The operating environment for charities is extremely tough. Cuts in public sector funding, fewer grants from trusts and foundations and a fall in individual donations means that charities are increasingly looking at areas of giving that perhaps they haven’t used before – or used to their full potential. Corporate partnerships, sponsorship deals and cause-related marketing are just some of the areas that many charities are looking to exploit, as the need to diversify income becomes ever greater.

However, as James Allen, policy manager from NCVO points out, working with corporates, as with any business relationship, carries an element of risk.3

 

1.1 Reputational Risk

One of the biggest risks of working with a corporate – or even accepting substantial sums of money from one – is the risk to a charity’s reputation. In 2011, 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. A comment on the Daily Mail website, reporting the donation sums up the risks to the organisation’s reputation: “Wow, I’m disappointed. I can’t trust the National Obesity Forum’s claims or advice now”.4

Sometimes, the negative publicity of a partnership backfires so much that the partnership collapses. In 2011, RBS announced that it would not sponsor 2012 Climate Week, following accusations from campaigners of ‘corporate greenwash’ and hypocrisy because of RBS’s involvement in financing high carbon and polluting industries.5

The decision for a charity or not-for-profit to enter into a partnership or relationship with a commercial company is not one to be taken lightly, say experts. Within charities, it is the Trustees’ responsibility to protect the charity’s reputation as well as its assets. This will include looking at the reputational risk of any business relationship – whether the company is seeking to donate money or enter into a more complex or long-term relationship. “The jargon is risk management” says a spokesperson from the Charity Commission. “It’s important to really think through – what are the risks in doing – or not doing – a certain thing. There may be financial risks in not engaging in a relationship, but there could also be reputational risks to consider” says the Commission.6 

When thinking about the reputational risks, James Allen cautions charities to think carefully both in terms of “public trust and confidence” as well as in practical terms about “whether the relationship will be beneficial for the charity or not, and whether that relationship is taking a charity closer to its organisational aims – or not”.3

 

1.2 Changing public perceptions

A 2009 poll found that most shoppers said that they expected companies to act responsibility towards the environment and to producers in developing countries.7 In 2011, despite the economic downturn in the UK, the sales of ethical goods and services remained resilient and even increased by 9% to £46.8bn.8

Research for the 2010 Ethical Consumerism report found that 55% of people avoided a product or service because of a company’s behaviour. Clearly, if some consumers are going out of their way to avoid commercial companies because of links to controversial issues, they could avoid donating to charities linked to those companies too. James Allen from NVCO says that the public does care about the sorts of relationships that charities have, and are increasingly aware of the issues, both in terms of as consumers, and in terms of the causes that they support.3

Confusingly perhaps, other surveys have shown that around 55% of respondents say that charities should accept donations from anyone.(10) Nevertheless, accepting anonymous donations from companies carries with it completely different reputational risks to putting a charity logo on products on supermarket shelves. The surveys giving these kinds of results do not apparently place before consumers the full variety of possible commercial arrangements.

It’s also important to take into account changing public perceptions of what is acceptable. “Sponsorship shifts have occurred on numerous occasions according to changing social norms and contexts” says Platform in its Culture Beyond Oil report. “Many ... cultural institutions were receiving tobacco money ...yet now tobacco logos are absent from the cultural sphere.” While some might argue that sponsorship “should be taken from any legally registered company”, this sidesteps any ethical considerations and ignores public perceptions say Platform. “Arms manufacturers and tobacco companies, once proud sponsors of many a sporting and cultural event, lost this marketing opportunity due to public outcry. Both remain legal businesses but are no longer considered acceptable sponsorship partners”. Platform believes that “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.”

 

1.3 The Charities Commission

In 2002 the Charities Commission published a detailed study on Charities and Commercial Partners: http://www.charity-commission.gov.uk/Publications/rs2.aspx

It warns that an unsuccessful commercial partnership, “where stakeholders perceive the charity to have “sold out”, can damage income and profile” of the charity. This document  "Charities should consider establishing an ethical policy which clearly sets out the charity's values. This will form part of their wider fund-raising strategy and they can use it to ensure that trustees, staff and any potential commercial partners share a common understanding of the charity's ethical values.

As best practice, charities should highlight their ethical policies and any commercial partnerships they have in their Annual Report and yearly accounts.

Against the framework of their ethical policy, charities need to carefully consider whether a proposed commercial partnership is appropriate and in the best interests of the charity." 12

The three examples of commercial partnership it gave were:
sponsorship agreement
licensing agreement (e.g. Christmas cards)
cause-related marketing.

Its more recent guide on Fundraising (published in May 2011) suggests that engaging with commercial partnerships has high reputational risks and that “charities should be particularly cautious as co-branding or closely associating with a company can become problematic if the company is discovered to engage in unethical practices or criminal activity”. It suggests that charities “carefully research the commercial participator and should consider whether a partnership with the commercial participator is appropriate and in line with the charity’s values and objects”.(13)

The Charity Commission cautions that it’s the Trustees’ responsibility to look at the impact and risks of corporate partnerships, both in terms of protecting its reputation and its assets. As part of this, trustees need to consider the long-term implications of decisions – what the risks are of engaging or not engaging with a certain company.

 

1.4 Avoidance and engagement

Before looking at the detail of developing a policy, it is useful to understand two distinct approaches to commercial partnership.

Avoidance

Many ethical policies will be built around a list of the types of business that the charity will avoid. Tobacco and armaments manufacturers commonly find themselves on avoidance lists at many charities. The mission of the charity itself will also dictate the type of business that the charity will want to avoid. See the section on Areas of Concern for more information. Specific examples are found here: (link to examples)

Engagement

Sometimes when a potential problem with a company is less clearly outside the boundaries of acceptability, a charity can choose to 'engage' in discussions with a corporate partner to try to persuade it to change its behaviour. To some extent the idea of engagement has been borrowed from the world of ethical investment where its use is more prevalent.
WWF’s business engagement policy has a number of different levels. As well as no-go areas and extreme high caution industries it also considers what the potential partner is prepared to do to improve “their role in society helping to green up the economy while improving their own impacts”.(14)

Speaking about its engagement relationship with HSBC WWF previously explained how it "has been feeding into bank policy and changing its approach to issues such as the way it lends funds to development projects". (15) However, it has has been noted that the engagement position can sound 'suspiciously convenient', particularly if the size of the charity bears no relation to its corporate partner. (16)

 

 

 

2.1 Investment

Charities need to consider having a policy in terms of their own investments, says James Allen of NVCO. “It’s up to an individual organisation to decide what their framework for ethical investment is, but charities are an important part of the economy and significant investors and it’s important that they’re using that influence to do the right thing”, he says.3

An increase in queries about ethical investments, has led the Charity Commission to update its investment advice to charities. In its updated report, it states more explicitly that charities may engage in stakeholder activism (where a charity, as a shareholder, exercises its voting rights in order to influence a company’s policies in a way that reflects its values and ethos). Practically, this means that a charity may keep (or buy) investments in a company whose environmental policies it disagrees with in order to “encourage more responsible business practices within those companies” just so long as the activism is related to the charity’s aims. This guidance makes it explicit that charities can choose investments, not just on the basis of best financial outcome but in a way that helps a charity directly further its aims while also making a financial return.17

 

2.2 Procurement

As institutional purchasers, charities could also consider adopting an ethical procurement policy. This policy takes into account ethical issues, as well as value for money.  Oxfam’s Ethical Purchasing policy statement says that the organisation will purchase goods and services that
“Are produced and delivered under labour conditions that meet the Ethical Trade Initiative Base Code (ETI) and therefore do not involve the abuse or exploitation of any person

Have the least negative impact on climate change and the environment.”18
Charities’ policies in the public domain.

Over the past decade, companies have been increasingly putting their corporate social responsibility policies and reports in the public domain. Charities, however, seem to be less forthcoming. You will find some links to some charity policies in the resources section.

 

 

3.1 What to consider

You may want to have one all-encompassing policy for any type of corporate relationship – as donor, supplier partner, or investments, or you may want to have separate policies for each. Whatever you decide, it’s important be explicit and to define the scope of the policy.

The Charity Commission recommends that policy formation addresses: sponsorship, cause-related marketing and licensing. You could also include: gifts in kind, corporate volunteering, affinity marketing, pro-bono work by suppliers and staff donor programmes.

The template below comprises an amalgamation of some of the best bits of organisational policies that ECRA has found, particularly MIND’s policy, along with some recommended clauses from ECRA. Italics in square brackets contain words which we would expect charities to want to amend to reflect their particular circumstances. Please feel free to copy for use.

 

 

[Name] Ethical Sponsorship Policy
[Date]

1. INFORMATION

Name of Organisation:

Address of Organisation:

Website and email:

Contact for sponsorship issues:

Aims of Charity:

[Mission/values/vision statement (if different)]

 

2. COMMITMENT TO ADDRESS ETHICAL ISSUES

We actively seek opportunities to work together with external organisations to achieve shared objectives. However, it is vital that we maintain our independence and do not allow external partnerships to bring the name of

[NAME] into disrepute.

[NAME] therefore seeks, so far as is practical and within the constraints of UK law;
initiatives that do not compromise the independent status of [NAME]
to ensure that the activities of organisations we work with are consistent with our organisational values

[Name]is not used in a manner that would express or imply [name] endorsement of the company/organisation or its policies.

This policy has been devised to ensure clarity and openness to all our stakeholders. It is designed to address sponsorship [and cause related marketing]. “Sponsorship” means payment by a private sector organisation – or individual – in return for public association with a {name] activity, project, event or asset. This could be in cash or in kind.

For our policy on donations, donor rights and gifts in kind see [insert where applicable or include above].

We welcome comments, criticism and suggestions as to how these goals can be met.

 

3. AVOIDANCE CRITERIA

Partnerships with companies involved in any of the following activities will be avoided:
[tobacco manufacture
nuclear weapons systems manufacture
companies generating more than 10% of revenue from the sale of pornography
other]

 

Areas of potential concern

[name] will not accept support that could compromise who we are and what we do - or undermine our effectiveness in achieving our goals.
Partnerships with companies whose commercial objectives would conflict with our goals and values, or which could promote inaccurate or misleading messages about our commitment to those goals and values would not be appropriate.

Companies whose interests are opposed to the interests of [NAME] or compromise

Other circumstances where there will be legitimate concern include - but not exclusively-insert as appropriate. Suggestions include: Companies with a poor reputation for equal opportunities and diversity
 (It will be appropriate for your Trustees to have a discussion about which companies or industries would fit into this section). For specific examples see ‘resources’ section.

 

[4. CAUSE RELATED MARKETING, AFFINITY MARKETING AND PRODUCT ENDORSEMENTS

[Name] does not endorse or approve products or companies, and a statement to this effect will be included alongside any branding or promotion associated with products.

[Name] will not promote any products unless published research has shown direct benefit to our beneficiaries
Only [Name] and its subsidiaries will have direct access to our databases.]

 

[5. ENGAGEMENT

[Name] believes that benefits to both partners can be enhanced if the charity partner has an input into policy issues at the commercial organisation. To this end, for substantial partnerships of more than 12 months duration, [name] will seek to establish a formal process for consultation.]

 

6. PROCESS

[Name] will not accept more than [five per cent] of total income per annum from one corporate partner, nor more than [20 per cent] of total income per annum from commercial organisations, so as not to compromise our integrity. This does not include money raised via employee and customer fundraising as part of any corporate partnership arrangements.
All cause related marketing and sponsorship with a value of more than [£5,000] must be approved by the [Senior Management Team] and the [Board of Trustees].
[Potential funders will be screened through EIRIS/Corporate Critic Database/Other to provide an independent assessment of funders before a decision is made]
Contracts with partners must permit [Name] to withdraw from any partnership where new developments mean that areas of this ethical sponsorship policy become breached.

 

7. TRANSPARENCY

A full list of corporate sponsors giving over [£5,000] will be maintained on our website.
[Name] will communicate its commitment to this policy to the organisation's stakeholders. [A copy of this policy will be displayed on our website within 3 months of its adoption.]

 

 

 

5.1 Introduction

If an ethical sponsorship policy is to exclude support from certain industries or business sectors, how do you decide which should be in and which should be out?

Most charities look to exclude partnerships with companies whose activities:
conflict with the mission statement
could harm the charity - directly or indirectly
might damage the public's perception of a charity

For a more detailed discussion, the Institute of Fundraising has a 'Code of Fundraising Practice' which specifically relates to Charities Working with Business. This is freely downloadable and contains a very useful Risk Assessment section at page 18.

Whatever basic principles you choose, there are still a range of potential grey areas for any charity, and exploring the two inter-linked subjects of stakeholder surveying and company research can shed some light on the subject.

Sometimes it is difficult to know what things might be controversial or risky without some overview of the sort of PR problems that companies face. One solution may be to look through lists of the criteria that research organisations commonly track for their clients. Here at the Ethical Consumer Research Association we have 18 main 'categories' grouped into four main groups:

Environment: Environmental reporting, Nuclear Power, Climate change, Pollution & Toxics, habitats and resources

People: Human rights, Workers’ rights, Supply Chain Management, Irresponsible Marketing, Arms & Military supply

Animals: Animal Testing, Factory Farming, Animal rights

Politics: Genetic engineering, Boycott Call, Political Activities, Anti-social finance, Company ethos

Each category itself has a number of other subcategories which are explained in more detail on our Corporate Critic website.

 

5.2 Stakeholder Surveys

The best way to find out where the boundaries of appropriate fundraising should lie is to ask the organisation's 'stakeholders'. For most charities, key stakeholders would include staff, beneficiaries, and supporters. They might also include: donors and funders, volunteers, interest groups, the public, central, regional and local government (as a funder or as a policy maker), partners or suppliers, the media.

A stakeholder survey could be:
making a few phone calls to key players in a smaller charity and making a written record of the responses, or
sending a detailed questionnaire to 5,000 randomly selected supporters in a larger charity, or
anything in between.

Stakeholder surveys can also bring additional benefits to an organisation. They can help build a stronger relationship with stakeholder groups by giving them a sense of ownership or involvement. They can also (if the results are right) bring legitimacy to bolder policies which may be opposed elsewhere in the organisation. The Co-operative Bank, in the development of its own ethical policies, commonly mails questionnaires to around one million people.

 

5.3 Company Research

Once a list of problem industries or sectors has been drawn up, the next stage is to identify a consistent method to discover whether a potential partner is appropriate.
The Institute of Fundraising has a Code of Fundraising Practice for Charities working with business.

'Code of Fundraising Practice' for Charities Working with Business contains a section on research. Among its fourteen points are questions about:

Whether the company is part of a larger group?

What are its motives for giving?

Whether it is financially sound.

It also suggests that the company itself might "exercise due diligence on behalf of the charity and be responsible for all of the costs". Given that companies are not always as critical of themselves as the civil society around them may be, this looks a slightly risky position on the surface.
Some charities, with limited resources, carry out this research themselves.

Corporate Watch's has an excellent DIY Guide - How to research Companies and contains a number of links to further research sites.

Others may seek to use more commercial external information providers to help them in this process. Ethical Consumer's magazine and Corporate Critic database are commonly used tools and have a range of prices, starting from just £25.

The charity commission recommends that charities develop an internal policy to cover research, planning and strategy processes which includes establishing flexible written criteria for assessing the suitability of a proposed commercial partnership.

Some charities specifically refer to external sources as part of this external policy. Oxfam apparently uses ethical consumer materials as part of its due diligence process (19) and Mental Health Media states on its website that it assess "potential corporate sponsors and funders using the Corporate Critic Database. This offers us an independent and objective assessment of any potential funder or sponsor before a decision is made. In particular, it helps to identify companies which breach the criteria below..."