Financial experts RSM RSM urged charities to consider their corporate partners carefully.

A new report has warned that charities in Britain could lose potential supporters if they are not more open about their environmental and social impact. 

Research by the financiers RSM International has claimed charities’ brands could face exposure on social media if their environmental, social and governance standards fall below public expectations.

The research, What Does ESG Mean for the Charity Sector?, looks at the accounts and online presence of 114 UK charities to examine the quality of reporting on these issues in the sector. 

Less than a quarter of charities in the RSM study (23 per cent) had included a section in their financial accounts that looked at environmental, social and governance issues, with no groups  hosting sections dedicated exclusively to this on either their website or in their annual report.

Charities with annual incomes of more than £25m were six times more likely to publish some details than those with an income of £5m or less, researchers found, with charities, like private companies, “under heavier scrutiny than ever before”. 

The report claims: “Anyone with access to a computer or a phone can research the charities they interact with. 

“If practices that fall below society’s expectations, including but not limited to improper waste disposal, poor engagement with diversity and inclusion or overly inflated remuneration, are discovered people can and will readily move on — and also potentially share damaging performance information on social media channels which can expose the charity to reputational damage. 

“So it is more important than ever before to start including a separate section devoted to ESG within annual reports. It is direct communication to stakeholders which helps keep them updated.”

The charities included in the study were chosen at random from a representative sample taken from regulators in England and Wales, Scotland and Northern Ireland. 

A third of the charities investigated have a published governance code, while nearly all of the largest charities published legally required information on carbon and energy use.

RSM urged charities to consider their commitments when choosing corporate partners, especially given the financial impact of the pandemic. 

The report said: “Involvement with charities and local communities is a pivotal part of many corporate ESG strategies and charities must ensure they partner with a corporate that is the right strategic fit for the individual charity’s purpose.”