Trustee Decision Making when Promoting Environmental and Social Responsibility

These expectations may come from inside, from trustees, employees, members, donors and beneficiaries. They may come from outside, from the public and advocacy groups. At the same time, with contrary views so easily voiced and published, we seem to live in a society that can polarise around issues. Ultimately, the Charity Commission will expect charities to demonstrate they comply with charity law. In this article, we outline a framework trustees can use when working on these issues.

Acting in the Best Interests of Your Charity

In setting policy on these matters, as with anything else, the role and function of a charity's board is to act in the best interests of the charity. Those interests being those of the charity's beneficiaries. The question is how best to further the objects. This article isn't principally aimed at charities with environmental and social purposes, since action on these issues falls squarely within their objects. It is principally for trustees of charities with other objects, wondering how far they can or should build-in thinking on ESR.

Complying with the Legal and Regulatory Framework

Our starting point is the general legal and regulatory framework. Charities should comply with all legal and regulatory best practice standards which apply in the fields in which they operate. This covers legal and regulatory environmental standards and social standards, like health and safety, safeguarding, equality and anti-bribery law and regulation. It is not just that these frameworks should be complied with for their own sake, but also as a matter of charity law. In its compliance work, the Charity Commission regards breaches of legal and regulatory standards as misconduct or mismanagement by trustees, a key threshold in using its compliance powers.

Commercially-Minded Decisions

Another area which seems obvious is making changes for which there is a compelling business argument, and which also have incidental environmental or social outcomes. High prices and volatility in energy markets means the argument to save energy purely from a costs point of view has never been more compelling. Is plant and equipment energy efficient? Can buildings be improved or better accommodation secured? Is it cheaper to create, maintain and store electronic records rather than paper? There are programmes to consider which have positive environmental and social outcomes, but which could benefit the charity if they have a more engaged, healthier workforce, better able to promote its objects. Programmes which encourage transport powered by healthy exercise rather than carbon or, particularly amongst an environmentally motivated workforce, initiatives which help employees who make low-carbon choices for holidays. A trustee decision in favour of these sorts of programmes would need very clearly to identify the benefits to the charity in commercial terms by reference to relevant evidence.  

What Are Your Charity's Objects?

Our next area to consider is the full scope of your charity's objects. They may not be environmental; they may not be social, but environmental and social issues are all pervasive. They can really impact on a wide range of charitable objects. If your charity prevents or relieves poverty, is climate change contributing to that poverty? If you promote health, does air or water quality harm health? Whatever your objects, are failures in social justice meaning the needs you serve are felt more acutely? This course is open to charities for whom the evidence supports the case that particular environmental or social action promotes their objects to an extent which justifies the resource committed.

Where trustees have established a link between their objects and environmental and social factors, this may help them to justify, in terms of the interests of the charity, being able to adopt ways of working which minimise unintended negative consequences of the way they work. In the context of investment, the Court confirmed this year in Butler Sloss and others v The Charity Commission for England and Wales and another [2022] EWHC 974 (Ch) that where trustees had formed a reasonable view that some investments or types of investment might conflict with their objects, they could decide not to invest in them. This of course is subject to trustees balancing relevant factors, like the impact on the objects and the financial impact. The analysis should apply beyond just investment, to the way the charity does business in other spheres too. If a more environmentally sound or more socially just way of doing business is to be justified, in these terms at least, in terms of the interests of the charity, the cost to the charity of those measures should be justified by the adverse impact on objects being avoided.

The Effect of ESR on a Charity's Supporters and Beneficiaries

Finally, trustees can take into account the effect of its environmental and social values, policies and credentials with its supporters and beneficiaries. Will adopting environmental and social standards in the way the charity does business lead to better engagement with supporters and beneficiaries? Again this needs to be evidenced and reasoned and balanced against the costs of doing so.

A note of caution on this last point both from the Court and the Charity Commission. In the Butler Sloss case, Court said, "trustees need to be careful in relation to making decisions as to investments on purely moral grounds, recognising that among the charity's supporters and beneficiaries there may be differing legitimate moral views on certain issues". The point was made in the context of investment but ought in principle apply to the way a charity does business in other spheres.

There is every possibility that supporters, being a much larger group than the trustees, may have amongst them a wider range of strongly and sincerely held values. In a blog on 'Engaging with controversial or divisive issues', the Charity Commission's Chief Executive reflected on the need for trustees to "be thoughtful about the impact of their actions on their supporters and the public more widely and consider any likely concerns or controversy before they act". This included being "mindful of the opposing views and diverse opinions" of supporters and the wider public. Before embarking on any programme to engage with supporters, beneficiaries and the public on values, care and research is needed to understand the diversity of views and values, and plan to manage public relations in respect of responses.   

For a charity without environmental or social objects, any environmental or social action must still be justified as being in the interests of the charity in furthering its objects. As outlined above, the legal framework provides routes to pursue environmental or social aims, but it is the role of the trustees in each case to gather the evidence of the advantages and disadvantages of the proposed actions, and carefully to weigh the choice.

For advice on promoting ESR in your charity, please contact Andrew Wherrett on 0117 314 5269 or your usual contact in the Charities team. Alternatively, please complete the form below.