Opinion

Fair trades

Finance | 27 Mar 2008

Charities should take a more ethical approach with their trading activities, argues Simon Erskine.

Accountants are typically most concerned with the bottom line. A frequently cited limitation of accountancy is that it fails to consider the non-financial implications of decision-making. However, at Gotham Erskine we try to see things in broader terms. We see accounting as our way to help charities and voluntary groups make the world a better place. We are also concerned that charities consider the broader picture in their financial actions, such as trading, and in particular do not cut across the good work done by other charities. With our clients’ focus spanning the environment, human rights, third world development, education, welfare, and poverty at home we would like to see a more joined-up approach to charity trading.

Most charities are concerned to act in a socially responsible way to fulfill their charitable aims but, in our view, may not apply these concerns to their trading activities. Thus most charity Christmas cards are not printed on recycled paper, most t-shirts are not printed on fair trade or organic cotton, and many products are manufactured under poor trading conditions, with no consideration of the freight miles. In this context, issues they may want to consider should include a reasonably full assessment of the supply chain working conditions. Questions charities should ask include are there guarantees against forced labour, is there freedom of association and collective bargaining, are working conditions safe and hygienic, and is child labour used?

Perhaps fewer UK charities consider the environmental dimension of their social obligations. Will global warming result in increased global levels of homelessness and poverty? Will the use of chemicals in less regulated economies increase the incidence of some cancers? Simple environmental questions to consider might include whether the product is recycled or recyclable, and how far the product has been imported.

Ethical trading extends further than trading with goods to fundraising more generally. When supporters are sponsored to trek through exotic locations, the flights there and back have considerable carbon footprints, and local communities can be disrupted.

The issue is not solely about charities failing to maximise opportunities to make themselves more ethical. Decisions on what to include in a trading catalogue, or the type of fundraising to adopt, can impose unforeseen restrictions on the consumer base that can be targeted. An example of such self-imposed restrictions on income generation would be the unintentional exclusion from a fundraising dinner of vegetarians and vegans who will not purchase food or other products containing animal derivatives. Taking trading or fundraising decisions in haste can unnecessarily restrict the income generating capacity of the charity.

We feel that if charities were to widen the ethical criteria for their own trading initiatives, they could achieve a synergistic effect and further contribute to bringing about the better world we are all working towards. Accountants in their broader role as advisers can help by working to bring the financial and ethical bottom lines closer together. We would like to see charities reflect this dimension in the trustees’ annual reports and are encouraging our own clients to do so.

Simon Erskine is a partner at Gotham Erskine