Case update: Charitable purpose - fair trade?

In the case of Harrogate Fairtrade Shop v Charity Commission, the Charity Tribunal have upheld the Charity Commission’s decision not to register a Fairtrade shop as a charity. The Harrogate Fairtrade Shop (“HFS”), which operates on Fairtrade principles appealed to the Tribunal after the Commission had twice refused HFS’s application for registration. 

The main point of contention was the first limb of HFS’s stated objects: “the prevention and relief of poverty in developing countries around the world by selling fair-trade goods, that is goods for which the producers of those goods have received a fair price, thus enabling those producers to lift themselves out of poverty and raising awareness of the same in the UK for the public benefit”. 

The Commission argued that the purported objects of HFS were not exclusively charitable and the relief of poverty was too remote from the primary purpose of HFS (the sale of goods to the public).

The Commission had also previously suggested how HFS could demonstrate their charitable status – for example, by creating a new charitable trust under which the shop could covenant its profits to it for charitable purposes – but the regulator could not agree that the shop itself was charitable.

In upholding the Commission’s decision, the Tribunal ruled that, although the relief of poverty fell within the list of descriptions of charitable purposes in the Charities Act 2011, HFS had not sufficiently proved that the means of achieving the relief of poverty described in the object (selling Fairtrade goods) would actually relieve the poverty of its potential beneficiaries.

However, the Tribunal was sympathetic to HFS’s cause and stated that the necessary link was: "eminently capable of proof, either with expert evidence from an economist or with the assistance of the Fairtrade Foundation itself, which will doubtless have better evidence than anyone else of the impact that the ultimate sale of goods has on the overall Fairtrade project". So it was not that the relief of poverty could not be achieved by the sale of Fairtrade goods, merely that HFS had not sufficiently established this at the Tribunal.

Although HFS were ultimately unsuccessful in their appeal, the Tribunal appears to have left the door open for the sale of Fairtrade goods to be considered as charitable or primary purpose trading and therefore potentially eligible for tax reliefs. The potential for achieving charitable status would clearly be welcome to Fairtrade businesses, but even if charitable status can be achieved, the potential trustees of such a charity should tread carefully and bear in mind the need to establish a clear link between their activity and the relief of poverty in developing countries. Organisations should seek clear advice on the advantages and disadvantages of achieving charitable status, and whether their purposes are capable of being charitable.

Of course, many charities operate shops throughout the country and may do so through their charity where selling goods donated for that purpose, although when selling bought in merchandise, are likely to be required to use a trading company.

Do you know what's on the menu? 

From 13 December 2014 charities (and others) will be required to provide allergen information when carrying out any activity in relation to the production, processing and distribution of food.

This will affect soup kitchens, "meals-on-wheels", school meals, canteens, residential and nursing homes, shelters, cafés, mobile food vans and any other charities producing, processing or distributing food. It is not intended to cover the occasional selling of food or serving of meals such as at charity events, or at local community fairs and meetings. 

Which allergens do people need to be made aware of?

  • Celery
  • Cereals containing gluten
  • Crustaceans
  • Eggs
  • Fish
  • Lupin
  • Milk
  • Molluscs
  • Mustard
  • Nuts
  • Peanuts
  • Sesame
  • Soybeans
  • Sulphur dioxide and sulphites at concentrations of more than 10mg/kg or 10mg/litre

How does the information need to be presented?

It is not sufficient to simply state that all foods may contain allergens. The information must be specific to the food in question, and complete and accurate.

Allergen information can be on menus or chalk boards but it must be clear, conspicuous, visible and legible. Alternatively it can be given verbally provided consumers are made aware that they need to ask for the information, a consistent approach is taken, and staff are fully and properly trained. If you choose to provide information verbally, you should also have written materials to provide if challenged, which can be contained in an ingredients information sheet, recipe book or chart.

A menu, for example, could contain a statement with wording to the effect of: “Before you order your food & drinks, please speak to our staff if you have a food allergy or intolerance"

What happens if you do not provide allergen information?

Failure to comply with this requirement is a criminal offence and could result in a fine of up to £5,000 (this is due to increase). An offender could also be served with an improvement notice requiring them to take specified steps to achieve compliance. Compliance will be enforced by local Trading Standards officers.

Commentary

It is now common practice for people to ask if someone has any food allergies but, whilst this is clearly helpful, it is not enough to comply with the new requirement. Charities should therefore be reviewing any existing practices and procedures, or developing new processes, to ensure that they are compliant before the deadline. Food suppliers are under a duty to provide their customers with allergen information in relation to the food they sell, and so a good first port of call is to contact your suppliers for information. 

Beyond responsibility: towards sustainability

Sustainability is back on the agenda. Our “Beyond Responsibility” report brings together the views and experiences of more than 60 leading professionals to assess how the new emphasis on sustainable business presents challenges and opportunities.

Sustainability plays out in different ways for different organisations. For some it’s about corporate governance, for others it’s securing substantial long term contracts, or ensuring a resilient, skilled and motivated workforce in the face of changing social norms. Perhaps it’s because sustainability is such a wide-ranging concept that it can be so often misunderstood. The sustainability policy is often unclear or the appropriate steps have not been taken to engage the workforce. Some employees will mutter that sustainability is a luxury rather than a business necessity; our report demonstrates the opposite is true. In the words of one of the participants in our survey, Robert Ivens, Head of Legal at Marks & Spencer “I am of the absolute conviction that sustainability is inextricably linked to business performance”.

How can charities translate the sustainability agenda into improved performance?

It is clear that to engage the workforce, sustainability must be linked to positive and tangible benefits. Too often sustainability is linked to worthy concepts that some find difficult to relate to. So, it’s important to set out a positive vision for what sustainability means for your organisation and all those who work within it. Instead of framing the debate solely by reference to global issues, there should be focus on those aspects of sustainability that specifically affect local people. And the benefits of getting workforce engagement are clear. Those organisations who promote a culture of “doing the right thing” at every level will experience positive outcomes in terms of performance, engagement and pride at being associated with the organisation,

Internally, sustainability also presents an opportunity for strengthening resilience. In light of changing social norms, values and demographics, HR policies, employment contracts and incentive schemes can be effective tools to influence the right behaviours, attract talent and retain skills.

Too often sustainability is approached first and foremost as an organisational risk factor. This begins with the analysis of the risks (whether financial or legal) of adopting new business practises. There are, however, risks in failing to adopt sustainable business practises: risks to brand and most importantly reputation. And a risk, too, in failing to engage the workforce to secure better performance.

How energy efficient are your properties?

Charitable organisations with large rental property portfolios may soon be affected by forthcoming regulations made under the Energy Act 2011, which impose minimum energy efficiency standards on privately rented properties.

From 1 April 2018 at the latest, it will be unlawful for landlords to privately rent out residential and commercial properties that fall below a certain energy efficiency rating (likely to be an 'E' rating) until they have made energy efficiency improvements to achieve the minimum standards. Both the required energy efficiency rating and the type of improvements that need to be made will be specified in regulations. The regulations will provide for penalties, including civil penalties that may be imposed in case of non-compliance with the minimum standards.

Similar measures will be introduced in Scotland from 1 April 2015 at the latest. It is important to note that the proposed regulations to implement the provisions of the Energy Act have not yet been published for consultation. Accordingly, there is still some uncertainty as to the exact content of the specified measures, including the energy rating that properties will need to achieve. However, the Government has indicated that this is likely to be an E rating.

In anticipation of these changes charities are advised to review their property portfolios in order to identify properties that may become unmarketable in the future and plan any necessary energy efficiency improvements.

On a similar note, recent legislation has brought a number of changes to the current Energy Performance Certificate (EPC) regime in England and Wales. Since 6 April 2014:

  • the asset rating appearing on an EPC has been substituted with the 'Energy Performance Indicator', which is expressed on a scale of A+ to G (or A to G in the case of residential properties). G represents the least energy efficient rating;
  • the fees for registering EPCs on the Landmark Register have been reduced and they now stand at £1.30 for EPCs relating to residential properties and £9.73 for EPCs relating to commercial properties; and
  • a breach of the duty to include the Energy Performance Indicator of a building in any advertisement of the sale or rental of the building in commercial media attracts a £200 penalty.

To avoid these unwelcome fines, charitable organisations involved in the marketing for sale or rent of a building should take care when preparing an advert.

Conflicts of Interest: Are you doing enough?

Earlier this year, the Charity Commission produced new guidance on conflicts of interest.

Trustees of charities have a legal duty to avoid conflicts of interest.

At the Charity Law Association conference this year, the head of legal at the Charity Commission said that conflicts of interest were on the Commission’s radar. In his view, charities had moved too far away from conflict of interest avoidance, to conflict of interest management. There was a failure amongst many charities to recognise that, in some circumstances, it will be impossible to manage conflicts of interest

Managing conflicts of interest is not only important for the charity and in protecting its reputation, it is also important for the individual concerned. A trustee who does not fulfil their duties in this respect will be in breach of trust and may be personally liable.

Charities should therefore be:

  • urging their trustees to read the Commission’s guidance on conflicts of interest;
  • reviewing their conflict of interest policy to ensure it is fit for purpose;
  • reviewing their governing document to ensure that conflict of interest authorisation and management processes are sufficient;
  • taking steps to identify conflicts of interest and being active in their approach to conflict management – when is a conflict too great that it becomes a barrier to a trustee acting;
  • careful in the way in which they record how conflicts of interest are managed and ensuring that they meet legal requirements.