With 2011 seeing budget cuts drive innovation and fresh-thinking at many charities, 2012 will be a year of change for the way UK-based charities are regulated. TSIC recently spoke with sector experts to gain an overview of some of the recent changes to the legal and regulatory framework governing charities. Some of the key changes charities should be aware of in 2012 include the following:

New guidance for charities on social investments

In October 2011, the Charity Commission published new guidance for trustees on the legal duties and decision-making processes surrounding ‘mixed motive investments’—a category of investments between financial and programme-related investment strategies that a growing number of charities are becoming interested in as they seek to further social change while also making a financial return. The guidance provides advice for trustees on how to determine whether a mixed-motive investment is in the best interest of the charity, given what the charity is doing in the world, and on how to justify a mixed-motive strategy to meet the legal duties connected to charity investments.

Read the full guidance here: http://www.charitycommission.gov.uk/Charity_requirements_guidance/Charity_governance/Managing_resources/charitable_funds_overview.aspx

Changes at the Charity Commission shifting responsibility to trustees

Following the government announcement that the Charity Commission would lose 1/3^rd of its funding by 2014/15, the Charity Commission was asked to develop a new strategic plan for the sector which it published in December 2011. The new strategy sets two, clear priorities: (1) developing the compliance and accountability of the sector; and (2) developing the self-reliance of the sector. What this means practically for charities is that the Commission will be shifting greater responsibility to trustees to ensure the charity is getting things right, and to self-report any irregularities (e.g. in terms of significant financial losses, challenges to a charity’s independence, etc). The Commission will be undertaking less pro-active investigations and instead will be issuing detailed guidance on how and when to report. Trustees should take note of these shifting expectations and responsibilities.

New Equality Act Guidance on restricting charity beneficiaries

Charities whose charitable aims or funders require that they limit their beneficiaries to a designated group of people should be aware of recent guidance published by the Charity Commission on the application of the Equality Act 2010. Essentially, whereas charities could previously restrict who benefitted from their activities provided (1) that restriction was set out in the charity’s constitution and (2) the class of individuals was not defined by reference to skin colour, now any restrictions to charity beneficiaries must be justifiable by applying either the charities exception or another exception permitted within the Equality Act. Charities that restrict their beneficiaries based on a specific, shared characteristic—such as age, disability, gender, or religion—should review their governing documents to make sure they are in compliance with the revised law.

A detailed article on the Equality Act guidance is available here: http://www.guardian.co.uk/voluntary-sector-network/2011/sep/01/charity-commission-issues-equality-guidance

Changes to the definition of ‘Public Benefit’ impacting educational charities

Educational charities should be aware of changes to what activities they can claim are meeting the requirement of providing public benefit following a decision of the Upper Tribunal published in October 2011. The decision found that part of the Charity Commission’s guidance to schools was erroneous, and that any trust which excludes the poor from the benefit it is providing (e.g. providing education) cannot be considered a charity. This ruling is important for independent schools, as the Tribunal was clear that people who are less able to pay fees are not genuinely ‘poor’, regardless of what sacrifices families might be making to cover fees. While bursaries and scholarships for students who cannot afford to pay fees remain an option for independent schools, the Court confirmed a range of alternative activities could be counted as meeting the public benefit requirement while simultaneously furthering schools’ charitable purpose—such as including students from local state schools in classes and activities, or sharing teachers and facilities with local schools.

The wobbling world economy, increased price volatility in the developing world and general political instability will all shape the way private donors pursue philanthropy in 2012.  In TSIC’s latest Marketplace Memo, we highlights five key trends that both funders and grant recipients should take note of.

Click here to access the 2-page Memo as a PDF.

1. Sustainability Rather Than Scale

The buzz around ‘income generation’ and using ‘for-profit business models’ will continue to dominate funders’ agendas.  Back in 2009, TSIC published a report¹ that demonstrated 44% of high-net-worth individuals are more willing to fund a charity’s sustainability activites rather than its direct programme costs.  This idea has now progressed from discussion to implementation.  Funders are looking to support organisations that have a plan to become self-reliant rather than those with bold growth ambitions that are dependent upon funders writing larger and larger cheques each year.

2. Greater Innovation from Charities and Social Enterprises

The number of professionals entering the third-sector from commercial backgrounds has resulted in a wave of new approaches to tackle old problems. Examples such as ColaLife² have captivated the attention of funders who are searching for innovators looking to disrupt traditional models and work via unlikely alliances.   Funders are becoming more receptive to creative, even wacky approaches to tackling social issues, and in 2012 more schemes will become available for seeding new ideas in the third sector.

3. Beyond Cash Donations

Corporate funders, eager to demonstrate their relevance to society at large (the so called ’99 percent’) but squeezed by an uncertain economic climate, will look for new ways to contribute towards social issues beyond cheque-writing.  More than ever, corporations are mobilising their business networks, specialist knowledge, operational infrastructure and public profiles to tackle burning problems faced by the community.  In addition, the growing pool of socially responsible and impact investors will also help channel more attention and funding into development projects, complementing the role of philanthropic donations and commercial sector expertise.

4. Policy Influence

No matter how generous private donors are, they cannot match the depth of funding that government offers.  Facing a drastic decline in public sector funding which experts estimate will total £2.6 billion over the next five years³, charities and community organisations will need to increase their ability to demonstrate their impact using standardised metrics, and engage with policy makers to prevent cuts to the most effective and critical social programmes.  Grantmakers and industry think-tanks may also need to play a major role in coordinating and amplifying the voices of community organisations to make sure a clear, coherent message is being communicated to policy makers.

5. Crowd-sourcing

The prevalence of technology will continue to drive a major shift towards democratising philanthropy.  Smaller charities will benefit from a growing list of online platforms and tools to help them profile their work and fundraise from the masses.  Correspondingly, funders are also becoming more technology savvy, using online platforms to field ideas and seek opinion from the public on where their donations should go – as US Billionaire William Conway has recently done⁴.  Quantity does not equate to quality, and inevitably some of the suggestions will be weird, wacky or off the wall – but often it’s the crazy ideas that change the world.

The 2-page Memo can be accessed as a PDF via
http://www.tsiconsultancy.com/reports/five-trends-for-philanthropy-in-2012.pdf

An exciting new job opportunity has recently arisen from within our network. The newly incorporated Sabin Foundation Europe, the European arm of the US organisation, Sabin Vaccine Institute, is looking for a dynamic and entrepreneurial fundraiser to run their UK fundraising efforts. Please click here for the job description and details of how to apply - European Fundraising Officer Job Description.

In a report published by Labour’s Business, released this month, our CEO Jake Hayman has written an article (titled Social Enterprise: a movement not an entity) that outlines a number of practical ways in which governments can help further the social enterprise movement.

Firstly, while public contracts should be awarded to the most competent bidder agnostic of whether it’s a private business or social enterprise, the government should also help drive up the competitiveness of social enterprises.  This could include a matching service to encourage joint-bids between social enterprises and private firms, as well as free advisory session for failed bidders so that social enterprises can learn from unsuccessful tenders.

Secondly, the pool of early stage risk capital is too small and the risk of starting a social enterprise is simply too high for many individuals – it often involves sacrificing the life savings of the entrepreneur (and their family and friends) as well as forgoing several years of salary.  At the same time, trusts and foundations, which hold £63 billion in assets, are discouraged from investing into social enterprises due to prohibitive tax requirements.  The government should reform the tax code to encourage trusts and foundations to invest in social enterprises.

Lastly, existing schemes such as the Enterprise Investment Scheme offers hugely compelling tax incentives for high-net-worth individuals to invest in early-stage enterprises.  This successful scheme should be further leveraged for social enterprises through a matching grant (alongside the private investment) and a mass public awareness campaign to help drive investors’ interest and private financing into the social sector.

To end with a direct quote from the article “We have a generous generation of people who are better versed in business than they are at charity.  It’s time we make better use of them.”

• Download the 4-page article written by Jake Hayman:  Social enterprise: a movement not an entity
• Or download the full 91-page report: Labour’s Business: Why enterprise must be at the heart of Labour politics in the 21^st century

The meeting last week of the Social Innovation Summit in Palo Alto, California brought together executives from leading companies—such as Microsoft, Wal Mart and Intel—with charity managers, social entrepreneurs, government leaders and philanthropists to discuss how business thinking can drive social innovation.  One of the strongest themes emerging from the summit was the need for non-profits and the private sector to work together in sustainable partnerships to solve some of the world’s most pressing social problems, particularly in light of the drawback in government resources.

Another theme highlighted by Waggener Edstrom’s Innovation Conversations blog was the need for non-profits and social businesses to talk about their failures as much as their positive impacts. The blog quotes Jacqueline Fuller, Director of Charitable Giving and Advocacy at Google, saying she ‘looks for non-profits who share Google’s “fail fast” motto and likes to see engineers and developers in the C-suite because they are used to things breaking or evolving constantly’.  Organisations working to benefit society should equally be open to experimentation and being honest about their failures as much as their successes.  Only through risk-taking and knowledge-sharing can socially-minded organisations learn from each other’s mistakes to build better solutions.   Furthermore, by ‘thinking like a business’—in terms of making data-driven decisions based on transparency and pushing big, ambitious ideas—non-profits can drive critical innovation within their organisations and develop transformative approaches for achieving change.

TSIC supports charities and social businesses in thinking differently through initiatives such as ThinkSpace, which brings together some of the brightest minds from across industries to get them engaged in designing solutions for a better world.  Watch this space to hear about some of our exciting results from ThinkSpace in the coming weeks.

Read the full blog post here: http://blogs.waggeneredstrom.com/innovation-conversations/2011/12/from-crazy-ideas-to-social-innovation-breakthroughs/

Corporate philanthropy is much wider than giving away money, staff time or free products and services.  A new generation of businesses are also applying their core expertise towards and developing products to better address a burning issue in the community.

Campbell Canada’s ‘Help Hunger Disappear’ campaign is a prime example.  They have developed a new meal in a can, called Nourish, that is a nutritionally wholesome product sold at exceptionally affordable prices, with 100% of profits going towards hunger awareness and relief efforts through the World Food Programme.

What’s more, Campbell has also mobilised their network in meeting this shared goal.  Suppliers such as Keystone Foods, McCormick Canada and Silgan Containers donated ingredients and materials.  Twelve retailers including Sobeys and Metro helped to promote the products via their advertisement and in-store promotions.   Shoppers were also encouraged to either purchase and donate the cans on-site to Food Bank Canada, or to make a donation to the World Food Programme which raised over £30K in some stores.

For further information about this campaigns as well as consumers’ response, you can visit Campbell Canada’s social media page https://www.facebook.com/CampbellCanada

According to a recent article by Wharton School of the University of Pennsylvania, of the USD$290 billion (£180 billion) that is donated annually in the U.S. – less than 10% of this is done online.  Furthermore, the author advised that a good fundraising strategy should not operate on one medium alone, while “the Internet is becoming an increasingly important acquisition channel… direct mail is the best method to retain donors.”

However, looking forward, the amount donated online is growing by over 30% year on year, and there is no doubt that the internet is transforming donor behaviour in three primary ways:

1. The increased availability of information, both direct from charities but also through independent rating platforms such as Charity Navigator in the U.S., have encouraged donors to apply more due diligence before they commit to a charity.  65% of donors use online information to research charities.
2. International causes are receiving a greater share of total donation by doing a better job at connecting donors with far-away projects through videos, live discussions etc. Being able to ’see the difference’ before and after provides a much more powerful motivation to give (or makes the issue more difficult to ignore).
3. The speed of information dissemination, particularly through social media, has enabled emergency relief fundraising to be far more responsive and popular.  Within hours of a disaster, thousands, sometimes millions, of people will be discussing and donating towards the  cause.

Read the full article here: http://knowledge.wharton.upenn.edu/arabic/article.cfm?articleid=2742

Social impact investing is an innovative, emerging sector that aims to solve social and environmental challenges while also generating attractive financial returns. In an article for Philanthropy UK’s quarterly report on social impact investing, Paul Cheng of CAF Venturesome argues that philanthropists have a ‘golden opportunity’ to lead the development of this sector much in the same way that forward-thinking individuals were critical to the global success of microfinance. In the early years of microfinance, grant funding from private donors and philanthropists was critical in providing microfinance pioneers with the financing they needed to prove their business models. Once the concept had been proven—demonstrating high repayment rates, transferability to different geographies and prevalent demand—these entrepreneurs were then able to attract alternative sources of financial support and the model was quickly exported, creating a new, global business sector.

In the area of impact investing, there is a similar opportunity for philanthropists to provide early-stage capital to support new social enterprises in proving they can provide both financial returns and do social good. It is a high-risk endeavour. However, considering the alternative is giving money away with a 0% expected return, philanthropists should be in the best position to try it. As Cheng argues: ‘Philanthropists by nature are looking for high-risk, high-impact opportunities and more willing to deploy their money through “minus 100%” opportunities than finance-first investors. This makes them the most powerful of all players involved in impact investing because they have capital that can in effect absorb infinite risk.’

‘Angel philanthropists’ thus can play a key role in developing the social investment market much in the same way that ‘angel investors’ helped many of today’s most successful for-profit corporations get their start. The potential recognition accorded from pioneering a new, socially-minded sector by putting money in early is an attractive, added benefit. As Cheng argues, ‘those who do not engage now might be missing a trick.”

Read the full article here (http://www.philanthropyuk.org/quarterly/articles/all-power-philanthropy) and the rest of Philanthropy UK’s report here (http://www.philanthropyuk.org/quarterly/social-impact-investing-philanthropy-uk-magazine-summer-2011).

October is breast cancer awareness month and once again consumers are reminded that breast cancer kills over 12,000 people (99% women) every year in the UK. But, it is a disease which could be made less common through healthier lifestyle changes and which can be effectively treated if detected early.

However, companies who are tying their advertising and products to breast cancer awareness have been accused of using the disease and its synonymous pink ribbon as a marketing ploy, while only donating a minority of their profits towards cancer research. Worse, some companies have been accused of ‘pink-washing’ – defined as a practice whereby a company profits from the sale of pink ribbon products and simultaneously sells products with cancer-causing ingredients or manufacturing processes.

In two separate Forbes articles, Paul Klein and Meghan Casserly question the sincerity of corporates who simply slap on the pink ribbon symbol without defining how they are contributing towards the battle against breast cancer through more effective prevention, detection and treatment. Just as we expect charities to measure their results, corporations that engage in social campaigns should also be expected to define and track their social impact.

For further information, refer to the two articles on Forbes by Paul Klein (http://onforb.es/rkHaGI) and Meghan Casserly (http://onforb.es/qy9s87)

The Institute for Philanthropy has just published an insightful paper on how philanthropists can utilise social media tools to leverage their social impact–whether that be via rapidly reaching key audiences to build support behind a cause, or building trust with stakeholders via increased dialogue and transparency.  While individual philanthropists typically have been assumed to be fairly private in their grant making, the report challenges this thinking and demonstrates the opportunity for individuals and foundations to have an even greater impact by using increasingly important, social media tools in impactful ways. Read an article on the report including some fascinating examples of effective social media use on the Guardian website or download the full report from the Institute for Philanthropy.

Corporate philanthropy has the ability to boost a brand’s image and its attractiveness to consumers, but done half-heartedly it can result in negative press and scepticism. Two recent examples prove this point.

IKEA recently announced a $62m donation to the Dadaab refugee camp in Kenya, which is a very generous donation and should be celebrated. However in a recent article in The Guardian, author Zahid Torres-Rahman questions whether this is over-simplifying the issue of overcrowding refugee camps and suggests that IKEA could have used its expertise and purchasing power to make much more of an impact. For example, IKEA could look to increase its sourcing from local enterprises in the region, or mobilise its global customer base to increase their awareness and action in support of refugees. These longer-term initiatives are what will eventually bring about more favourable policies and economic opportunities for poor families, and are far more valuable than a cash donation that faces the risk of bureaucracy and corruption.

Another example is that of Coles, the Australian supermarket chain, which recently received a flurry of media criticism for its ‘Sports for Schools’ program. This promotion offered consumers vouchers when they shopped at the supermarket, which the local schools would collect and exchange for sports equipment. The purpose of the programme, according to the Coles website was to ‘encouraging active, healthy lifestyles for Australian kids.’

Unfortunately for Coles, this is not the way their campaign has been viewed. In a recent video by The Australian newspaper, journalist Simon Canning talks about how ‘philanthropy’ was transformed into ‘brainwashing of kids’. Furthermore, the programme lacks consideration on how the programme will create the desired impact – giving sports equipments to schools doesn’t mean that more students take up sports, or that the less sporty children will use the new equipment. An even more farfetched inference is that just giving sports equipment will make children’s lifestyles healthier. Coles showed a lack of thought as to what problem it wanted to tackle, and how it could best use its assets to do so.

Corporate and social responsibility can go a long way to tackling pressing issues, and can also greatly enhance a brand’s image. However, it needs to be pursued with knowledge of the issues that are to be addressed, who the beneficiaries are and how the programmes will result in tangible impact. Corporations must become more creative in applying their own expertise and workforce to addressing social problems, as opposed to just handing over money. This way, consumers will believe that the company is genuinely concerned about doing good and not merely interested in boosting its brand.

We are currently looking for a fundraising consultant to join our team in Central London. The successful candidate will have experience in  fundraising as well as being an entrepreneurial self-starter. Closing date for applications is Monday 5th September. Please click here to see the full job description.