Charities in the ethical spotlight
Over 180,000 charities are currently registered within the UK, each competing for your valuable money and time. With cuts in public spending, donations falling by a fifth in 2012, and an increasing demand on charitable services, the sector is in a desperate state. The Charities Aid Foundation reported that ‘one in six charities believe they may close in the coming year, while nearly half say they are being forced to dip into reserves. One in three say they fear being forced to cut services. (1)
Small to medium sized charities are the most vulnerable, as are the least ‘fashionable’ causes. According to the National Council for Voluntary Organisations (NCVO), the most popular charities by cause, receiving 39% of total donations in 2012, are medical research, health and disability charities. Overseas aid charities received 10% of total donations, animal charities received 6% and surprisingly, environment causes received just 3% of total donations. (2)
Food for thought
Personal interest and emotions may be the primary factors that determine which causes people donate to, but what other factors should be considered when selecting the worthiest charity of them all?
This difficult question can be approached from multiple perspectives, including the cost-effective approach employed by the Oxford based research group, Giving What We Can (GWWC). GWWC argues that ultimately, the most important issue to consider when choosing a charity to donate to, is the effectiveness and impact of its work. It has been argued that saving a life is one of the most morally important acts that we can do.
Charitable work that focuses on saving lives is therefore more valuable and cost-effective than other charitable work, for example, donating to a private school.3 Consequently, GWWC’s work focuses on comparing and recommending the best health charities to donate to. (However, GWWC only reviews charities with one core focus. They therefore do not assess charities such as Oxfam who have multiple projects focusing on multiple areas.).
According to consumer surveys, a charity’s transparency about the impact of its work, how decisions are made, and how funds are raised and spent, are all hot topics when deciding on which charity to donate to. (4,5)
Social and environmental performance table
View the comparison table.
For all 21 charities examined in this study, up-to-date detailed information on all of these issues is presented from audited annual reports and reviews, which were generally available on the charity’s website. All charities are members of the Fundraising Standards Board, or equivalent, and all commended the valuable work of its volunteers.
In regard to charity expenditure, the amount spent on charitable activities compared to overhead and fundraising costs, has been highlighted as an important issue for consumers. Various research groups, including GWWC, dismiss this as an important comparative criteria as high administration costs are not necessarily correlated to less-effective charitable work. (6)
Another spending issue that recently received media attention is Chief Executive pay. In August 2013, the Daily Telegraph reported 30 staff at 14 leading UK foreign aid charities were paid £100,000 or more in 2012. When questioned about these high salaries, the charitable sector defended itself by stating “It’s essential that the sector attracts skilled and experienced professionals, not keen amateurs. If we compare professional levels of pay in the private and public sectors, our chief executives earn much less”. (In 2012 Coca Cola CEO Muhtar Kent received $21.6 million in remuneration). (7)
As a consequence of this public debate over pay, the National Council for Voluntary Organisations (NCVO) and the Charity Commission are currently creating guidelines for trustees on how to set ‘appropriate’ pay.8 According to Christian Aid, the Hutton Fair Pay Review presented a publicly recognised methodology for setting a limit on the highest paid employee; it used a 6:1 ratio based on median salary. Christian Aid stated by email that its pay ratio was 4:1. The top pay bands for all charities within this study were found within annual reports, and are presented in the table. Other than for Christian Aid, pay ratio information could not be found.
Who’s working with whom?
One subject that is becoming of increasing interest to consumers is corporate-charity partnerships. Sam Wilson from the Fundraising Standards Board (FSB) stated that “the corporate market was increasingly targeted by charities looking to diversify their income streams.” She said “it was ultimately up to the charity and its trustees to decide whether working with a specific corporate organisation would conflict with the charity’s objectives and values, and that the FSB recommended that charities create an ethical giving or donation policy to avoid such conflicts”. Similar issues are raised when a charity procures goods and services. (9)
As seen in the table overleaf. charities addressed ethical investment, partnership and procurement policies to varying degrees. The better organisations, such as Christian Aid, Oxfam and the Marine Stewardship Council, had policies that discussed some form of ethical screening process that assessed corporations based on activities conflicting with the charity’s objectives and values. These policies were applied to the charity’s investments, corporate partnerships and procurement processes. Other charities listed businesses they refused to work with, e.g. Cancer Research UK stated it would not partner or invest with tobacco companies.
When these policies were compared with the corporations that the charities were actually working with, a couple of surprising results appeared. For example, Oxfam’s principal bank RBS, and Oxfam’s partnership with Unilever. (Unilever has multiple accusations, even from Oxfam, of violating workers’ rights. (10) RBS has been criticised for avoiding tax and heavily investing in the fossil fuel and the nuclear industries). (11) If you actively avoid buying products from companies such as Coca Cola and Tesco due to their links with controversial issues, and they partner with your favourite charity, it may be worth contacting them to ask for an explanation.
Policies on workers’ rights and the environment
Unlike corporations which are focused on making a profit, charities have a legal obligation to focus funds on their core values and objectives. This can potentially restrict charities from investing funds on developing policies that may not be directly related to the charity’s work e.g. the NSPCC spending donated funds on monitoring its ecological footprint and developing an externally verified environmental report. However, charities are facing increasing pressure both internally from employees, and externally from donors, to start addressing their own social and environmental impacts.
With the exception of the RSPB, charities whose work focused on the environment, animals or health provided very little, if any information in regard to addressing workers’ rights in their supply chain. As may be expected, out of all charities examined, the development and aid charities had the best Supply Chain Management (SCM) policies. They discussed the International Labour Organisation’s Core Conventions, auditing processes, and some were members of an ethical trading body.
When asked why charities, including those whose work focused on promoting human and workers’ rights, should have a supply chain management policy, Peter Frankental, Economic Programme Director for Amnesty International UK, commented “It is important for charities, including Amnesty International, to have a supply chain management policy, so as to ensure that the charity’s own code of conduct is consistent with its values and with international human rights standards; to ensure its actions reflect what it asks others to do; e.g. companies; to protect its reputation; key stakeholders may expect the charity to have such a policy in place, and it’s the right thing to do”.12
It may be expected then, that environmentally-focused charities would have the better environmental reporting. This was not necessarily the case. Two out of the six environmentally focused charities looked at provided no information on the charity’s own environmental impact. The two wildlife and conservation charities, WWF UK and the RSPB, had the best environmental policies, as did Oxfam, Christian Aid and the British Red Cross. Others provided some discussion of their organisation’s environmental impact, but failed to commit to reducing their identified impacts.
The gender issue
Inclusivity and equality are key values within the charity sector, and yet charity boards are still predominantly “stale, pale and male”.13 Considering women are 61% of all donors to voluntary organisations, 68% of its workforce and a majority of volunteers, it is disappointing that 9 out of the 21 charities studied had 30% or less women on their board of trustees, 33% had a female CEO and just 29% had a female chair.(14) Only Oxfam exceeded the 50% women mark, in addition to having a female chair of trustees. Internal inequality issues were also highlighted within Norma Jarboe’s ‘Women Count’ report, (14) which stated that a pay gap of 16% between male and female chief executives in voluntary bodies was currently observed, with the pay gap rising to almost 30% for some roles.
The importance of having a diverse board and gender balance is clear: more diverse boards provide a broader range of perspectives on issues, are better able to serve the communities that they represent and generally make better decisions. Numerous articles viewed quoted a McKinsey & Co study, which found that organisations across Europe, Asia and America which had three or more women in senior positions scored higher on nine criteria of organisational excellence.
These included leadership, direction, accountability and control, innovation, external orientation, capability, work environment and values. (15) Although the charity sector performs better than the private sector (FTSE 100 had 15% female chief executives compared to the Charity 100 which had 32% female chief executives), the charity sector still has work to do to achieve balanced gender representation on boards. The Women Count report presents possible methods
for achieving this.
As highlighted in a report by Animal Aid, numerous health charities conduct or fund research on animals, including Cancer Research UK (who commented that they only use animal testing where there are no alternatives) and the British Heart Foundation. Some organisations may not be directly involved in animal testing, such as Marie Curie Cancer Care, but may be members of the Association of Medical Research Charities (AMRC) – an organisation that supports and promotes the use of animals in laboratories. (16) Macmillan Cancer Support was the only health charity studied that did not support animal testing.
A full list of health charities and their current stance on animal testing can be found here.
Additional animal welfare criticisms have been raised against several conservation charities. The Roots of Blood campaign has accused the Woodland Trust of killing roe deer and other wildlife for conservation purposes, and WWF was accused of supporting wild game hunting and endorsing the Canadian seal slaughter and animal testing for chemical trials. (17,18)
Movey Your Money
Move Your Money scores present information on the ethics of banks. The lower the score, the higher the recommendation to switch banks due to the bank’s link to controversial issues. The higher the score, the better the bank in terms of ethical ratings. For more information on the Move Your Money campaign and the scoring methodology, visit www.moveyourmoney.org.uk
1 James Doward, ‘One out of six charities say they may have to close in 2013’, The Guardian, 9/12/2013, www.theguardian.com/society/2012/dec/09/one-in-six-charities-close
2 NCVO, ‘What are the main trends in charitable giving?’ 01/2011, www.data.ncvo.org.uk/a/almanac12/almanac/voluntary-sector/income-in-focus/what-are-the-main-trends-in-charitable-giving
3 BBC, Charity, viewed 11/2013 www.bbc.co.uk/ethics/charity
4 Charity Navigator, Year-End Giving Trends: 2012 Poll Results, 11/2013, www.charitynavigator.org 5 Charity Commission, Transparency and Accountability, 06/2004 www.charitycommission.gov.uk/media/95441/rs8text.pdf, https://www.cafonline.org/PDF/UKGiving2012Full.pdf
6 Giving Evidence, 2/2013 www.giving-evidence.com/2013/05/02/admin-data
7 BBC, Charity Commission chairman issues charity pay warning 7/2013 www.bbc.co.uk/news/uk-23584191 Global News, Coca-Cola paid CEO $21.6 million for 2012, up slightly from previous year, 03/2013 www. globalnews.ca/news/401111/coca-cola-paid-ceo-21-6-million-for-2012-up-slightly-from-previous-year
8 Third Sector, NCVO and Charity Commission to draw up guidelines on executive pay, David Ainsworth, 08/2013 www. m.thirdsector.co.uk/article/1194733/ncvo-charity-commission-draw-guidelines-executive-pay?bulletin=third_sector_management_bulletin
9 Phone conversation, Sam Wilson, FSB, 11/2013
10 Oxfam, Labour Rights in Unilever’s Supply Chain, 01/2013 www. policypractice.oxfam.org.uk/publications/labour-rights-in-unilevers-supply-chain-from-compliance-to-good-practice-an-oxf-267532?cid=rdt_unileverlabourrights
11 World Development Movement, Banking While Borneo Burns, 09/2013 www.wdm.org.uk/sites/default/files/banking_while_borneo_burns.pdf
12 Email response, Peter Frankental, Amnesty International 11/2013
13 Ian Joseph, Charities need to do more to develop female leaders, 6/6/2013, www.theguardian.com/voluntary-sector-network/2012/jun/06/charities-need-develop-female-leaders 14 Women Count, 2012, Norma Jarboe, www.women-count.org/Women-Count-Report-2012.pdf
15 ICAEW, Advancing women’s leadership in the charitable sector, www.icaew.com/en/technical/charity-and-voluntary-sector/volunteering/charity-trustee/charity-trustee-role-and-responsibilities-new/advancing-womens-leadership-in-the-charitable-sector
16 Animal Aid, Health Charities and Animal Testing, www.animalaid.org.uk/h/n/campaigns/experiments/all/281
17 Roots of Blood Campaign website, viewed 11/2013, www.roots-of-blood.org.uk
18 PETA, What Does WWF Really Stand For?, 08/2011, www.peta.org