Environmental, Social and Governance (ESG) principles are steadily gaining traction as part of business strategies across industries, but adoption is slower in the not-for-profit (NFP) sector. NFP organisations are aware of ESG’s potential to strengthen governance, build trust, and attract funding, however operational challenges are slowing progress.
Strong intent, slow uptake
Our 2025 not-for-profit survey revealed only 9% of NFP organisations report taking active steps to improve their business activities through an ESG lens, with a further 25% engaged in the planning phase of initiatives, compared to 15% and 36% of middle market businesses as reported in Pitcher Partners recent Business Radar report. These figures suggest that while ESG is on the radar, for most organisations it remains in the ‘intent’ phase rather than embedded in operations.
The sector’s slow uptake is likely a reflection of broader operational pressures. The top three hurdles for implementing ESG initiatives for NFP organisations are increased costs and time constraints (63%), measuring and reporting (51%) and shifting operations and culture (37%). In an environment with time and resource constraints, measuring and reporting ESG factors simply isn’t a high priority for most when competing against constant operational pressures.
Governance leads the way
Of the three ESG pillars, governance is receiving the most attention. Over three quarters (77%) of respondents have at least partially implemented governance initiatives, and 23% have fully integrated these into their operations. Social initiatives take the next priority, with 18% of respondents stating they have fully implemented relevant initiatives.
Environmental initiatives, however, rank lowest in the priority pecking order. Nearly a quarter of respondents (23%) reported that environmental considerations have not been addressed at all – underscoring the challenge of balancing mission driven outcomes with long-term sustainability goals.
ESG seen as a tool overcome sector challenges
The top three challenges identified by respondents were increased operating costs, attracting and retaining staff and non-government funding sustainability. Interestingly ESG was highlighted as a possible tool to address two of these three pressures. Respondents saw that the key benefits of implementing ESG initiatives can include enhanced reputation (66%), regulatory compliance and access to subsidies or grants (54%), and improved employee engagement (45%). Far from being just a tick-the-box exercise, ESG is seen as a way to enhance organisational reputation, draw funding (helping with operating costs) and attract talent.
For organisations that have begun their ESG journey, the motivation is clear. A compelling 74% said that aligning ESG with the organisation’s mission was the main driver for investment. Meeting donor, stakeholder, and community expectations was equally important (74%), while 58% cited fulfilling governance expectations as a key reason for pursuing ESG initiatives.
However, 29% of NFPs also site the personal beliefs of those on committees or the board as being a top three factor driving ESG adoption. To ensure ESG strategies remain mission-driven, boards must adopt a clear, objective framework that prioritises aligning with the NFP mission and the long-term impacts.
What this means for you
The not-for-profit sector is well positioned to benefit from a strategic ESG focus – particularly as employees, governments and the community increasingly demand transparency and accountability. While current uptake may be slow, the underlying drivers are strong. As tools, frameworks and partnerships evolve to support ESG implementation, NFPs that invest early will be better placed to strengthen their impact, attract support, and future-proof their operations.
- Start with small, mission-aligned ESG initiatives: Begin with targeted projects that connect directly to your core mission and can demonstrate immediate value to stakeholders.
- Leverage existing governance frameworks: Build on your current governance structures rather than creating entirely new systems for ESG implementation.
- Prioritise measurement of social impact: Focus first on metrics that showcase your organisation’s existing community contributions before expanding to new environmental measures.
- Communicate ESG alignment with potential funders: Highlight how your ESG initiatives address donor priorities to strengthen funding applications and stakeholder engagement.
- Develop ESG partnerships: Collaborate with similar organisations to share ESG implementation costs, expertise, and reporting frameworks.
