Is charity just another big business?

"Some big charities are more commercial than many traditional businesses, and are exploiting their charitable status as an unfair competitive advantage."

It is a bold statement - and reflects what an increasing number of smaller businesses are saying in private, if not in public. Casting aspersions on organisations such as Help the Aged, Red Cross, the RNID and RNIB, which are generally held in such high regard, is risky; not least because adverse comments are likely to be misinterpreted as an attack on the charities themselves, when in fact it is their trading activities that are causing the rumbles of concern.

This website provides information about products and services to help with living independently. Although what we do may be considered a valuable social service, we are not a charity, but are funded by subscriptions from reputable suppliers. Over the last few years, we have become increasingly aware of powerfully marketed product ranges emanating from charities such as those mentioned above.

There is a growing trend for charities to become involved in business. The government encourages this, having recognised the valuable contribution that can be made to delivery of social and healthcare services by not-for-profit organisations. The "third sector" is flourishing, with more than 55,000 social enterprises across the UK investing most of their profits in socially beneficial activities, rather than turning them to the benefit of shareholders or business owners. Charities who seek grants are advised that they are more likely to be successful if they set up a trading arm: grant-making trusts regard those with a business generating income as a safer bet than charities which rely on more traditional methods of raising money.

So charities are definitely part of the business environment, and they are not going away. It is perhaps not surprising that the leviathans of the sector have decided to exploit their brand recognition to market products to the public. These brands have been built up through decades of charitable work. Consumers may well be more inclined to buy from Help the Aged or British Red Cross because they know the name in a philanthropic context. Their purchase also becomes a charitable donation; nobody feels that they are doing good to anyone but themselves when they buy a hearing aid or a stairlift - but if it comes from the RNID or Help the Aged? And in some respects, their activities have been beneficial: for example, their concern to protect their brand gives them a powerful interest in ensuring that the products and services provided in their name are of the highest quality.

But there is so much confusion about what is charity and what is business that I don't find it at all surprising that many business people are suspicious of and threatened by the charities' commercial activities. Charities enjoy exemption from corporation tax, some VAT exemptions, and rates relief of at least 80 percent. Whilst the trading arms and any independent companies which run their businesses for them do not, the lines between the different areas are often very blurred. For example, from personal experience, charities expect (fruitlessly) to receive at no charge a subscriber page on Independent Living for which the companies they are competing with have paid the full price. They don't say: "We are the trading arm of charity x, so of course we understand that we should be treated like any other business." Rather, they tend towards: "We are a charity, so you should be donating your services to us." Or they request a link as a charitable organisation, but then direct that link towards their online shop. If they are not honest about what they are doing, how can they expect their customers or their competitors to understand what is going on? Charity shops selling new goods are already a powerful presence on the high street, undermining many small retail enterprises with a combination of big business-style purchasing power and charity-style tax breaks. 'Charity muggers' who ambush you with a hard sell designed to persuade you to commit to a regular donation are probably paid workers, rather than the volunteers they often claim to be.

The overwhelming advantage enjoyed by charities is their name and reputation. A traditional company selling goods in our market, however well-run and ethical it may be, will always be on the back foot when competing with them. But as they become ever-more closely aligned with the world of business, they should not be surprised if their carefully nurtured brands lose some of their lustre through the association.