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Sponsorship and Corporate Philanthropy Ethics

by | March 28, 2015

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Sponsors you select to partner with contribute to the success of your events and shape the perception of attendees or spectators.  

Given the rise of ethical consumerism, brands featured on your sponsorship list can be either your strongest asset or your weakest point. 

At the core of ethical marketing lies transparency and honesty. Consumers become increasingly aware of their purchasing power and the consequences of their purchase decisions. Hence, a growing number of your target audience favors companies with corporate social responsibility. 

This guide covers every key factor of ethical sponsorship and discusses some pivotal questions with an expert on the topic. 

Is Sponsorship Ethical?

Before we jump to the interview, let’s answer a fundamental question – does ethical sponsorship exist? No doubt that who you partner with sends a message to the public, and so every sponsorship-seeking organization should spend some time thinking about the types of corporate development they are willing to engage in.

Sponsorship is ethical if you:

  • Team up with organizations and brands that have values aligned with your target audience
  • Keep the balance between advertising and ethical responsibility and not let financial gain prevail over social responsibility
  • Support equality in sponsorship and avoid discriminating behavior in your marketing efforts 
  • Do not promote health-harming substances, especially to a young audience 

When growing your sponsorship pool, you can source companies with corporate social responsibility (CSR) policy. CSR indicates a brand’s dedication to sustainability and ethical business operations. 

I’ve teamed up with fundraising Jedi, Mena Gainpaulsingh of Purposeful Fundraising Inc. Mena has worked with international charities involved in everything from human rights to international development and knows first-hand how important an ethical policy is as part of the fundraising strategy.

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Mena Gainpaulsingh on the Topic of an Ethical Policy

Mena Gainpaulsingh has shared groundbreaking ideas on ethical policy as a key element of the fundraising strategy. Below, you can read in-depth answers to the questions I got an opportunity to ask. 

Why is it important to have a policy relating to ethics when working with corporate sponsors?

Reputation is everything for a charity. Public perception and reputation can make or break a charitable organization, so having a policy that determines the types of companies that a charity aligns itself with is crucial. What may be an appropriate relationship between one charity and a sponsor would not necessarily be appropriate for another.

In many cases, ethical policies also cover additional aspects of the relationship, including the types of gifts to be accepted or the terms that are to be included within a sponsorship agreement. 

For example, some terms of delivering the sponsorship benefits under a contract could place a charity under a considerable burden to deliver on their promises. An appropriate policy should protect a charity from inadvertently entering into such agreements that draw on resources beyond a reasonable point.

What types of organizations do you think are most at risk without having an ethical policy?

Every organization should have an Acceptance of Funds policy in place, but those most at risk are those who might be advocating for a particular beneficiary group or social outcome. If, for example, a company is engaged in activities that work against the mission of the charity, then the charity may be at risk of reputation damage with their donors, beneficiaries, staff, and other stakeholders.

Typical examples might include a human rights organization accepting funds from a company engaged in the arms trade or a labor rights organization working with a company that has been condemned for discriminatory employment practices.

Can you give an example of where you had to turn away a gift because of an ethical agreement?

One example was while I was working with a human rights charity that had an individual donor who often hosted events for the organization where he would talk about his financial support. 

It later came to light that the company where he held a very senior position had been involved with groups overseas that had committed human rights abuses. 

The charity had to make some very difficult decisions with regard to how to approach this relationship moving forward since the funds were not technically coming from the company but were, in fact, personal donations. 

In this case, the organization felt that the donor’s alignment with the company was so strong and so public that he could no longer represent the organization publicly at events.

Wow! That sounds like a really tough situation. How do you handle a conversation like that?

It’s not easy, and it is up to each organization to determine the stance that it would take in particular situations. It is also likely to depend upon whether the situation has become public knowledge or is still an issue that remains within the walls of the charity.

I know of charities that feel that where their donors work is irrelevant, regardless of the position held within the company. Other charities believe that people operating at a senior board level within a company always represent that company. 

Having a policy in place in advance, and possibly even carrying out a risk assessment relating to different scenarios, is very helpful in determining an appropriate course of action should such a situation arise.

What kinds of things should an ethical agreement cover?

Most ethical policies are relatively broad and include terms that simply state that all gifts should be in accordance with the vision and mission of the organization and should not put the organization at reputational risk. 

While a broad policy can be appropriate, the charity should ensure that it has in place a rigorous process that ensures that decisions around what funds to accept and what not to accept are consistent and in line with its brand, values, and goals.

Other policies go much further and clarify a number of factors relating to the gift, such as:

  • The types of companies that the charity is willing to accept funds from
  • The types of support that the charity is willing to accept, e.g., donation, sponsorship, gifts in kind, etc.
  • The terms of the agreement in relation to the gift and whether fulfilling them could place too onerous an administrative or financial burden on the organization
  • The process to be adopted when reviewing a gift under the policy
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What should sponsorship-seeking organizations be concerned about when aligning their brand with external brands?

Some things that come to mind:

  • The reputational risk of accepting a particular gift
  • Whether or not there could be a perception that a company might be seeking to influence the activities of the charity
  • Whether the company is seeking access to the organization’s contact database and how this relates to privacy and data protection laws

I am immensely grateful to Mena for sharing her knowledge and insights into the sometimes complicated world of fundraising ethics and for helping us make the connection to the world of corporate fundraising.

Why Ethical Sponsorship Matters

The sponsors you take onboard should align with your values and those of your consumers. Inviting a sponsor that contradicts your ethical principle has a high risk of causing a backlash that will eventually hurt your and your sponsors’ reputation. 

Ethical sponsorship can be characterized by transparency and trustworthiness and serves as a powerful tool for companies that want to showcase their commitment to social responsibility and integrity. 

Demonstrating genuine concern for the well-being of society, brands can improve their image and reputation and cultivate deeper connections with consumers. 

Partnering with such brands can greatly help you, as an event organizer, to achieve commercial success. 

Negative Impact of Unethical Sponsorships

You might already have some ideas about what may happen if you partner with a sponsor who has been involved in unethical activities. As Mena Gainpaulsingh mentioned in our interview, a cease of partnership is the most logical choice. But what if you parted with a brand-damaging sponsor too late?

Depending on the audience and the seriousness of a misstep, the typical response from audiences often involves a backlash, frequently seen on social media platforms. While some might believe that any publicity, even negative, can be beneficial, it’s crucial to recognize the significant risk of facing cancellations and enduring harm to your reputation in the long run. 

How to Ensure Ethical Sponsorship?

Let’s say you are organizing a charitable event and seeking in-kind and/or monetary sponsorships. Charitable events may be the most sensitive ones, with the audience most attuned to social issues and activism. 

There are a few things you can do to evaluate sponsors and make the right choice:

  1. Always research your sponsors: As time-consuming research can be, this is the easiest way to find out crucial information about your potential sponsors, including their past actions and values. 
  2. Have guidelines you won’t break: As an event organizer, you know your audience better than anyone else, and you must have a good idea about what excites and upsets them. Hence, you can set guidelines that will help you filter sponsors and negotiate only with those that align with your values. 
  3. Think about the consequences: Different sponsors will want to achieve various goals from your event – it can be a promotion of a brand or products or establishing trust with your audience.  Your task is to consider what impact a certain advertisement can have on the event and its main purpose. 
  4. Have an ethical policy: Having an ethical policy in place will help you navigate the sponsorship process and have pre-established actions that you can follow in case of escalation or ethical issues that arise in the process. 

Challenges of Ethical Sponsorship

No matter how hard you work to get ethical sponsors, there will always be issues you will have to navigate as carefully as possible. Some common issues include:

  • Gray areas: What if you have a great sponsorship deal, but the potential sponsor has a history stained by unethical practices such as child labor or other concerns? Or a brand can have a pristine reputation, yet its leadership has been associated with actions conflicting with your values. Given the partial alignment with your values, is it enough for you to partner with a brand like this? 
  • Balance between your sponsors and consumers: Partnering with certain sponsors may have a positive or negative reaction from your event attendees, especially for a charitable cause. Your target audience is likely to share the same values as you, yet they don’t see the dilemmas you may be faced with when meeting the interests of sponsors and attendees. 
  • Maintaining transparency: Depending on the nature of your event, attendees may be interested in learning the criteria for sponsor selection and hearing the reasoning behind your decisions. While it may not always be the case for you, having a clear policy you can rely on will help you avoid potential missteps. 
  • Immediate vs long-term impact: When managing sponsorship collaborations, an immediate effect on the brand image, visibility, and reputation is often key to assessing the success of an event. However, the long-term impact is as important as short-term success. Despite everything appearing smooth during the event, there’s always the possibility of sudden backlash, so being extra careful with who you invite will never hurt. 
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Ethical Responsibility as a Future Trend in Sponsorship

As Mena Gainpaulsingh well noted, having an ethical policy is what will shield your reputation from decisions that may harm your business. However, I would also add that practicing ethical sponsorship will not only help to enhance the trust of the audience in not only charities but all other types of events. 

Ethical sponsorship is evolving in response to consumer demands, which include not only transparency but also accountability. 

When screening sponsors and wondering whether a company fits your criteria or not, think about your long-term commitment to the cause you are supporting.