Transparency around charitable donations should not be feared by the private sector

In light of recent figures which show that charitable giving by big business has stagnated, Susan Elan-Jones MP says that corporations should be more transparent about donating to good causes.

Recent weeks have been dominated by allegations levied against businesses such as Google for their complex tax arrangements, with some businesses standing accused of using unorthodox schemes and complicated ruses to confuse and mislead legislators and regulators. But rather than obfuscating under scrutiny, are there areas where an embrace of transparency could actively boost opportunities for business?

Many of the biggest businesses in the UK make a significant contribution to society, not least though charitable donations. Unfortunately, that message doesn’t always cut through to the public. Research carried out by the Charities Aid Foundation (CAF) discovered that only one in five British adults think that more than half of the UK’s biggest companies donate to charitable causes in a typical year, even though the real figure is much, much higher.

However, recent legislative changes have muddied the water somewhat. At the risk of delving into technical jargon, a statutory instrument in 2013 removed an obligation in the Companies Act 2006 that forced businesses to account for any money given away (in excess of £2,000) for charitable purposes in their annual reports. Rather than being obliged to report their charitable donations, businesses are now able to choose whether or not they do.

Monitoring of FTSE 100 accounts shows that since the 2013 change, reporting of charitable donations has started to drop away. From 100 per cent of the FTSE 100 companies reporting charitable donations in 2012, this has fallen to 92 per cent in 2013 and 87 per cent in 2014. The irony of this is businesses choosing to reveal less about their charitable donations, even as those for which data is available are giving away more. As a proportion of revenue, the average charitable donation from FSTE 100 companies has increased. In 2014, 27 companies donated at least 1 per cent of their pre-tax profits to charity.

This matters because the actions of businesses are having an increasing impact on consumers, who want to know more about the organisations that they buy from, invest in, and even work for. Over two-fifths (45 per cent) of British adults would be more inclined to work for a business that donates to charitable causes, and half (51 per cent) say that they would be more inclined to buy a product or use a service from a businesses that supports good causes.

This is a matter of particular importance to younger people – the next generation of consumers, employees and business leaders. Almost two-thirds (65 per cent) of 18-24 year olds would be more likely to buy a product or use a service from a business that donates to charity, and 61 per cent say that they would be more inclined to work for a charity that makes a social contribution in this way.

It’s more than just a transactional issue though, with many people seeing the role of business intertwined with that of society as a whole.

Corporate responsibility a PR exercise?

At present, the public is still sceptical about the social impact that businesses make. Over three-fifths (61 per cent) of adults think that corporate responsibility is just a PR exercise for business. That patently is not the case, but businesses cannot rely on consumers to discover this on their own; they need to be leading the charge, and explaining just how much they do to make a positive contribution.

Of course, many businesses do already account for their charitable donations, both technically in their reports, but also through promotion and engagement. However, because there is now no obligation on all businesses to do so, it means that consumers aren’t getting a clear picture. Where consumers want to compare the social records of businesses, it’s now more difficult. That that makes it more difficult to make an informed choice about where to spend their cash, and which brands deserve their loyalty.

It’s important to stress that transparency should not be feared; instead, businesses should see it as an opportunity. Visibly accounting for their charitable donations can help to strengthen bonds with existing consumers and help to develop new ones. It gives them a way of standing out from competitors, and shows future generations that they are committed to making a difference, and are a good employer to work for.

We need a cross-party consensus and the support of business leaders to repeal the 2013 change and make the charitable support provided by businesses more transparent, promoted and celebrated across the country.

Susan Elan Jones MP is the Labour member for Clwyd South and co-chair of the All Party Parliamentary Group for Charities and Volunteering