Hot potato!

By Gerbren Deves
On June 13, 2013 At 2:00 pm

Category : corporate, governance, high value donors, Latest posts, opinion

Responses : One Comment

hotpotato

Corporate funding is a hot potato within many NGO’s: lively debates filled with emotion. But how do you judge the (valid) sensitivities and define whether or not corporate support may harm your charity in any way? Extremely difficult! Nevertheless, a few thoughts (and questions):

I guess the basic rule is that funding may never compromise the charity’s mission and key principles. Here are some risks:

Safety risks for staff

Although not applicable for all charities, they are real for organizations working in dangerous contexts. MSF can only work in these contexts because we are independent, also financially. So we cannot accept funding from organizations with a political, military or religious agenda. But we also cannot afford to be linked to an organization that is in any way part of a conflict we are working in, or even part of wrongs in these areas.

Reputational risks

“If we associate ourselves with this company or if an incident occurs at this company, could this damage our public perception?”

These risks depend on various aspects like the incident, the nature of the relationship and the communication about it. But how real are these risks? I believe that negative impact on the charity remains fairly improbable, as one should:

  1. know about the incident
  2. link the company to the incident
  3. feel negative about the company
  4. know of the relationship between the company and the charity
  5. link this negative perception of the company to their social activities, and in particular to the specific charity
  6. feel negative about the charity
  7. materialize this negative perception

Would it be fair to say that many charities are very good at finding causal links that are not really there?

Ethical dilemmas

EthicsOften linked with reputational risks are ethical dilemmas, like damaging the environment, corruption, child labour and greenwashing. Reasons to refuse support? And if so, when? And recently a Dutch charity stopped a funding relationship after finding out the corporate donor was involved in guarding prisons in Israel. The right decision?

And what about tax evasion of large multinationals, a current hot topic? Their letterbox companies and complex international tax constructions are 100% legal. But one can doubt that this is in the spirit of the law. So are these companies unethical? One can argue that these companies are just being smart, using legal possibilities and moreover do something good (read: support your charity) with parts of their profit.

Recipe for lively debates..

Conflict of interest

Funding should never undermine the charity’s objectives to achieve greater benefits through other means like negotiating or campaigning.

At MSF, we have created an entity that is committed to increase the availability of essential medicines in developing countries, and this objective is not always in line with the agendas of big pharmaceutical companies. So from time to time we do campaign against these companies. And to avoid (the perception of) a possible conflict of interest, we have decided not to accept funding from this industry at all.

But how rigid should a charity be here? A multi-million euro donation in times of a campaign against the company will surely be seen as an attempt to influence the charity’s standpoint. But how much impact would a €5k Christmas donation have?

 

How to mitigate these risks?

 Good research, right?

I guess good research should be the starting point of all significant funding relations, but this is not as simple as it sounds:

What are you supposed to research?

Should you research incidents, policies, …? For instance, in case of large production chains; I don’t think a company can be held accountable for problems at suppliers of suppliers of suppliers. In my opinion the production chain of some companies is so complex that you cannot expect that companies know exactly what happens in these chains. But you can and should expect that they are taking their responsibility to prevent problems as much as can fairly be expected and that they will do the right thing when they encounter a problem.

Again ingredients for a lively debate: what can fairly be expected and what is the right thing?

How are you going to research?

Many large companies have complex structures, which makes it hard to measure risks.

I would advise to involve a variety of relevant (critical campaigning) NGO’s, branch organizations and independent experts. There are also several CSR-indices you can take into account. Hiring of a specialized agency can also be considered.

Do note that continuous research is necessary, as performance of the company can change.

How to judge the outcome?

Another subjective aspect in the process: interpreting the information. One can look at hard figures such as scores on indices, but do they cover all your concerns? And how do you decide what is good enough? And what if different involved parties tell different stories (which is likely to happen)? Do you believe the critical campaigning NGO that says that there is still much to be done, or the branch organization that tells about how much have been done already? Both might have their own agenda, so how to decide who is right? And what if they are both right?

And to make it even more complex: perception of the general public is also a relevant aspect. After all, whether or not the criticism is justified, the truth is in the eye of the beholder.

Blacklist-300x211Blacklisting sectors?

Many charities have certain sectors blacklisted, such as the weapon industry. But when is a company part of this industry? At MSF we say: when at least 10% of the annual revenues derive from blacklisted activities. But this still leaves enough room for debate. Clearly a producer of machine guns is a weapon company. But would a producer of 4WD’s that are used both by the military and civilians be part of the weapon industry if more than 10% of their revenues comes from the military? And is the producer of caterpillar tracks for tanks part of the weapon industry?

Is it actually ethical to refuse support?

Refusing support on reputational grounds can be justified as the harmed reputation might have much larger implications than the specific support.  But is it ethical to refuse funding solely on ethical grounds? Because you as a charity do not agree with the method of working of a company, you decide to refuse their funding, meaning less money for your social mission?

Conclusion and tips

It is extremely hard to find solid answers on all these questions, but I guess the important thing is to be able to defend your standpoint with a clear and credible story.

In addition, some tips for sensitive alliances:

  • Check your current relationship with this company and the people behind it. Can you deepen/harm the relationship by accepting/refusing their support?
  • Take into account the current support, but also the future potential.
  • Try to establish an open and transparent relationship with the company, so that they are willing to provide you with information on their strategy/response on possible incidents/accusations. Transparency also works the other way around; you should explain your position, which the company should understand and appreciate.
  • Make agreements with the company on communication
  • Have a Q&A ready about why you have engaged in this relationship.
  • Lastly, you could set up an ethical framework that you want the company to formally acknowledge.

I wish you all the best with your difficult decisions, but be aware that there is a fine line between careful & selective on one hand, and arrogant & ungrateful on the other.  Good luck!

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Gerbren Deves (7 blogs on 101fundraising)

Gerbren is Coordinator Relationship Management at Médecins Sans Frontières Holland (MSF, Artsen zonder Grenzen). He has been working for MSF since April 2006. Before that, he worked in 'the corporate world', in various (strategic) marketing functions.


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Comments

  1. Love reading your posts. Great info and interesting,.
    Cheers

     — Reply