Free Ethical Sponsorship Policy Framework
1. Key issues
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 mean that charities are increasingly looking at areas of giving that they perhaps 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, the National Council for Voluntary Organisations points out that working with corporates, as with any business relationship, carries an element of risk. The Council suggests that developing gift acceptance policies can help prevent tricky situations from arising.
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 2022, the Charity Commission opened a compliance case into one of the key donors of the Prince’s Trust. The Barrowman Foundation’s founder, the businessman Doug Barrowman, is head of a financial group that includes firms that promoted tax avoidance schemes to off-payroll workers. These are now being pursued by HM Revenue and Customs. It wasn’t just the Commission after the Trust, campaigners had previously criticised a decision to name one of the Prince’s Trust centres after Barrowman. And if that wasn’t enough, Barrowman happens to be married to ex-Tory peer, Michelle Mone, mostly known for her PPE scandal. While the Prince’s Trust may be well cushioned against the negative effects of scandal tainted sponsorships, the same may not be true for an “ordinary“ charity.
Sometimes the negative publicity of a partnership backfires so much that the partnership collapses. In May 2024, Hay Literary festival suspended its sponsorship from Baillie Gifford following controversy over the investment company’s links with Israel and fossil fuel firms. What followed this was nothing short of an avalanche: Baillie Gifford cancelled all of its remaining sponsorship deals with literary festivals around the country.
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 includes 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. “Trustees should consider carefully donations from sources that might be seen to compromise the charity's reputation, independence and work.", states the Charity Commission in its Compliance toolkit created to protect charities from harm. Due diligence is key if the charity wants to establish if a “donor's activities or ethics may give rise to risks to the charity.
When thinking about the reputational risks, charities need 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.
1.2 Changing public perceptions
According to a survey commissioned by Big Issue in 2024, eight in 10 shoppers are more likely to support brands that 'reflect their beliefs'.
“Some 70% of the poll’s 2,000 respondents said they were more likely to buy products from brands actively promoting their ethical and sustainable credentials, and 86% agreed that companies have a responsibility to set a good example in being environmentally aware.”
Ethical Consumer’s 2022 Market Report suggests that despite the economic downturn in the UK, the sales of ethical goods and services remained resilient and even increased by 33% in 2021.
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. The public does care about the sorts of relationships that charities have, and is increasingly aware of the issues, both as consumers and in terms of the causes that they support.
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.
The past few years have seen a number of high profile fossil fuel funded partnerships break. The National Portrait Gallery, the Royal Opera House, the Royal Shakespeare Company, the Scottish Ballet and The Tate have all cut ties with BP during the past ten years. Platform says that “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.
It warns to take the “value of a charity's name” seriously. It says that an unsuccessful commercial partnership, “where stakeholders perceive the charity to have 'sold out', can damage the income and profile” of the charity.... Charities should consider establishing an ethical policy that clearly sets out the charity's values. This will form part of their wider fundraising 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."
The three examples of commercial partnership it gives are:
- sponsorship agreement
- licensing agreement (e.g. Christmas cards)
- cause-related marketing.
In its 2013 The Charities Commission compliance toolkit for protecting charities from harm dedicates a whole chapter for the importance of due diligence. It states that “Trustees should take reasonable and appropriate steps to know who the charity's donors are” and that due diligence will help to “assess any risks to the charity that may arise from accepting a donation or certain types of donations”.
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, and increasingly, fossil fuel companies 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.
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.
Amnesty International’s Global Fundraising Policy states that “Amnesty International will not accept funding from sources that are linked to the violation of human rights”. To ensure this, the organisation makes it mandatory for any solicited or unsolicited gift to go through a screening process before acceptance is permitted.