
Closer to home and taking a more positive and proactive view on social licence we have some examples of large corporates proactively reporting their impacts and showing how they care. Our national carrier, Air New Zealand has recently been proactively reporting on its range of sustainability measures as they appreciate they operate in an industry which has adverse environmental impacts. Interestingly though they are also very concerned about the impact on the social environment in which the company and its people operate.
Another example is Ravensdown, a public company that operates in what many would consider a challenging area of fertilisers. They have released their integrated report and as they say on their integrated reporting website:
Rather than just look at the financial picture of our year, our performance is better understood in the context of our stakeholders: the ones who impact us and the ones we have an impact upon. After all, we exist to enable smarter farming for a better New Zealand. Smarter farming is all about reducing environmental impact and optimising value from the land. When it comes to a better New Zealand, we are part of the solution.
Other good New Zealand integrated reporting examples are NZ Post and Sanford. While some may look at this reporting cynically, it is interesting hearing from companies that have been doing it for some time how positive it has been for them in a variety of ways; team attraction, retention and happiness, customer support, and even including in some cases reducing their cost of raising capital.
While this trend has been around for a few years, it now feels like this is a snowball that is really starting to roll.
Implications of trends converging?
So, what we are seeing is this trend of impact reporting and a much more holistic view of organisations happening in our three main sectors; the state sector, the private sector, and the NFP/Charitable sector, and at the same time. This raises some potentially interesting implications and opportunities including the following:
- Better opportunities for organisational partnering between sectors due to greater awareness - For example, a corporate like Ravensdown that is involved in fertiliser supply and committed to reducing the negative impact of its product on waterways may now more logically and easily be able to partner with charities and NFP groups working in the clean waterways area. Likewise, it may be easier to link up with Universities studying this area and to take advantage of Government funding or other regulatory policy initiatives in this space. This is not to say that this could not have happened previously. However, with a greater understanding from all parties of the impact of others and better measurement and reporting it can make it easier to identify and facilitate possible partnerships. And between organisations that may have traditionally seen themselves at odds with others. From a traditional concept of “us versus them”, to a concept of “us and them” where all parties can benefit.
- A combined approach to difficult issues – As well as individual organisational partnering in the above point, increased awareness and transparency allows easier identification of opportunities to work together and a broad multi-sectorial policy approach to solving issues most effectively. Moving from activity silos to a broader and more team solution approach.
- Utilising the impact reporting of others – When an organisation looks to measure things that are further away from its core activity it can often benefit from the measurement skills and results that others may already be undertaking.
- Sharing best practice - Impact measurement is hard. Reporting in a way that communicates effectively is also hard. However, there is huge benefit in seeing how others have grappled with this and sharing best practice is a way to help everyone improve.
If you are not already seeking to understand, measure, and report your impact then now is the time to hop on the wave. And the great news is that there are some great examples popping up in different sectors where this is being done well. We all look forward to hearing and understanding your impact story.