Last updated: Jan 2012
A Match Made in Heaven or a Deal with the Devil?
Ruth Rosselson investigates the ethical issues that arise when charities seek partnerships with businesses.
On 10th July 2011, British tabloid News of the World offered charities free advertising space in its final edition, after a huge public backlash over phone hacking revelations forced it to close. However, rather than jumping at the chance for the free publicity, a huge number of charities, including Water Aid, the RSPCA, Action Aid and the Salvation Army, rejected the offer.
Several charities were quoted as saying that it would have been inappropriate to take up the offer, and could upset their existing supporters. It isn’t the first time that a company’s apparent generosity has been turned down. In 2004, Breakthrough Breast Cancer refused a million pound donation from Nestlé, due to its unethical marketing of breast milk substitutes.
On the flip side, accepting corporate sponsorship from problem companies can also be headline news. In 1997, around 70 breastfeeding counsellors with the National Childbirth Trust were so incensed by its decision to accept sponsorship of Sainsbury’s – which sells its own brand of breast milk substitute – that they quit the NCT altogether, setting up the Breastfeeding Network.
More recently, the National Obesity Forum was criticised for accepting a £50,000 donation from Coca-Cola, despite the fact that it had itself criticised the UK government for accepting money from junk food companies to help pay for public health campaigns.
Sometimes, the publicity of the partnership results in its collapse. Last year, RBS announced that it would not sponsor 2012 Climate Week, following accusations from campaigners of ‘corporate greenwash’ and hypocrisy because of RBS’ involvement in financing high carbon and polluting industries.
Types of relationship
Business and charity relationships aren’t just about straight financial donations. M&S’s partnership with Oxfam is one example, where customers are encouraged to donate their unwanted M&S clothes to Oxfam, receiving a £5 voucher for M&S as a reward. Oxfam has raised millions from the sale of the donated clothes, which have also been diverted from landfill. Meanwhile M&S ensures consumers return to its shops and enhances its reputation as a responsible company.
This is to some degree a ‘cause-related marketing’ arrangement. Other well-known cause-related marketing campaigns include Unicef and Pampers’ one pack one vaccine campaign, which has the aim of eradicating maternal and newborn tetanus. The rise in such campaigns are a result of companies thinking more strategically and “looking for partnerships for mutual benefit” says Jane Arnott from the Charities Aid Foundation. 
It’s seen as a win-win situation with the cause benefiting from the finances raised, and the companies seeing an increase in sales, loyalty and an improvement in their corporate image. As well as the financial relationships, businesses are also increasingly engaging in non-financial relationships – where companies lend their staff and expertise to charities. “Charities can benefit through the skills and experience coming into the organisation while the businesses also benefit both in terms of their reputation and profile and in more practical terms through higher staff satisfaction and training opportunities,” explains James Allen, policy manager at the National Council for Voluntary Organisations.
Donating for the greater good?
Dan Lyons at Uncaged is currently behind a campaign to call the Olympics to account because of sponsorship by Procter & Gamble. “Procter & Gamble’s cruelty to animals [through its continued use of animal testing] is in direct conflict with the IOC’s professed claims to support ethical Principles”, says Lyons. “You can run Olympics without becoming a corporate whore. The sponsorship money that P&G is putting in is not necessary or essential. Bunging money to get good publicity in no way makes up for the fact that they are gratuitously cruel”, he says. He argues that many corporate sponsorship and partnership deals aren’t done ‘for the greater good’. “They’re donating to get themselves publicity. They give these token amounts to welfare-related causes and use that as a way of diverting attention from the core issue which, in this case, is the systematic use of animals in testing. It’s a way of actively avoiding the real issues”.
Baby Milk Action, which has spearheaded the ongoing boycott of Nestlé, agrees that companies can sponsor “good causes to divert attention from malpractice elsewhere”.
Mike Brady from Baby Milk Action also points out that in some cases it is used as a way of undermining moves by legislators. “We found that Nestlé was using its association with the British Red Cross in Africa to try to prevent legislation on marketing of breast milk substitutes” he says. Meanwhile, British Red Cross found that its supporters were upset with the association, cancelling donations as a result.
Platform London is currently campaigning against the Tate’s relationship with BP, arguing that BP’s sponsorship is not philanthropy at all. “It is the BP marketing department outsourcing a bargain PR campaign from Tate”.
It argues that oil companies should go the way of arms manufactures and tobacco companies, which “once proud sponsors of many a sporting and cultural event, lost this marketing opportunity due to public outcry. According to Platform: “As we transition towards a low carbon economy, it is inevitable that oil companies will find themselves increasingly marginalised in terms of partnership and sponsorship”. 
The current financial climate means that it’s becoming more and more necessary for charities to seek out funding or partnerships from the business sector. “The economic climate has hit charities in three ways,” says Jane Arnott. “Cuts in public sector funding, trusts and foundations have less money to give in grants, and individual donations are also falling”.
James Allen agrees. “The operating environment is extremely tough,” he says. “Charities have seen significant cuts and it’s having an impact”.7 As a result of this, charities are “looking for areas of giving that they haven’t necessarily used before, or haven’t used to their full potential, and corporate partnerships are one of them” says Arnott.
While the need for charities to diversify their income seems to be more essential than ever, it’s important that, in the quest for financial stability, the charity doesn’t lose its mission, or public support. As in any business relationship or partnership, there is an element of risk, says Allen.
“We’d encourage our members to think carefully before entering into any relationship,” he says. “Think very carefully in terms of public trust and confidence, whether the relationship will be beneficial for the charity, whether it will take a charity closer to its organisational aims or not, and what the reputational damage could be”.
It’s a view that’s echoed across the board, from campaigners to charity advisers. The Charities Commission emphasises that Trustees have a responsibility to do what’s in the best interest of the charity, including maintaining its independence. “Trustees need to demonstrate to their potential supporters or donors that their decision making processes and that the decisions they’re taking are in the charity’s best interests” says a spokesperson from the Commission.12 This means looking at the impact of a partnership, at the potential reputational risks, and at being transparent about the process.
Many charities have developed formal funding policies, which set out the types of business that they will and won’t accept funds from, or partner with. Others take it on a case-by-case basis. Arnott argues that a blanket ethical policy for all charities to adopt isn’t useful.
“It will depend on the nature of the charity and the nature of the company.” Allen agrees. “Generally speaking we would advise charities to have a policy and that would be a responsibility for their trustees, but I’m not sure if it’s helpful to have a universal policy.”
For single-issue charities – such as the Mines Advisory Group – a funding policy can be relatively straightforward. “We can’t be involved with any organisation that produces or transfers or is involved with the export of land mines and other weapons; anything involved in the arms trade,” says Sean Sutton, the communications manager. Sean says “You could make the argument that companies that have gained from the sales of weapons that cause problems after war should contribute to trying to solve the problems. But we don’t, and we’d have to be very careful if companies were using donations to try to pursue an ‘ethical’ perception. We just wouldn’t want to be involved in anything like that”.
Having very high ethical standards could be problematic with your trustees who have to think holistically in the charity’s best interests – which will include overseeing financial stability as well as the reputational risk. Liz O’Neill from the Vegetarian Society explains why the Society doesn’t have a formal ethical screening policy: “The bottom line is that we are a charity charged with one area of concern, vegetarianism. As with all charities, we have a legal obligation to make best use of all donations (including membership fees) and other income to further our specific charitable aims. We believe that we can only legitimately avoid an association if we can demonstrate that it would damage our relationship with our supporters”.
Funding out about the risks
When considering any kind of business relationships, it’s important to look at the risks and benefits to decide whether the company is a ‘good fit’ for a charity - including whether it’s compatible with a charity’s mission and values. That could include commissioning a full scale ethical screening report or using online tools such as the Ethical Consumer’s Corporate Critic database, to make sure a company’s subsidiaries or activities aren’t going to undermine your charity’s aims or mission. Mike Brady emphasises the importance of good research and in setting up a robust policy from the outset: “There are a whole host of issues around there and it might not be immediately apparent what those might be” he says.
Having a set policy about the types of companies that you would never work with can also be useful in preventing the same discussions happening multiple times amongst your trustees. More information about how to develop such a policy is available on Ethical Consumer’s Corporate Critic website.
Happily, not all business donors are large multinationals with dubious ethical records. Best buy company Lush often favours donating to more grassroots charities over higher profile partnerships with larger charities. Naturesave, another Ethical Consumer best buy, donates 10% from some policies into a trust fund which is used to benefit environmental and conservationist projects and charities in the UK. 
Overall, all the experts seem to agree, for charities to be financially sustainable in the long-term, they are going to have to diversify their funding streams. That will include looking to large philanthropic donors, applying to trusts and foundations, looking at generating income by selling their goods and services, and ultimately being strategic about the types of businesses that they enter into relationships with.
Advice on how to develop a policy is available on our Corporate Critic website: www.corporatecritic.org/info/ps/espf.aspx
Ethical Screenings: Ethical Consumer’s own research service for charities
The charity commission has some excellent background documents to help Trustees with their responsibilities: www.charity-commission.gov.uk
Particularly relevant are the following two documents:
Charities & Fundraising May 2011 and CC20 & Charities and Investment Matters: A guide for trustees Oct 2011.
Charities Aid Foundation: www.cafonline.org
1 BBC News online: Charities reject News of the World advertising offer, 9/7/11 www.bbc.co.uk/news/uk-14087518 2 Guardian online 6/5/04 Cancer Charity Turns down £1m Nestle Donation www.guardian.co.uk/society/2004/may/06/charities.cancercare 3 Independent, 25/9/07 Health: The NCT’s provisional wing www.independent.co.uk/news/health-the-ncts-provisional-wing-1241028.html 4 Daily mail, 10/7/11 www.dailymail.co.uk/news/article-2013062/Obesity-charity-paid-50k-secret-Coca-Cola-promote-sweeteners.html 5 Guardian Business 28/11/11 www.guardian.co.uk/business/2011/nov/28/royal-bank-scotland-climate-sponsorship?newsfeed=true 6 Telephone conversation with Jane Arnott from Charities Aid Foundation, 13/1/12 7 Conversation with James Allen NVCO, 11/1/12 8 Telephone conversation with Dr Dan Lyons, Uncaged 11/1/12 9 Baby Milk Action website viewed 18/1/12 www.babymilkaction.org/action/nspons.html 10 Conversation with Mike Brady, Baby Milk Action, 13/1/12 11 Culture Without Oil, Platform London published November 2011 12 Conversation with spokesperson from Charity Commission 12/1/12 13 Email from Liz O’Neill at the Vegetarian Society 12/1/12 14 Naturesave website, viewed 18/1/12 www.naturesave.co.uk/trust_naturesave_about.html.