Environmental and social reporting: Could charities learn a thing or two from the private sector?

Inviting greater scrutiny could be good public relations for charities, writes Kirsten Downer.

Charities are increasingly being criticised in the same terms as transnational corporations: as wealthy behemoths, unaccountable to the communities whose lives they affect profoundly. In fact, large international NGOs are less transparent than transnational corporations when it comes to making information accessible online, according to a recent One World Trust report. The document said charities are still not doing enough to make sure donors or beneficiaries understand how their money is spent.

Elsewhere, charities have been accused of private sector and government co-option, duplicity about lobbying activities and of failing to truly represent their beneficiaries.

In the face of this kind of criticism, offering themselves up to greater public scrutiny may be the last thing charities feel like doing. But having the courage to be more transparent could be the most potent weapon they have in their defence. Battered transnationals such as Shell, Nike and British American Tobacco already know this; many now audit their social and environmental impacts, with some companies, including BAT, winning awards.

Charities are rightly suspicious of the way many corporates have used 'triple bottom line' reporting as a cynical PR exercise to avoid regulation.

But sidestepping their own transparency and accountability issues could prove a dangerous mistake, argues Seb Beloe of think tank SustainAbility.

"A lot of people who work in charities and NGOs are impassioned about what they do, but blind to the fact that the moral high ground is shifting," he says. "That high ground is becoming a dangerously ephemeral thing to rely on - charities need to invest in it, and social reporting is one way they can do so."

Campaigning charities could also be labelled hypocritical if they continue to pressurise business to be more open while remaining cagey themselves.

Only a handful of charities, including ActionAid, WWF-UK and Save the Children, produce stand-alone reports scrutinising their social and environmental impacts. WWF is one of the few charities that gets its report verified externally.

Annual reports have improved but are still not good enough, according to Luke Fitzherbert, senior researcher at the Directory of Social Change.

"The key question is whether they give the kind of information that enables a serious investor to make an informed decision about supporting the charity's work," he says. "The answer is: not very often."

Social and environmental reporting would help charities access more significant investment, argues Beloe, and the greater transparency would protect them against third party co-option.

"Charities are missing a trick by not embracing social reporting," agrees Tim Morgan, finance director of Traidcraft, whose latest award-winning report takes a warts-and-all approach. "The danger is that if you don't set the pace, those who say you're lacking in legitimacy will."

When Traidcraft decided to publish all the feedback - negative and positive - from its stakeholders, its marketing personnel were understandably nervous.

But opting for candour has boosted staff morale and supporter loyalty, says Peter Collins, communications director at Traidcraft. "People know it's not just some PR exercise," he says. "Having the confidence to openly acknowledge one's mistakes makes it much easier for affected parties to forgive."

Traidcraft spends roughly £10,000 a year on its award-winning social audit, taken from a turnover of approximately £20m. Charities unable to afford consultants and auditors can cut costs by using free peer reviews and student placements, an approach taken by award-winning Liverpool-based social business the Furniture Resource Group.

Charities are sometimes hesitant to commit themselves to a process that increases administration costs. "In the short term, spending money on accountability could lose you support from those not in tune with the realities of running a million-pound organisation," admits Aidan Timlin, accountability manager with Christian Aid. "But in the long term it'll be worth it." The problem is not only a reluctant sector but also an ill-informed public - although this can change through initiatives such as the ImpACT coalition, which attempts to educate the public about charity management issues.

A controversial decision for voluntary organisations is deciding which stakeholders they should be accountable to. Whose needs are more important - donors' or beneficiaries'? At present, western donors get far better information than beneficiaries in developing countries. And what about the other communities whose lives you affect? Greenpeace regards itself as accountable only to its supporters - in its view, trawlermen are certainly not stakeholders. Some commentators draw parallels between this way of thinking and the corporate world's indifference to anyone other than shareholders.

Beloe of SustainAbility is critical. "It's complacent and irresponsible," he says. "After all, many people affected by Greenpeace campaigns are not members. Do Greenpeace and others not have any responsibility for understanding these impacts?" It is questions such as these that charities will have to get to grips with if they want to maintain their position on the moral high ground.

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