Governance and climate change. More attention is being given to the interplay of these seemingly unrelated issues, including at the upcoming 2024 Stanford Social Innovation Review Nonprofit Management Institute – What’s Next for the Social Sector? This year’s conference, taking place on September 17-18, is organized as a hybrid, allowing for in-person and virtual attendees.

We have previously written a post – What’s Your Nonprofit Doing to Fight Climate Change? – touching on why addressing climate change may be in the best interests of most charitable organizations, even if they do not have a mission focused on the physical environment. In this post, we’ll look at this issue from a governance lens.

Fiduciary Duties

Directors are subject to two fiduciary duties in carrying out their governance responsibilities:  the duty of care and the duty of loyalty. Within such duties are various subduties that some governance professionals may refer to, including the duty of obedience.

Meeting a director’s duty of care generally requires acting in a reasonable and informed manner under the given circumstances.  The standard of care is typically expressed as that which “an ordinarily prudent person in a like position would use under similar circumstances.”

Meeting a director’s duty of loyalty generally requires acting in good faith and in the best interests of the corporation. The key to meeting this duty is to place the interests of the corporation before the director’s own interests or the interests of another person or entity. For charitable corporations, the best interests of the corporation must be viewed in light of its charitable purposes or mission. See Restatement of the Law: Duty of Loyalty.

Charitable Purposes and Values

The charitable purposes of a charitable corporation are first evidenced by its articles of incorporation and then by its bylaws and other governing documents. They may also be evidenced by the corporation’s representations on its tax-exemption application, annual information returns, website, grant applications, and fundraising solicitations. See, e.g., Charitable Trust Doctrine.

Lawyers will generally advise that, relative to a director’s fiduciary duties, the expressly declared charitable purpose statements are the only ones the board must seek to advance when making decisions about broader organizational matters. And for liability and risk mitigation purposes, I would agree.

However, I have argued in previous posts that a director’s duty of loyalty to act in the best interests of the charity should also factor in the charity’s core values. While some charities publish their values on their websites and other communications, there are often unstated values that the charity leadership may believe to be guiding principles. For example, in managing activities and making decisions, a charity may be guided by the following principles:

• do not advance our mission in a way that also harms our intended beneficiaries
• treat our intended beneficiaries (and others) with respect and dignity
• treat our broader community and environments in which we work with consideration and respect

Failure to consider these principles and their corresponding values may not create liability risks for a charity or its leadership, but it would be a failure of sound governance and, in my opinion, a breach of their fiduciary duty to act in the best interests of the organization. For charities that desire greater certainty regarding any unstated by guiding principles and values, incorporating them as part of the purpose statement in their governing documents is worth discussion and serious consideration.

Purpose-Driven Board Leadership

Purpose-Driven Board Leadership (PDBL) is a nonprofit governance model characterized by four fundamental principles that define the way that the board sees itself and its work:

• Purpose before organization: prioritizing the organization’s purpose, versus the organization itself.
• Respect for ecosystem: acknowledging that the organization’s actions can positively or negatively impact its surrounding ecosystem, and a commitment to being a respectful and responsible ecosystem player.
• Equity mindset: committing to advancing equitable outcomes, and interrogating and avoiding the ways in which the organization’s strategies and work may reinforce systemic inequities.
• Authorized voice and power: recognizing that organizational power and voice must be authorized by those impacted by the organization’s work.

Former CEO of BoardSource Anne Wallestad wrote the first article on PDBL, The Four Principles of Purpose-Driven Board Leadership, which focuses on the board’s obligation to prioritize decision-making and direction-setting on the organization’s charitable purpose, even ahead of the organization’s own livelihood. In the context of PDBL, Wallestad defines purpose as “a melding of the concepts of mission and values in pursuit of vision.” The prioritization of purpose over organization requires the board to shift its viewpoint from being organization-centric to ecosystem-centric.

The principle of purpose before organization makes sense from a duty of loyalty perspective for charity board members, as I discuss in Purpose-Driven Board Leadership, Legally Speaking.

Respect for ecosystem also resonates where charities are intended to serve future generations and have core values consistent with the often-unwritten principles I identified above.

Similarly, an equity mindset is important when considering intergenerational equity and other equity issues in delivering charitable services or benefits. If an organization’s values include fairness in delivering services across different communities, the best interests of that organization would include determining how that may be best accomplished. Board members of such organization would likely not be meeting their fiduciary duties if they maximized the amount of services delivered but without any attention to what segments of their targeted beneficiaries were being served.

Authorized voice and power are closely related to an equity mindset. If an organization’s values include serving its intended beneficiaries in a manner that would be most effective and respectful for their particular needs, the best interests of the organization would include having leadership that is adequately connected to the communities of such beneficiaries.

Climate Change

Most charities do not have a charitable purpose directly related to protecting or preserving the environment. But the environment impacts everything in a community.

Based on the almost universal acceptance by scientists that human activity causes climate change, we’ll assume this belief as fact. Where advocacy can change human activity in a way that mitigates the harms caused by climate change, a community may benefit by mitigating or avoiding the harms caused by certain natural disasters (e.g., fires, droughts, tsunamis, hurricanes, heat waves, rises in sea levels) on health, living conditions, access to necessities, and community infrastructures. Accordingly –

A poverty alleviation charity would justifiably be active in climate change advocacy because climate change causes poverty and distress.

A child welfare organization would justifiably be active in climate change advocacy because climate change endangers children’s welfare.

A health care charity would justifiably be active in climate change advocacy be climate change adversely impacts community health.

A racial justice organization would justifiably be active in climate change advocacy because climate change disproportionately impacts BIPOC communities.

A social services organization would justifiably be active in climate change advocacy because climate change adversely impacts (a) beneficiaries’ health, safety, and service delivery and (b) service providers’ health and safety.

A school would justifiably be active in climate change advocacy because climate change adversely impacts (a) students’ health and their ability to learn, (b) teachers’ health and their ability to teach, and (c) access to educational facilities.

A symphony would justifiably be active in climate change advocacy because climate change adversely impacts (a) patrons’ ability to access and learn from performances and (b) the facilities at which performances are given.

Putting it Together

Purpose-Driven Board Leadership guides a board towards focusing on the advancement of mission, vision, and values – both short- and long-term – beyond the charity’s own part in such activities. This means taking into account how the charity’s decisions and activities impact the communities it serves and exists within. And to the extent that the charity values providing services across communities in a fair and equitable manner, this means planning and finding solutions that address inequities, whether caused by the charity or not. This can only be done by including leaders who are connected to the communities the charity serves.

The adverse impacts of climate change on communities served by a charity are grossly underappreciated, and lack of planning and thinking around these impacts can greatly harm many charities’ ability to advance their missions in a manner consistent with their values. These impacts are rapidly getting worse, and future generations a charity intends to serve will be most impacted, particularly those who belong to BIPOC and other marginalized groups. For the vast majority of charities that desire to maintain or grow their positive impacts on the communities they serve and exist within, advocating for, and, in some cases, adopting policies and practices to address climate change further their organization’s best interests. PDBL provides a very valuable and logical framework for such activities.