Many commercial businesses are taking corporate social responsibility (CSR) more seriously and more strategically, recognising increased public expectations on the private sector to demonstrate a strong commitment to the communities they operate in.
Corporate charitable foundations (CCFs) can be a useful tool in helping businesses achieve more focus and impact in their CSR objectives. The Charity Commission estimates there are now over 100 such foundations.
As an example, leading UK food wholesalers and catering suppliers Brake Bros recently established (with our charity law legal support) a new foundation to operate their ‘Meals & More’ initiative, which works to reduce and eradicate child hunger during school holiday periods.
What is a charitable corporate foundation?
A charity established by a commercial business, will often use the business name and brand and be funded primarily by the business, usually carrying out charitable activity consistent with the business’ CSR objectives.
Why would a business consider setting up its corporate charitable foundation?
Many commercial businesses are setting up their own corporate foundation which can:
- Create more long-term focus and impact for the business’ philanthropy as part of its CSR strategy, as an alternative to shorter-term arrangements such as ‘Charity of the Year’ arrangements.
- Create reputational benefits by facilitating charitable activities in the community linked to the business’ brand.
- Be set up to support current or former members of staff who have fallen on hard times or who are otherwise in charitable need.
- Have charitable purposes set initially by the business which is consistent with the business’ CSR objectives (although please note there is an ongoing need for the CCF to be independent as below).
- Have the ability for the business to appoint one or more of the CCF trustees.
- Raise additional funding in its own right from individuals and corporations, on top of that provided by the business.
- Provide volunteering and other opportunities for the business’ staff to participate in the charitable activities of the CCF.
How does a corporate charitable foundation work?
A CCF will be a separate legal entity needing suitable trustees to run the CCF and sufficient expertise and resources to ensure it is properly administered and complies with charity law and Charity Commission requirements.
CCFs do not exist to promote the business. All CCFs need to have exclusively charitable purposes and operate for the public benefit. The Charity Commission acknowledges some reputational benefits may be provided to the business by being associated with a CCF’s charitable work but it is vital any such benefits are outweighed by the wider benefit to the public provided by the CCF.
The key point is all charities, including CCFs, have to be independent. It is not possible to have a ‘pet’ charity with the business dictating to the CCF trustees what activities the CCF can and can’t undertake. There will need to be an ‘arms’ length’ relationship between the business and the CCF trustees.
The CCF trustees have to act in the best interests of the charity, not the business, at all times. Whilst it is fine for the business to have some control over the appointment of the trustees of the CCF, and for some of the CCF trustees to be members of the staff of the business, the CCF needs to have sufficient independent trustees. This is so that if any trustee has a conflict of interest or loyalty as a result of their role in the business, this can be properly managed so as not to impact decision-making in the best interests of the CCF.
Are there alternatives to corporate charitable foundations?
Businesses considering the CCF route should also explore the alternative option of working with their local community foundation(s), who may be able to administer a charitable fund for the business, ringfenced for local community purposes set by the business. This arrangement avoids the need to establish and administer a separate CCF charity but may involve reduced flexibility in terms of the projects and organisations which can benefit from the fund.
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