Estimates of corporate community contributions are notoriously inexact, but three recent publications help to give us a better guide. Here we examine the data currently available, assess their weaknesses and suggest what companies can do to improve the position.
Each year the Charities Aid Foundation and the Directory of Social Change conduct a joint survey of UK companies. The starting point is data extracted from annual reports by Extel. Legally obliged to publish a figure for UK charitable donations, one in five of the top 500 companies now also give an estimate for their total community contribution. Companies are requested to verify these details and update the previous year’s programme description.
Charity trends
CAF publishes an annual guide to trends in charity finances, Dimensions of the Voluntary Sector(1), with recent editions supported by NatWest. This reports the total corporate contribution in the UK for the 1996-97 year (actual year ends vary between companies), based on the top 500 companies, as ?306 million, up 11% on the year before. Cash donations were ?196 million, up 7.6%. Based on Gift Aid statistics from the Inland Revenue, CAF estimates that another ?40 million is donated to UK charities by companies outside the top 500. (Gift Aid donations by all companies in 1997 totalled ?204 million, yielding an extra ?66 million in tax relief to the charities.) Data from recent years is shown in Table One.
Donations of top 500 UK corporate donors
1994-95 1995-95 1996-97
Total cash donations £162m £182m £196m
As % of pre-tax profits 0.21% 0.22% 0.22%
Total corporate support £285m £276m £306m
As % of pre-tax profit 0.37% 0.33% 0.34%
Source: Charities Aid Foundation
Putting the corporate contribution into context, CAF also reports other main voluntary sector funding sources, for example:
local authority grants: £1.3 billion;
central government (excluding housing): £1 billion;
trusts and foundations: £1.9 billion;
National Lottery Charities Board: £19 million;
individuals approx £5-6 billion.1
Reported giving by companies in the UK accounts for up to 2.4% of voluntary sector income, depending on the definition of voluntary sector adopted.
In a separate CAF survey, the top 500 charities report receiving ?19 million in non-cash giving, presumably mainly from companies. However this figure should be treated with caution as it appears unreliable (£33 million was reported in the previous year) and valuation methods are very varied. Despite the new charity accounting rules, some major fundraising charities do not record in-kind gifts from companies, as their targets are expressed as cash amounts only.
In addition, CAF’s figures show that payroll giving yielded £24 million in 1997 from 368,800 employees in 5,270 employers. But this does not count towards the total of corporate community contribution, as the employee makes the donation (although of course amounts matched by the company do).
Annual directory
The Directory of Social Change uses the same data as CAF to publish an annual guide to company giving(2). Intended primarily as a source book for voluntary sector fundraisers, it does include a brief analysis of the figures. The 1998 edition includes data on the top 550 companies, arriving at a slightly different totals to CAF. These companies contributed £336 million in the UK, including £206 million in charitable donations. Extrapolating from the one in five companies who give a more comprehensive contribution figure, the Directory says the total of corporate support would rise to around £530 million. Data from recent years is given in Table Two.
Donations of top 400 UK corporate donors
1994/95 1995/96 1996/97
Charitable donations £158m £182m £199m
As a % of pre-tax profit 0.21% 0.21% 0.22%
Community contributions £269m £252m £315m
As a % of pre-tax profit 0.36% 0.29% 0.33%
Source: Directory of Social Change
Sector almanac
The third source of data is the NCVO, now in the second year of publishing the UK voluntary sector almanac(3), with key statistics mainly based on data collected from charities by the Office for National Statistics. This covers income and expenditure, assets and liabilities, employment and outputs.
NCVO bases its analysis on a voluntary sector defined as UK general charities, some 135,000 in all with a total gross income in 1997 of £13.1 billion. This excludes non-profit bodies that are effectively part of government, such as schools and universities, or are membership based (housing associations and sports clubs, or are religious.
Income from companies is split into two categories:
£311 million from earned income, such as commercial sponsorships, cause-related marketing and sales of consultancy services, and
£255 million in voluntary income, principally grants from community affairs departments.
The earned income category needs to be treated with some caution as it includes some amounts which should not be counted as part of companies’ voluntary community contribution – while the London Benchmarking Group model includes the community benefit element of cause-related marketing in the ‘commercial initiative’ category, for example, payments to a disability charity for consultancy advice on equal opportunities employment policies would normally be treated as ‘business basics’.
NCVO says companies contribute 4.3% of voluntary sector income. Earned income from companies rose by 12% in real terms between 1994 and 1997, with no significant change in voluntary income over the same period (only 0.1% real growth). Putting the corporate contribution in context, the other main funding sources in 1997 were as follows:
general public: 35%;
government and agencies: 28%;
voluntary organisations (trusts and foundations): 10%; and
Top three beneficiaries from corporate contributions are the environment, education and arts and culture, measured by the proportion of their income coming from companies. One in five charities received donations from companies and one in eight earn income fro the corporate sector.
Weaknesses
Companies are getting better at recording data on the input cost of their voluntary community investment, for example by adding estimates of employee involvement in paid time to existing figures for cash donated. But significant weaknesses remain, including:
too many companies still only provide the minimum required by statute, namely UK charitable donations only:
total community contribution figures often only capture data at corporate centre by the community affairs departments, missing activities in commercial departments;
valuations of in-kind giving vary widely, from zero (because it is perceived as too difficult to make an estimate) to sales price (excessive as stated at notional worth to beneficiaries, not cost to the company);
the costs of managing community involvement, principally dedicated community affairs staff, are sometimes not included;
the focus is on the UK, but most large companies are now global in reach and should be judged as much on what they do in far flung parts of the operation, not just at home
Action
The good news is that a concerted effort is underway to encourage companies to improve their data collection, with help on offer. For the first time, this year the Per Cent Club is requiring members to submit a figure for total community contribution, showing whether that meets the percentage profit/dividend target. A pro forma acts as a checklist of the main types of contribution: cash, time, in-kind and management costs.
This year’s CAF/Directory of Social Change survey of companies, due out in September, will be asking companies to make an extra effort to provide a total figure, not just UK charitable donations. Included with the survey will be guidance, based on the London Benchmarking Group model, on eligible categories and consistent valuation methods.
As previously reported in Community Affairs Briefing, the London Benchmarking Group of six companies has been joined by another 12 in a follow-up project, Getting the Measure. This aims to develop the Group’s model further and to disseminate it widely. CAF has organised a programme of seminars for companies. The project will now be contacting larger companies directly, offering help to make a better estimation of their input costs and to show how to assess their outputs – what the programme actually achieves for the company and the community.
No one doubts that current limited data significantly understate the extent of involvement. So is it possible to say how much companies really contribute in the UK? Certainly, for the top 500 companies, the figure is double the existing amount, around £500-£600 million, and probably more. The Directory of Social Change’s extrapolation from the one in five companies producing a more comprehensive figure arrives at this sort of level. When companies like BT, GrandMet (now Diageo) and Whitbread applied the LBG model, their totals rose; in BT’s case from £15 million to £27 million, and that is still an underestimate.
So as more companies see the sense of putting a proper value on their voluntary community contributions, the grand total will rise and its importance to the voluntary sector will become widely recognised. And with better data, programmes can be better managed, achieving more.
1. Dimensions of the Voluntary Sector: key facts, figures, analysis and trends, ed. Cathy Pharoah and Matthew Smerdon. Charities Aid Foundation (01403 710851) £35, 264pp, ISBN 1 85934 077 6
2. The Guide to UK Company Giving 1998, by John Smyth, Paul Brown and Dave Casson. Directory of Social Change (0171 209 5151) £25, 369pp, ISBN 1 900360 23 3
3. The UK Voluntary Sector Almanac 1998/99, by Les Hems and Andrew Passey. NCVO Publications (0171 713 6161) £20, 159pp, ISBN 0 7199 1513 9
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