2. Key Issues

2.1 Reputational Risk

In July 2000, a demonstration at the opening of "@ Bristol" - a £98 million science and art discovery centre - drew the attention of local media to sponsorship by Nestlé - a company criticised for its marketing of breast-milk substitutes.(2) In 2002, UNICEF found itself the target of an international campaign of public health professionals for "lending its good name and endorsement to McDonald's" on World Children's Day.(3)

These are two examples from many in the last few years where a decision to develop a fundraising partnership between a charity and a commercial company has backfired on both organisations.(4)

As large organisations have developed mature and systematic approaches to all elements of risk management, the idea of reputational risk has emerged as a key area of concern. Much of this growth of concern has been focussed on commercial companies and the risks they carry in the event of serious environmental incidents. Nevertheless, it is clear that charities also carry reputational risk and that, to some extent, all large organisations are operating in a changing environment whereby public interest in ideas of corporate responsibility is growing.

2.2 Changing public perceptions

In 2001, 80% of people in the UK thought that companies should attach 'at least as much' importance to social responsibility as profits.(5) Also in 2001, two thirds of UK consumers claimed to have boycotted brands because of their 'unethical behaviour'.(6) A whole raft of other surveys have not only confirmed these trends but have also pointed to the growing market shares for green and ethical products.(7)

Clearly if some consumers are going out of their way to avoid commercial companies because of links to controversial issues, they could avoid charities linked to these companies too. It is this scenario which has presumably led to the Charities Commission (see below) to recommend the development of clear policy in this area.

Confusingly perhaps, other surveys have shown that around 55% of respondents say that charities should accept donations from anyone.(8) 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 kind of results do not apparently place before consumers the full variety of possible commercial arrangements.

2.3 The Charities Commission

In July 2002 the Charities Commission published on its website a detailed study entitled 'Charities and Commercial Partners'.
Three of the sixteen main points in the executive summary were:

The three examples of commercial partnership its gave were:

2.4 Avoidance and engagement

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

Avoidance

Most ethical sponsorship 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.

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, speaking about its engagement relationship with HSBC has 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". (10) However, it 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. (11)

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