Sustainability and related reporting are all abuzz at the moment. However, the focus is on for-profit companies with little to no attention paid to charitable organisations (COs) that have a significant impact on vulnerable groups, animals and the environment. If sustainability is about outcomes, why is this sector an afterthought?
Governments are increasingly unable or unwilling to meet today’s complex social and environmental challenges – constrained by budgets, bureaucracy and politics. Decades of our ‘take-make-use-dispose’ approach have amplified climate risks and extreme weather conditions, further exacerbating public services. Corporations play a big role, but market incentives mean not all marginalised communities and modest, hyper-local needs are addressed. This is where COs matter most.
COs are led by their respective causes, free from short-term profit pressures, enabling them to tackle the hardest of problems: providing access to food, healthcare, and education; providing safety for women, children and excluded communities; rehabilitating key ecosystems; and protecting wildlife. Often, COs’ major advantage is not money but their social infrastructure and public trust which mobilise volunteers and partnering organisations to extend their charitable causes at scale.
However, despite COs’ importance, there isn’t a specific globally accepted financial reporting framework1 to guide COs. Even if there was, it’s intuitive that judging COs by financial statements alone is ill-advised and could lead to unintended negative consequences. Accordingly, what is needed is an integrated reporting framework.
With over 600 sustainability reporting frameworks globally, none are specifically tailored to COs and their unique context. If profit-driven companies with highly skilled and paid staff require such extensive guidance about how to report non-financial information, is it realistic to expect COs to be able to adapt existing frameworks to suit their needs? And is the cost worth it?
Research reveals that many small- and mid-sized COs struggle to decide what to measure, how to collect non-financial data, and how to integrate it with their financial information to provide decision-useful reports. This results in anxiety, costly workarounds, and missed funding when COs cannot satisfy the multiple (sometimes conflicting) and varied disclosure requests from potential donors on demand; or they must scramble to reconstruct information after the fact.
Donors face similar issues. Without a common reporting framework designed for COs, they often create custom templates (from scratch) that request extraneous details and omit essentials. They also vary significantly across donors. Comparability suffers and potential partnerships stall. This waste of precious resources sacrifices support that could have assisted beneficiaries but is spent on administrative tasks. This approach is failing COs precisely where they create the most value.
*AI was used to enhance the readability and language of this piece.
NOTE
1 The International Financial Reporting for Non Profit Organisations (IFR4NPO) organisation is beginning to address the financial reporting framework aspect.
So what are we waiting for?
We need to create a tailored, globally accepted, integrated reporting framework tailored for charitable organisations. This would reduce anxiety and costs for COs yet enable improved decision-useful information for donors and stakeholders alike. It would also enable the development of off-the-shelf software that handles COs’ data collection, analysis and presentation swiftly and efficiently. Moreover, the global nature means it would be feasible to create this software and retail it at very affordable prices due to economies of scale. So what are we waiting for?
Wayne van Zijl CA(SA)
Associate Professor at School of Accountancy WITS
