Commercial Agreements
As explained by our roundtable experts, many areas of the sports sector aren’t as wealthy as they may appear. Many smaller clubs and organisations have little resource outside of their immediate priority – holding sporting events – and the injection of funds through partnerships and sponsorships can be very attractive.
Marc Hope explained that it can also provide incentive to introduce sustainable policies. “Getting a sustainability sponsor seems to encourage the federation’s commitment to sustainability. It gives organisations more space to own and control their sustainability goals. Also, from the sponsor’s perspective, they’re interested in knowing the results of their financial support. With their contribution comes questions around what’s being achieved and how it’s helping the environment. Their involvement puts pressure on the issue and moves it up the priority list.
“A lot of it does come down to money and unlocking that resource when clubs already have so much to focus on and limited finances to do so.”
But organisations should be careful who they chose to partner with. Accepting money from companies that are associated with environmental damage, such as fossil fuel companies or airlines, can attract controversy and threaten a club’s reputation. British Cycling’s agreement with Shell UK was the subject of much criticism. Santos, an Australian oil and gas company, was met with backlash following their sponsorship of the 2021 Australian Open. As the Guardian reports, this sponsorship was particularly controversial given the events of the 2014 Australian Open, when play had to be stopped and over 1,000 spectators were treated for heat exhaustion. It’s often regarded as evidence of sports’ impact on climate change.
Tom Barnard discussed how sports organisations can use contractual terms to minimise the risk of reputational damage.
“We are seeing a rise in “coolerplate” clauses in commercial sponsorship agreements. These are contractual provisions which give the sports organisations certain rights in relation to the sponsors climate impact. For example, there may be a clause requiring the sponsor to provide the sports organisations with full reporting on its climate impact, and the sponsor could have a right to terminate the sponsorship agreement early if the sponsor is not meeting certain thresholds. Such clauses protect the sports organisation, and may enable it to step away from commercial contracts if the sponsor is causing reputational damage.”
Tom Barnard discussed how sports organisations can use contractual terms to minimise the risk of reputational damage.
“We are seeing a rise in “coolerplate” clauses in commercial sponsorship agreements. These are contractual provisions which give the sports organisations certain rights in relation to the sponsors climate impact. For example, there may be a clause requiring the sponsor to provide the sports organisations with full reporting on its climate impact, and the sponsor could have a right to terminate the sponsorship agreement early if the sponsor is not meeting certain thresholds. Such clauses protect the sports organisation, and may enable it to step away from commercial contracts if the sponsor is causing reputational damage.”
Russell Seymour explained that these companies, whose reputations have plummeted as climate change remains central to public consciousness, are keen to use sports to legitimise themselves. But for sports organisations struggling for money, there’s no easy answer. “It’s difficult because sport needs money and some of these organisations are willing to give money to get some of the reflected glory from the sport. It’s about making your brand socially acceptable. We saw it with tobacco in the 70s and 80s. You couldn’t go to a cricket match tournament without seeing cigarette advertising. But public opinion changed, and the government realised they should legislate against it. Now, you’ve got very damaging organisations such as fossil fuel companies and airline industries appearing all over sports kits and stadium advertising.
“What do we do about it? The simple thing to say is don’t do it. But what’s the alternative? Sports need funds, and some of these companies are willing to pay, possibly exceed, the market rate. It’s just sport washing. These organisations are lining up next to sport to be legitimised. In my heart, I’d say to avoid these sponsorship deals. But it’s very tough for sports that need money to put events on. It’s hard to suggest a solution.”
Richard Batley explained the devastating impact that the COVID-19 pandemic had on sports funding and sponsorship.
“It’s worth considering that since the pandemic, the commercial landscape is more challenging. A lot of organisations are being much more pragmatic about how they invest their marketing budgets and a key part of that is rights holders’ plans and attitudes towards ESG.”
As touched upon earlier in their discussion, our experts believed that change must come from the top. Mark Fairbrother explains that it’s legislation and restructure that’s needed to offer sports clubs alternative options.
“There needs to be pressure from the governing bodies or from the government. When tobacco advertising was banned, it wasn’t sports that achieved that, it was legislation pushed on them. Some clubs now have gambling sponsors, and there’s movement towards that being phased out through legislation. The Premier League has actually just banned gambling companies from advertising as main shirt sponsors from 2026. If it’s not done through governing bodies or through the government, you’re always going to find that clubs or institutions will take that option.
“If it gives them a financial competitive advantage, then it’s not going to stop. Money talks, and if they’re offering £5,000,000+ for the front of shirt, that could be the best offer on the table. That’s two or three players, potentially. So unfortunately, it goes back to the point I made earlier. It’s all about short-termism, which is obviously focused on immediate success rather than thinking longer-term.”
Until then, what’s the best course of action organisations can take when entering a deal that could attract criticism? Ted Powell believed clarity was the best policy.
“It seems inevitable that sports organisations will continue to enter into sponsorship agreements that could cause controversy. When doing so, they should try to clearly demonstrate why, despite the controversy, they’ve chosen to go with that organisation, the due diligence that you’ve done, the projects they’ll be funding. If you’re taking money from organisations that could impact on your reputation, you need to balance it against projects that are going to have a positive impact and communicate those projects clearly.”