Do academy trusts need an ESG strategy?

ESG (short for environmental, social and governance) is a hot topic but what is it and do academy trusts need an ESG strategy?

ESG is a set of standards used to help stakeholders understand an organisation’s wider impact on the world, rather than measuring purely educational performance. ESG is well established in the investment and corporate worlds and we are now seeing it on the rise in the schools sector too.

The ‘E’ stands for environmental and relates to how an organisation interacts with and impacts on its surrounding environment, including things such as resource use and waste produced.

The ‘S’ stands for social and is concerned with how an organisation interacts with its stakeholders (for example its students, staff and trustees), as well as how it contributes to the wider society.

The ‘G’ stands for governance and relates to how an organisation is run and operates. This includes considerations such as whether your trustees know and understand their legal duties and how you engage with your students, parents and communities to ensure all of your stakeholders are engaged in a meaningful way.

One of the main difficulties with ESG is that there isn’t a single framework that every organisation can use, although the Department for Education (DfE) has published Sustainability and climate change:  a strategy for the education and children’s services systems on how it will work with and support the sector.   This builds on the United Nations 17 Sustainable Development Goals.    There are several different elements and sets of standards that could fall under each of the E, S and G limbs, and various different reporting requirements, each of which apply to different sizes and types of organisation. As things stand, most of the compulsory reporting only applies to ‘large’ organisations, which may include some larger academy trusts.  However, regardless of size and compulsory obligations, there are several reasons why academy trusts may want to think about adopting an ESG strategy, and reporting on it, even if there is currently no legal need to do so. These include:

1. Reputation – this is a valuable asset which may be damaged where students, staff and communities are dissatisfied with the environmental performance of the academy trust. Conversely, complying with ESG principles may help to improve an academy trust’s reputation and engender greater confidence and shared ownership in everything an academy trust is seeking to achieve.

2. Staff and partnerships – a strong response to ESG issues may help an academy trust to attract staff and other partners as well as increasing the morale of the staff it already has. 

3. Cost – there may be cost benefits associated with some ESG activities, particularly those relating to the environment, for example by reducing waste, improving energy efficiency and reducing the consumption of other resources which can only help in a time of financial constraint.

4. Sector policies – the DfE policy paper on ‘Sustainability and climate change: a strategy for the education and children’s services systems’ focuses on the environmental aspects of ESG, but refers throughout to the establishment of consistent reporting frameworks. Taking time to consider what you are already doing from an ESG perspective, where you would like to go with it in the future and then putting this together into a strategy is likely to assist and can also be a useful and rewarding way of engaging with pupils, employees, parents and suppliers - your stakeholders.

When you are considering ESG factors in relation to your academy trust’s activities it is crucial for your trustees to remember that everything the organisation does must be in furtherance of its charitable purposes to advance education for the public benefit and in line with the law and its own articles of association. ESG considerations should not be a diversion or distraction for an academy trust. Instead, they should be a way of helping the academy trust to achieve its charitable purposes in the most positive way possible. What this looks like will vary on a case-by-case basis and. if in doubt, we recommend that you take professional advice.