A new Third Sector Governance Code for 2024

The Scottish Governance Code for the Third Sector was originally developed in 2018 by the Third Sector Governance Forum. Designed specifically for Scotland’s voluntary sector, it provided a statement of best practice on what good governance looks like. Since then, both our understanding of good governance and stakeholders’ expectations have evolved.

Five years on from its launch, with a pandemic, digital change, environmental crisis, and a global demand for greater equality, diversity, and inclusion, we knew we had to update the Code. So in 2022 we undertook a review of the Code with the support of the Robertson Trust. We carried out a wide-ranging consultation and have now incorporated the recommendations into a newly revised Code.

This Code has still got the five broad principles of good governance that act as a point of reference for trustees in carrying out their role: Organisational Purpose; Leadership; Behaviour; Control; Effectiveness. The changes we’ve made are to update and strengthen the detail of how you demonstrate the principles in the following ways.

Equality, diversity and inclusion

The initial Code was based on the understanding that all voluntary organisations should fully recognise equality, diversity, and inclusion (EDI) as an essential part of good governance, and this underpinned all the five principles. But, generally, charity boards are still less diverse than the general public and do not reflect the communities they serve. Both the Black Lives Matter Movement and the #CharitySoWhite campaign sparked reflections about power, privilege and inequality in our sector, and the Code review found that many thought that what we had just wasn’t enough.

So, with help from Third Sector Human Rights and Equalities we’ve strengthened the language and detail surrounding EDI throughout the Code. Under the Leadership principle, we’ve amended the statements to ensure that trustees create an inclusive culture through their own behaviour and embed EDI across all aspects of their organisation.

Similarly, under the Effectiveness principle, we’ve added the need for trustees to proactively identify and implement opportunities for diversity and representation on their board and put EDI at the centre of how they work.

We hope that further understanding and implementation of the principles of EDI will support and empower boards to be more effective and informed, and to make better decisions when it is central to their ways of working.

Control and risk management

Many of the respondents to the Code review highlighted the need for trustees to better analyse the external environment so they can fully identify, manage and report on risks and opportunities. We added ‘risk management’ to the title of the Control principle to make this more explicit, and strengthened a number of the statements. We also further developed the references to safeguarding, emphasising that trustees should develop and provide a safe and respectful culture for all, as well as comply with legal safeguarding duties and responsibilities.

The evolution of good governance was also seen in consultation respondents request for the Code to better reflect the importance of trustees taking account of climate change and other environmental factors in their decision making. Under the Control and risk management principle we’ve added that the need for trustees to regularly consider how climate change will impact service users and the way they deliver activities. Take a look at the Growing Climate Confidence website if you need more help on taking positive climate action on your board.

Partnership working

Against a background of growing funding challenges and cycles of change, under the principle of Organisational Purpose we added that trustees should regularly monitor and review the sustainability of their organisation, and evaluate the benefits and risks of collaboration or merger. In addition, the revised Code also suggests that trustees should proactively consider dissolution if other organisations are fulfilling similar purposes more effectively and/or if the organisation’s viability is uncertain.

Board dynamics

Recognising that inter-personal dynamics and dysfunction on a board can destroy an organisation, the revised Code has strengthened trustees’ responsibility to manage both real and perceived conflicts of interest in line with the law, their governing document and conflicts of interest policy. We’ve also highlighted that the board collectively need to deal with any dominant trustees, or power imbalances, which may affect an organisation.

Scotland’s Third Sector Governance Forum would like to thank everyone who contributed to the review and are keen hear your thoughts on the revised Code. Whether you’re a new trustee or a full-on governance geek who’s been on large charity Boards for many years, we want your input. Governance evolves, so we want to know if we’re getting it right and how you’re using both the Code and SCVO’s Good Governance Checkup.

Join us on 16 January for a free lunchtime Good Governance webinar to hear more about the Code update and get some practical hints and tips on good governance.