Our partners Lime Green Consulting have brought out a new blog post on a critical topic that we think you'll find particularly relevant and beneficial. We've included a brief overview below, and you can visit their website here to view the full blog.
The cost-of-living and energy crisis is the latest major headache for charities and social enterprises, with many experts now predicting that the impact could be more severe than the pandemic.
When the outlook is so serious, and you have a million other things to do, it might be tempting to put off thinking strategically about this, and simply hope that the worst projections don't come true. But - I can’t stress this enough - this is a crisis to tackle head on, because there are things you can do to navigate your organisation through the worst of it.
Firstly, how will charities and social enterprises be impacted?
Rising energy bills will push up your running costs and project costs, particularly if you have large or older, energy-inefficient premises, or run lots of energy-intensive activities - for example activities involving cooking, electrical machinery or digital equipment.
Inflation is forecast to hit historic levels, so the cost of pretty much anything you need will increase - fuel, food, materials needed for activities, services provided to you by businesses.
Increasing staffing costs - rising costs will impact your staff too, making it more expensive for them to travel to work, feed their family etc. In a sector already known for low pay, this will put pressure on charities to pay staff more - Pro Bono Economics previously reported that to ensure that wages don’t fall in real terms, charities would need to increase salaries by 8.8% between 2021 and 2024.
As costs increase, the real value of existing grants and donations goes down. Again, let’s look at what Pro Bono Economics say: a grant worth £100,000 per year in 2021 will only be worth £94,000 by 2023, and a monthly direct debit of £20 in 2021 will have effectively depreciated to £17.20 by 2026. These figures are all based on inflation estimates that may already be too optimistic.
All this points towards you having to spend more to achieve the same impact - bad news, especially if you’re reliant on funders with antiquated views on how much things cost, and what they're willing to fund.
But charities can’t control inflation and rising energy costs - so what can you do in response?
1. Urgently re-budget
Before deciding what action to take, you need to understand exactly how your organisation will be impacted. This will depend entirely on your circumstances and what you do.
2. Ask funders (and donors) for help
If you’re currently in receipt of a multi-year grant, contact the funder and explore whether it's possible to renegotiate the grant amount for future years, based on the unexpected and unavoidable rise in your costs.
3. Look for cost savings
This crisis isn’t your fault, but there will still be things you can do to make savings, even if this only makes a modest difference in the face of rising costs.
Visit the Lime Green Consulting website to view the full blog.