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:
licensing agreement (e.g. Christmas cards)
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.
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)
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)