Gamechanger Olympic Games
Is being there really everything? Sports Sponsoring in the (ESG-)Upheaval
From February 4 to February 20, 2022, the 24th Olympic Winter Games in Beijing will once again feature skiing and ski jumping, tobogganing, ice skating, and nearly 100 nations competing in many other winter disciplines. The images in the run-up to these superlative Games, in which white bands of snow redraw mountain massifs in a region where snow hardly ever falls due to its aridity, have already made a lasting impression. However, the challenges for sponsors, who have recently experienced negative headlines, start at the other end of the "ESG flagpole": the Olympic Games in a country with a particularly tense political and human rights situation - an occasion to also highlight ESG limits and practices for sports sponsorship.
The Winter Olympics are undoubtedly one of the best-known major sporting events, but also one of the most controversial. While the outstanding sporting performances and the associated entertainment are still in the focus, accompanying factors are becoming increasingly important. For companies and sponsors involved in Beijing 2022, this means not only confronting negative reporting on the handling of environmental resources, but also, among other things, dealing with headlines about doping and corruption and, in particular, the restriction of freedom of expression and freedom of the press and accusations of human rights violations.
These factors, together with numerous calls for boycotts and actual diplomatic boycotts, also put the numerous international sponsors and suppliers of the event and the athletes under massive pressure. The advertising value as consideration for the investments of outfitters and sponsors is almost destroyed after a necessary significant reduction of the agreed advertising measures due to the public discussion and is in some cases measurably negative, i.e. results in an image damage. Only recently, major sponsors such as Intel and Coca Cola even had to publicly justify their economic support in the U.S. Congress.
However, the question of the increasing significance of ESG factors in sports sponsorship does not require the - probably predictable - development in the Olympic village more than 4,500 miles away: For example, in December 2021 the general meeting of the German Football League adopted a resolution that sustainability will be an additional criteria for soccer clubs to obtain a license for participation in the first and second German Bundesliga. The specific key points for meeting this further critera are still being defined, but are based on the Sustainable Development Goals (SDG) and in this respect have a direct impact on the requirements for funds sourcing by the clubs and the handling of games operations. Since DFL licenses are awarded annually, it can also be assumed that there will be ongoing revaluation and readjustment. The sporting reality of being directly dependent on sponsors on the one side and consumers and fans on the other side, i.e. “being caught in the middle”, has not spared FC Bayern München. At the annual general meeting in November 2021, fans called for an end to the cooperation with Qatar Airways and the Emirate of Qatar behind it.
All these developments, particularly recent ones, once again clearly demonstrate the steadily increasing importance of the S(ocial) and G(overnance) factors of the ESG criteria and the associated Corporate Social Responsibility (CSR) for the area of sports sponsorship.
For sports sponsoring, this also means disruptive effects on the requirements for the future design of sponsoring contracts and the adaptation of existing contracts, both from the perspective of the sponsor and that of the recipient of sponsoring services. In any case, special attention should be paid to ESG-relevant target definitions and their linkage with remuneration provisions (incentivization instead of penalization), catch-up clauses for unused or suspended advertising volumes, hold-, exit- and withdrawal-terms linked to ESG adverse effects, as well as a focus on reporting and disclosure and planning. The definition of a forward-looking strategy including clear criteria catalogs, their ongoing evaluation and the maintenance of transparency also with regard to the decision-making processes underlying sports sponsorship are essential accompanying measures.