Study Finds that Corporate Sponsorships Negatively Impact Nonprofit Brands

August 24, 2016; Harvard Business Review

When we think of the intersection of corporate philanthropy and brand, we typically think about the positive benefit companies receive through their commitments to community development or enrichment projects. However, a recent study conducted by researchers from Kings College and Vlerick Business School suggests that corporate branding of social initiatives might also have an unintended, negative impact on the nonprofit recipients themselves.

The study, focused on the arts and culture sector, identified a decrease in external recognition and brand strength of institutions that accepted corporate sponsorships. Those negatives increased when organizations had a higher volume of corporate logos associated with their name, especially in cases where companies were sponsoring the organizations overall, versus a specific program or initiative.

Organizations accepting significant funding from companies are seen as compromising their artistic and strategic freedom as part of the package. While this may or may not be true, and likely varies from organization to organization, this is a case where perception matters more than reality. A prime example that the researchers hold up is British Petroleum’s sponsorship of the Royal Opera House, which caused several high profile artists to cut ties with the theater, citing that BP was simply “buying social legitimacy.”

Corporate Social Responsibility (CSR)—and the philanthropy, sponsorships and volunteerism that come along with it—has been expanding over the past decade as the business value for companies to engage in their communities has grown by leaps and bounds. In its early stages, first becoming popular in the 1960s, CSR, self-regulation integrated into the business model, was largely oriented towards compliance—the adherence to regulations ensuring that companies do the least amount of harm to the communities in which they operate. Now, companies, heeding the call of an increasingly millennial workforce demanding double or triple bottom line strategies from their employers, are realizing that CSR is a marketing, recruitment, and retention strategy. For example, CECP’s latest Giving in Numbers report, which surveys corporate philanthropic and engagement activity, indicated that 56 percent of companies have increased their giving since 2012.

So, in light of the potential for increased corporate funding but recognizing the branding dangers of such sponsorships, what’s a cash-strapped nonprofit to do?

There are no easy answers The advice that the researchers put forth to avoid pitfalls might actually lead nonprofits into other more entangling traps. They lead with a wise word to corporate philanthropists to “stay away from any form of interventionism” and let the nonprofits and cultural institutions that know their work best have the creative and strategic freedom they need. However, they then follow with potentially contradictory guidance to nonprofits, encouraging them to direct funding towards a specific program, saying, “The key is to offer well-identified and focused projects for the consideration of corporate support.”

Traditionally, the more programmatic or specific the support, the more defined the goals and outcomes need to be—and the more limited the scope of the funding becomes. And, in a philanthropic environment that has a track record of underfunding the real cost of nonprofit operations, intentionally limiting or mandating how funds are used is inherently problematic and propagates an already troubling pattern.

Nonprofits would be better served by incorporating this study’s findings as one of the many inputs they weigh when considering a corporate partnership, looking at two factors in particular. The first is the degree to which they are philosophically comfortable being associated with the core business of their corporate sponsor. Companies seeking reputational repair are the most inclined to provide corporate sponsorships where co-branding and flashy displays of its logo are part of the deal. While funds from troubled businesses can still do tremendous good, a recipient organization needs to invest in the due diligence required to truly understand the company’s business, its footprint, and its brand before signing on the dotted line. And secondly, a nonprofit organization should identify any clear conflicts of interest that may influence its programmatic freedom, such as board or formal advisory positions, and address those openly and transparently so that key stakeholders feel “bought in” and not “sold out” through the process.—Danielle Holly