First and foremost, all GCC members should be calculating their annual carbon emissions, setting targets, and creating action plans to reduce their emissions. SCFs must be done in addition to, not instead of, effective decarbonisation.
Calculating SCFs Using Revenue
Calculating how much money to set aside each year in a Strategic Climate Fund can be done in different ways depending on the type of organisation.
As a starting point, we recommend finding a figure between 0.1 and 1% of annual revenue, depending on the type and size of the organisation and what is realistic for you.
This will be different for everyone, but, most importantly, whatever the total, your fund should contribute to meaningful change at a level proportionate to your organisation, while also being achievable and financially sustainable.
We recommend using revenue as the default figure from which to calculate your SCF. We make this recommendation for the following reasons:
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Businesses, non-profit organisations, and individuals all generate ‘revenue’, so this figure can be consistently applied across our broad membership.
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Revenue, in its various forms (including sales, subscriptions, and advertising income), is a standard go-to metric for measuring success, and is a simple and easily quantifiable indicator of the financial health of an organisation.
Notes for Nonprofits and Charitable Organisations
For nonprofits and charities, revenue can be referred to by a variety of different names, such as sales, fees, interest, dividends and royalties. A charity may have multiple sources of revenue, such as donations, government grants or the sale of goods or services.
For some nonprofits and charities, it may be preferable to use ‘Unrestricted Funds’ for your SCF calculation. Unrestricted funds are donations that the organisation may use for any purpose so long as it meets aims and objectives outlined in their governing document. Nonprofit art organisations may use unrestricted funds to go towards operating costs for the organisation, or for other costs that are difficult to fund. Other types of donations might be given specifically for certain types of activities and therefore considered ‘restricted’, so it would not be possible to put these towards an SCF.
If sufficient unrestricted funds are not available, then non-profit arts organisations could instead set a target amount for their SCFs and then creatively fundraise towards it. Please contact GCC if you wish to take this approach and we can discuss the best way to achieve it.
The Problems With ‘Profit’
Obviously, ‘profit’ may not be recorded by nonprofits and charities. As GCC has a great number of nonprofit organisations as members, it does not make sense for us to use profit as a metric against which to calculate SCF contributions. Furthermore, profit may also not adequately represent the financial standing of a commercial organisation as it is quite possible for a company to report profits but to go out of business, or for a wealthy and growing company not to register profit. Recorded ‘profits’ can be misleading and manipulated through practices such as ‘expense manipulation’, which involves artificially boosting profits by delaying or understating expenses, or ‘asset valuation’, which involves overvaluing assets and inflating book values and profits. As a result, we consider profit to be an unreliable metric against which to calculate SCF donations.
Alternatives to the Revenue Model
We acknowledge that using revenue might not feel appropriate for all organisations. If this is the case for you, we recommend using a percentage of ‘Net Income’, ‘Sales’, ‘The Bottom Line’, or, for non-profits, a percentage of ‘Unrestricted Funding’.
Depending on the metric chosen, we would expect to see a higher or lower percentage applied for SCF contributions. For example, ‘Revenue’ might have a lower percentage (e.g. 0.2%), whereas ‘Net Income’ might have a higher percentage, (e.g. 0.7%), because net income is calculated as revenues minus expenses, interest, and taxes.
Summary
In short, we trust you to find an appropriate way of calculating your own SCF allocation; however, you must comply with our SCF spending guidance and criteria before claiming it to be a Strategic Climate Fund, as we define it.
Our default recommendation is to find a small percentage of annual revenue and continue doing this annually. If everyone stepped up in this way, we could rapidly decarbonise the visual art sector and provide significant funding for effectively tackling the climate crisis. However, we recognise that alternative metrics and methods may be more appropriate for some individuals or organisations.
If your budget does not immediately allow you to set aside money into a fund, consider using the percentage of revenue method to fundraise specifically for an SCF. In the meantime, we recommend prioritising actions that will decarbonise your own operations without requiring designated funds.
Whatever you choose, please be transparent about the method you have chosen, make sure it generates enough money for meaningful climate action, apply for your SCF following the guidance and criteria and remember - be bold, be ambitious, and be generous!
This is GCC’s recommendation and is applicable for all of our members. We acknowledge other methods for calculating contributions to climate action can be effective and may be preferable to certain organisations - see the website for more information on how others do this and how GCC’s policy has evolved.
Further SCF reading:
