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Charitable donations – How much actually goes to the cause?

As we reach the end of Gynaecological Cancer month (September, despite some strange posts lately on social media), we hit October. It’s that time again. Out come the pink products, every brand seems to have one these days, and while we would all obviously support charitable giving, I am turning slightly more cynical as the years progress.

It seems I’m not alone. The Charity Commission has implemented new rules (they’re not voluntary) for anyone claiming to donate money to charity through selling goods. Where previously ‘5% of profits will be given to XYZ charity’ was sufficient, that will now have to give a specific amount thus:

‘I L9.6 Requirement to have an agreement in place:
a) It is unlawful for a commercial participator to represent as part of a promotional venture that it will give money to a charity (or an institution established for benevolent or philanthropic purposes) unless it is done in accordance with a written agreement with the organisation it is raising funds for. The agreement MUST* be in writing and signed by or on behalf of both the commercial participator and the organisation it is raising funds for.
The agreement MUST* specify:
The names and addresses of all the parties to the agreement;
The date on which each party signed and the duration of the agreement;
any terms dealing with early termination or variation;
a statement of the principal objectives of the agreement and the methods to be used to achieve those objectives;
the proportions in which each charity will benefit in cases where the money is to be divided between more than one charity;
‘what proportion of the price of the goods or services will be given to the charity or what sums will be donated by the commercial participator in connection with the sale or supply of the goods or services;’
and any amount the commercial participator will be paid as remuneration or expenses.’

This explains for example, why Estee Lauder now state ‘La Mer will donate £19.50 from the purchase price of the Limited Edition 15ml Creme De la Mer Moisturizing Cream in support of The Estee Lauder Companies Breast Cancer Campaign’ and not ‘100% of the profit from’ or even more dubiously ‘5% of profits’ (*not that ELC have said that, but others have and still do. ELC, to my knowledge, are always up to date with legislation, they are far too large and responsible a corporation to not be).
Another example is The Eve Appeal’s recent corporate relationship with Oliver Bonas: Eve Appeal/Oliver Bonas which very clearly states that £1 or £2 from individual products is given directly to the charity.

Why the tightening down of legislation? Like anything, to the average consumer unaware of costings/marketing terms, ‘5% of profits’ on an expensive product, say, something electrical costing £100, may lead you to think that £5 of your money goes to charity. What isn’t picked up on is the phrase ‘of profits’.

Example:

£100 product.

Less 20% (for argument’s sake) tax (the taxman always gets paid) = £80.00

Less 50% for the retailer margin (higher in some retailers) = £40.00

Less ‘cost of goods’ <— this part right here is where brands can recoup all their costs, including the marketing costs for the entire campaign, the extra money for the pink packaging, everything. The brand will not lose any money by donating to charity. They can recoup the 5% by inflating these costs. If the costs of goods are listed at £25.00 officially, that means:

£40.00 wholesale price to retailers minus the £25.00 cost of goods = £15.00 ‘profits’.

So out of your £100.00 product, 0.75p actually goes to charity.

And if a brand says ‘100% of our profits will be given to XYZ charity’, they are not only being shady, they’re potentially being unlawful and in direct conflict with the Charity Commission.

Be careful where you give, and if in doubt, ask the brand outright. It’s shocking how awkwardly some brands react when asked outright about charitable donations.

 

 

 

Source: Gov.UK/Charity Commission

For absolute clarity I am a very proud Ambassador of The Eve Appeal.