action and communications. This is an area where organisations outside of the sector could learn from charities. It is also about the way in which the charity interacts with its employees, volunteers, beneficiaries, suppliers, and the communities which they are in and support. It includes areas such as its organisational culture, diversity and inclusion and modern slavery. It is often taken for granted that a charity, by virtue of its charitable status, will operate responsibly but it is important that this is at the forefront of how charities operate. The environmental factors will be core to those charities with this at the heart of their charitable purpose. However, it is not just those charities with charitable objects relating to environmental matters which should take this seriously, particularly with the spotlight on this given by the 2021 United Nations Climate Change Conference (COP26). All charities should be clear on how they have considered environmental factors within their strategy and decisionmaking. Charities should take time to consider what their impact will be on the environment and how to make positive changes to this. These considerations should also be taken into account when considering their investments, and there are now greater, and often more explicit, emphasis on ESG factors. It is also important for charities to ensure that their governance remains fit for purpose, underpinning its values and enabling decisions to be made effectively in considering these matters. This includes the Charity Governance Code, which was updated in December 2020 with an enhanced focus on the principles of ‘Integrity’ and ‘Equality, Diversity and Inclusion’. ESG is shifting the landscape for all organisations, bringing with it a complex set of risks, challenges and opportunities. What should be the key considerations for charities’ financial reporting this year? At PwC, each year, we review the trustees’ annual reports of charities in the Charity Finance ‘Charity 100 Index’ for our Reporting in Charities Award, as part of the annual PwC Building Public Trust Awards to celebrate those that tell their story in an engaging and effective way. We saw that charities took the opportunity of using their reporting to be honest with their stakeholders about the year that they have had and the challenges they have faced. There was a clear differentiation between those charities that embraced openness in conveying the important work of the charity and their direction of travel going forward. They saw their reporting as being genuinely valuable, beyond being a mere ‘finance’ or ‘compliance’ document, as opposed to charities which had cut back on their reporting during this difficult time. There has been continued improvement in the reporting by many charities over recent years, with greater focus being placed on the impact a charity can make, as well as showcasing how good governance and strong financial management can support this purpose. It has never been more important for charities to be clear about what they do, why they do it and what difference their work makes. It is often hard to compare given the breadth and diversity of the charity sector, particularly among the largest charities, therefore it is vital that charities invest in how they communicate their strategy and impact and demonstrate their value to stakeholders. Reporting by charities is a key part of a suite of communications - “It is also important for charities to ensure that their governance remains fit for purpose, underpinning its values and enabling decisions to be made effectively in considering these matters.” Bank i ng & F i nanc i a l Se r v i ce s 32 Finance Monthly.
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