Third Sector Survey: Working with business - The Company we keep

In the second Third Sector report into voluntary sector relationships, Nicola Hill discovers that charities are moving away from short-term financial agreements with companies to look for real partnerships.

Nearly seven out of 10 large charities have relationships with more than 50 companies, according to our latest research. But are these partnerships big business for charities? Our survey shows that 66 per cent of charities receive no more than 5 per cent of their income from the corporate sector.

Indeed, one in three charities say they receive no income at all from the corporate sector. So are charities not asking for enough money, or is there a different purpose behind seeking relationships with companies?

This survey, conducted for Third Sector by nfpSynergy, shows that charities enter into relationships with companies for a variety of reasons: 55 per cent want to increase income for service delivery; an equal proportion want to use the corporate sector to raise the profile of the charity; and 35 per cent want to change public or employee attitudes. However, only 9 per cent of all charities say changing company policy is a major motivation for getting involved with corporate partnerships.

Among larger charities, this figure climbs to 24 per cent, but working with companies to improve their policies still seems to rate well below raising funds and raising awareness of the cause or brand. Indeed, 61 per cent of charities say that raising income was their primary reason for forming corporate partnerships.

With the variety of reasons and the many forms of relationships, from pro bono support to gifts in kind, and from sponsorship to dialogues on environmental impact, there is a shifting debate about how charities and companies should work together.

Ros Tennyson, director of the Partnership and Learning Programme at the Prince of Wales International Business Leaders Forum and Partnering Initiative, says: "The bulk of charities are still fixated on trying to get money out of companies, but they should be moving towards genuine partnerships."

She says sponsorship is "quick-fix PR" and advises charities to be business-focused by thoroughly researching the companies they are approaching and walking in with a proposition that has mutual benefit and synergy. "Companies will have a completely different response to you," she says. Tennyson also adds that charities should go in with their heads held high, not with a begging bowl.

Dr Tony Kendle, foundation director at the Eden Project, agrees that charities should approach the negotiating table as equal partners. Although companies have the financial power, he says, charities should not forget the value of their intellectual property, brand, reputation and public reach. "If you have a clear enough vision of these other capitals, you approach the table as equals," he adds.

This approach is evident in Kendle's attitude to corporate donations of materials or services. "Even in accepting such transactions, the Eden Project is wary of how much publicity it allows the companies," he says.

"We acknowledge these contributions on site, but in a relatively discreet way. Neither we nor our major funder, the Millennium Commission, would like to see the site invaded by other logos."

The Eden Project has hundreds of relationships with companies, but Kendle counts only five or six of them as genuine partnerships. One example is its partnership with mining company Rio Tinto (see case study). "These are alliances where the relationship demonstrably goes beyond a financial transaction," he says. "The real value comes from the emergence of new possibilities and ideas that would not have existed for either side without the partnership."

Raising profile

Although raising funds is clearly high on charities' priority lists, many do strive to go beyond basic financial agreements and towards genuine partnerships. Our survey found that 55 per cent of charities want corporate partnerships to increase their profiles too.

Working with a company can help a charity get its message out to a whole new audience. As part of Comic Relief's partnership with Unilever, the charity's branding appeared on 10 million promotional packs of Persil.

And information about WaterAid is distributed in water bills to households up and down the country, thanks to the charity's partnership with the water industry. Staff and customer fundraising also gives charities the chance to increase awareness of their cause and strike up loyal relationships with new supporters.

But for some charities it is not the money or the chance to build brand loyalty that motivates them to get involved with companies. Conservation charity WWF-UK is four years into a five-year partnership with HSBC. The charity is receiving £12m over the five years for its freshwater fieldwork, but the partnership runs much deeper than this. The charity has spent the past four years feeding into bank policy and changing its approach to issues such as the way it lends funding to development projects.

Influencing company policy

Throughout the partnership, the two organisations have had regular meetings.

"We've always had a seat at the table at the most senior level," says the charity's company relations manager, Dax Lovegrove. The fact that WWF-UK conservation expert Francis Sullivan is on a two-year secondment to the bank has helped the partnership run smoothly.

Lovegrove is in no doubt that it has been worthwhile. "It is exactly the kind of partnership that we aspire to," he says. "It is a deep relationship that reaches many areas - it provides funding for conservation work, but it also means we can influence what is the second or third biggest bank in the world. We are able have an input into shaping the impacts it makes through its funding and operations."

This enthusiasm is well founded. The charity's achievements include working with the bank to adopt and comply with the Equator Principles (a global framework of guidelines to help financial institutions manage social and environmental risks when financing development projects) as well as helping the bank develop and apply forest and water conservation policies to govern lending to organisations working in these areas. It also makes presentations to staff on the bank's graduate trainee programme with the aim of developing the thinking of the next generation of bank leaders.

"Our involvement has been as a real catalyst for change," says Lovegrove, "Some of the things that have been achieved were thought up before we came onto the scene, some we suggested and others we accelerated."

WWF-UK supporters recognise the importance of working with businesses.

"We did a survey of our supporters and they were happy for us to work with businesses like the bank as long as we were trying to influence their policies," says Lovegrove.

But our survey shows that only 9 per cent of charities strive for this sort of relationship. "I am surprised the figures are so low," Lovegrove says. "I have heard more and more organisations saying that this sort of interaction is very important to them. It does involve a lot of time and resources, though. Maybe organisations don't get involved because they are not confident that they have the resources to commit."

Lovegrove says charities need to draft a partnership policy before entering into a relationship with a company to make sure they get the most out of it. "We have a business engagement policy and a companies group, which decides how best to proceed with partnerships," he says. "You also have to look at the reputational risks and have a due diligence process in place. You've got to have the resources available."

To achieve this kind of genuine partnership, according to the Eden Project's Kendle, there needs to be a timescale of several years to allow for proper strategic planning. And the charities that answered our survey agree: only 47 per cent believe their partnerships with companies last long enough to properly achieve their objectives. Kendle expects both sides to have spent time learning the ethic, purpose, direction, constraints and practice of the partner: "There needs to be a genuine compatibility of organisational 'personality' and cause, and a real chance of making a difference through synergy."

This is exactly the approach taken by WWF-UK. Its partnership with HSBC has been thoroughly planned and thought out at every stage to make sure it reaches its full potential. "We started with a two-year preparatory phase," says Lovegrove. "We used this time to assess the fit between the organisations, make sure we were comfortable working together and assess where they were in terms of environmental commitments. There was a lot of internal debate on both sides. We had to be sure we were happy, and confident there was a willingness to improve on their side."

More partnerships

Although many charities acknowledge that building relationships with companies takes a lot of time, more than seven out of 10 charities surveyed want to increase the number of relationships they have. Age Concern is one of them, even though spokesperson Zena Ambrose agrees that "for it to work you have to put in a lot of effort". Currently, the charity's partnerships cover sponsorship, cause-related marketing, staff and customer donations, pro bono work by suppliers, gifts in kind, affinity marketing and corporate volunteering. It has relationships with more than 20 major UK companies.

This year, Age Concern has secured the holy grail of partnerships: it has been chosen as the Tesco charity of the year. Ambrose admits it is difficult to secure such relationships, with only one in 10 approaches succeeding. Age Concern focuses on the top 100 UK companies in sectors that have the greatest fit with its mission and priorities.

But at least Age Concern has a £66.2m budget and the staff to resource such relationships. How do smaller charities cope? Coeliac UK, which is concerned with gluten intolerance, has an annual income of £2m. Finance manager Hamza Ali explains that the charity employed a commercial manager 18 months ago and defined the key purpose of relationships with companies as raising awareness. Since then, the charity has established a relationship with the supermarket Asda and the company Nutrition Point, which markets gluten-free products. The charity will receive 20p per item for a range of products sold during a four-week campaign in Asda, with a minimum contribution of £5,000 from each of the companies.

The charity has also linked up with another manufacturer of gluten-free products to conduct research and raise awareness of coeliac disease among GPs. Ali says: "We have to tread very carefully and insist on our independence. So far, companies have responded well to that request."

Another small charity, Vista, which works with nearly 6,000 blind and partially sighted people in Leicestershire and Rutland, has a turnover of £4.4m. Chief executive Gordon Diffy says it has relationships with companies on three levels: commercial outsourcing; semi-commercial, where it receives services at a preferential rate; and sponsorship, where a company offers a service, product or event for free. He says even the commercial outsourcing often comes with spin-offs such as pro bono work.

Diffy says it is very hard as a small charity to secure relationships.

"You need to be aware of each other's agendas and drivers where the commonalities are." He warns smaller charities not to be naive, because few companies give from a purely philanthropic viewpoint. He also says charities should be prepared to walk away: "People are too tempted by a bag of money and lose their objectivity. You need to approach it professionally."

He also advises charities to be honest about what they can and cannot achieve and to be realistic about timescales.

Brokering organisations

One way for charities of any size to gain support from companies is through specialist organisations that co-ordinate corporate support, such as In Kind Direct, the goodwill.co.uk website or industry-based charities such as Crash.

Crash was set up by the construction industry to help homeless charities.

It has more than 30 patron companies, which are committed to covering the core administration costs for three years. Another 300 building and material suppliers have signed up to provide expertise and products.

The director of the charity, Tom Biddlecombe, says challenging stereotypes is the key to setting up good relationships between the voluntary and corporate sectors. "Some charities look suspiciously at the corporate world, wondering about its motives," he says. "It's true, corporates are doing it for PR, but most also feel they have a responsibility to give something back." He adds that corporates also need to challenge their stereotypes of charity workers. To further improve relationships, Biddlecombe says he has had to be realistic about timescales: "The charity sector is not very good at deadlines. I've learned not to approach a corporate until I'm reassured the charity is ready to go." He says both sides need to understand that they operate in different ways. "A corporate partner makes a decision and can act on it straightaway; charities often have to go through committees of trustees or involve users in decisions."

Biddlecombe believes communication is key to successful partnerships.

This is exemplified by the fact that there are only three people employed by Crash, and one is a PR executive, whose job is to maintain a link with corporate supporters to show them the difference their contributions are making.

This, however, highlights another aspect of the difficulties a partnership brings. Crash can easily gather the financial worth of a company's contribution, but it is more difficult to provide realistic outcomes data about the effect the contribution has on the lives of homeless people.

To resolve this, the charity is putting in place an outcome measurement system with the aim of gathering such data and giving it back to the industry so it can be used internally and externally for charities' reports. Biddlecombe recommends the model and challenges other industry sectors to establish similar charities that help manage relationships between the two sectors.

One industry-wide initiative is the charity In Kind Direct, which acts as a clearing house for surplus goods from the corporate sector, channelling them to good causes in the voluntary sector. Last year it saw a 49 per cent increase in the value of goods donated, rising from £6m to £9m. Director Robin Boles says giving in kind is becoming an important part of community involvement for companies. But she adds: "In order to give charities the best service, we have to think what is best for the companies. Charities need to be clear about what they want and construct a strong business case that corporates will relate to."

However, Edward Hodgkins, head of corporate fundraising at Macmillan Cancer Relief, says the onus shouldn't always be on charities to improve relationships between the two sectors. Hodgkins believes more partnerships could be forged if corporates spent time researching appropriate charities and being proactive in securing a partnership where there is a real fit for both organisations.

- Third Sector's survey of voluntary organisations' use of IT will be published on 13 April

HIGHLIGHTS ...

- 61% per cent say raising income is the main reason for corporate partnerships

- 24% receive no income from companies

- 11% say corporate partnerships are the only way they survive financially

- 39% say that a key reason for partnerships is to achieve shared objectives

- 27% don't feel constrained in campaigning against their corporate partners

THE RESULTS

A quick glance at the results reveals one immediate truth: when it comes to working with companies, charities seem to have few reservations and are enthusiastic, writes Ariel Spigelman. An overwhelming 73 per cent of the 283 not-for-profits that responded said they would like to increase their corporate partnerships. Perhaps most tellingly, not a single respondent felt over-dependent on the corporate sector.

What are the reasons behind this enthusiasm? The most obvious answer may be that it is financially driven. This is a decisive factor, but it paints only part of the picture. Although 55 per cent of organisations said they work with companies to "increase income for service delivery", only 11 per cent said it was the "only way we survive financially".

An equally important reason for getting involved with companies, selected by 55 per cent of respondents, is the opportunity it brings to increase the profile of the charity. Smaller organisations were particularly keen: 71 per cent of organisations with an annual turnover of between £1m and £5m chose this as one of the most important reasons for working with a company, and the figure for organisations earning more than £51m a year fell to 47 per cent.

However, only 9 per cent of charities said they enter into corporate partnerships as a way of "changing company policy on areas of key importance".

This is somewhat out of touch with the public's perceptions: in May last year, 77 per cent of 1,000 respondents surveyed by nfpSynergy answered "yes" to the question: "Do you think charities should try to influence companies to improve their behaviour?" Success in achieving these objectives is mixed. The figures show that 24 per cent of responding organisations derive no income from such relationships, with two out of every three organisations earning 5 per cent or less of their income from engagement with companies.

Meanwhile, more than half of respondents agreed either strongly or slightly with the statement: "Our partnerships with companies have increased and improved our public image". But larger organisations seem more satisfied than their smaller counterparts: 78 per cent of organisations with an annual turnover of more than £51m agreed to some degree with this statement, but for those that take in less than £1m, the agreement level dropped to 60 per cent.

So how healthy are relationships between the two sectors? The results suggest they are good, but there is room for improvement. An encouraging 68 per cent agreed strongly or slightly that their experience of working with companies has, on the whole, been positive. This increased to 100 per cent among the £51m+ organisations and those that derive more than a fifth of their total income from corporate partnerships. A further 64 per cent agreed that their relationships with companies achieve their objectives. Finally, corporate relationships are for the most part uncontroversial: only 14 per cent agreed that "working with companies is seen as controversial and fraught with risks".

On the less positive side, less than half (48 per cent) felt they were an equal partner in relationships with companies. This was pronounced among smaller organisations: one in five with an annual income of less than £1m strongly disagreed with the statement "we feel like equals"; none with an income of more than £21m agreed.

Charities also seem to be entering into partnerships that are too short in duration, with under half saying they last long enough to achieve their objectives. And finally, only 27 per cent agreed that they feel no constraints in campaigning against the policies of companies they work with.

- Ariel Spigelman is a research executive at nfpSynergy, which completed the research on behalf of Third Sector

CASE STUDY - MACMILLAN CANCER RELIEF

About 70 per cent of Macmillan Cancer Relief's corporate income comes from employee fundraising. It also engages with companies in a range of ways to raise funds, including affinity products, donations, facilitated giving, payroll giving, sales promotions (such as cause-related marketing), sponsorship, gifts in kind and volunteering. The charity is involved with more than 100 companies.

Energy giant npower has already contributed more than £600,000 to Macmillan Cancer Relief since the start of its support nine months ago, through a wide range of activities, including employee fundraising, gifts in kind and various marketing initiatives. Spring 2004 saw npower launch the 'npower500' charity walk with ex-England cricketer and I'm a Celebrity ... Get me Out of Here! winner Phil Tufnell, who walked more than 500 miles in 28 days, visiting English village and test cricket grounds. The event raised Macmillan's profile, as well as raising money.

In September, npower also commissioned a joint TV advertisement as part of its campaign to promote Macmillan's World's Biggest Coffee Morning 2004, supported by ex-England rugby union international Jason Leonard (above). This was the first TV push the charity had had for the event in the 14 years it has run, and would have been extremely costly without the npower partnership.

OPINION

It is clear from the research that the majority of charities want more income over the longer term from more corporate sources, writes Jean Collingwood.

It is useful to take into account, however, that this is not just any old income. Income from corporates - whether it results from sponsorship, cause-related marketing or endorsement deals - doesn't only fund service delivery. More importantly, it provides a valuable source of what is increasingly scarce these days - unrestricted funds.

Despite the obvious need for charities to fund salaries and meet running costs, core funding is still viewed as unattractive by other funding sources, not least the public. Corporate funds are therefore seen from board level down as providing a valuable solution to the problem.

However, as pressure mounts to increase corporate donations, with more and more charities targeting the same business donors, some charities are changing their approach to corporate fundraising. But this new approach might not be impressing potential partners. Some of our corporate clients fear that many charities are switching away from sincere long-term relationship-building approaches in favour of immediate financial gratification. To demonstrate this point, a board of trustees from a charity we work with recently dismissed the signing of a three-year partnership with one of the world's biggest global organisations because no financial contribution was confirmed at the time of signing the contract. This reaction can act as a real disincentive to the people on the ground.

Our corporate clients are also weary of the new breed of corporate fundraisers.

One client described them as "hard-nosed sales people that could walk straight into a trading floor and steal business from a trader without so much as blinking". Although charities are understandably seeking to become more businesslike, hard-nosed aggression is clearly not a quality most companies look for, value or find attractive. What companies are buying now is much closer involvement with real, passionate people.

The majority of companies we work with see the true value of building long-term charity partnerships as a means of working with dedicated and knowledgeable charity people, whose values and organisations have a strong personality and fit with theirs.

Britain has some of the most talented, dedicated and skilled corporate fundraisers, able to seek out relevant opportunities and to cultivate and build long-term relationships for mutual gain. One example of this talent is Rachel Groves from the NSPCC, who is currently doing a great job in Alan Sugar's televised challenge The Apprentice.

However, there needs to be greater recognition and understanding at boardroom level, from directors, CEOs and trustees, of the real benefits of developing long-term relationships with corporates. For charities to really benefit from partnerships, they need to look beyond short-term financial gains and recognise the long-term and cumulative value that real partnerships can bring. The majority of fundraisers surveyed clearly understand the partnership benefits, including profile raising, staff and customer fundraising, marketing expertise and sheer marketing clout, that companies bring. This needs to be put into practice.

Charities also need to recognise that these partnerships should mutually benefit the charity and the company. It is worrying that only just over a third of charities in the survey said that one of their key motivations for partnerships was "achieving shared objectives". Companies tend to cite this as a greater priority. Clearly, there is an imbalance here that needs to be addressed.

The key message is that if we plan to grow more corporate partnerships we need to improve the levels of trust and gain a much deeper understanding of each other's needs and motivations for working together. The onus to make this happen is on both parties because, like all good relationships that last, they first need to be founded in mutual benefit.

- Jean Collingwood is chief executive of social marketing company Ingenious Group

CASE STUDY - THE EDEN PROJECT

The Eden Project has a partnership with mining company Rio Tinto. Dr Tony Kendle, foundation director, says: "Some find it provocative that Eden has associations with an industry that receives so much criticism, but we are firmly of the belief that every one of us in the developed world shares responsibility for the impacts of mineral extraction." Rio Tinto provides finance to help with the payroll costs of a small team that acts as the secretariat for joint initiatives. Eden contributes other staff time and in-kind costs, such as office support. One initiative is an exhibition to educate people about their dependence on minerals.

Another project has been the development of a copper roof for Eden's new education centre. This roof has been sourced from a single US mine with high environmental and social standards. The copper has then been processed and transported with a complete supply trail documented, demonstrating that it is feasible to account for origins when sourcing copper in this way.

The Eden Project's biggest collaboration with Rio Tinto has been an initiative that looks for solutions to the problem of abandoned mines, many of which are 'orphaned' in that there is no extant owning company with responsibility for cleaning up or dealing with the social or environmental costs.

"Exploring solutions to these issues means developing trusting partnerships between government, voluntary sector and corporates that are focused on solutions rather than blame," says Kendle.

He concludes: "The Rio Tinto Eden partnership is clearly not just a single-issue, single-project transaction, but has a dynamic that explores innovation on a range of fronts."

FURTHER INFORMATION

- Business in the Community provides support and advice to help companies and charities work together: www.bitc.org.uk

- Crash is the construction and property industry charity for the homeless: www.crash.org.uk

- In Kind Direct channels surplus goods from companies to charities: www.inkinddirect.org

- Partnering Initiative promotes cross-sector partnership through training, skills development and research: www.thePartneringInitiative.org.

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