'Private equity should drive sustainability in sport'

Around two-thirds of all new sponsorship revenue coming into British Olympic sport in 2022 came from British Cycling’s eight-year partnership with Shell, Andy Westlake of the European Sponsorship Association (ESA) told delegates at the BASIS Conference last week, wrote Campelli in his editorial piece in The Sustainability Report published on 4 May.

Considering the fact that there are more than 30 sports on the Olympic programme in Britain, that proportion is astounding, Campelli added.

"You could look at this from a couple of perspectives: one is that, when presented with that kind of financial opportunity, sports organisations don’t have a choice but to take it. Another point of view could be that because of an apparent lack of commercial opportunities, companies from industries like oil and gas have the chance to swoop in and attempt to cleanse their image through alignment with popular sports and athletes.

"But, instead of pointing fingers at individual organisations, we have to accept that this is a systemic problem for the sports industry. Why is it that commercial funding is so difficult to come by? Is it because of the challenging current financial landscape? Does the product (i.e. the sport or organisation) lack significant value, or does it fail to properly articulate its value?"

Camepelli added that much of this comes down to the way sport is governed - traditionally very short-term in its thinking, conservative in its viewpoint and often with a nonprofit status, sport can be reactive in its approach to many critical issues, including commercialisation, digital transformation and sustainability.

"And while it may seem counterintuitive to call for a more business-like, commercial approach to sports governance in order to drive environmental and social responsibility, it could be part of the answer.

"In the last few years, private equity has come into sport in a big way, and the direction of travel indicates that won’t end anytime soon. Private equity and sustainability are two words you don’t commonly see in the same sentence, with a perception that the industry cares about profit and very little else. But, in their Harvard Business Review essay, Robert G. Eccles, Vinay Shandal, David Young and Benedicte Montgomery argue that private equity is in the perfect position to take the lead in sustainability. And they give a few reasons why."

Campelli added that the private equity industry is so large that “society won’t be able to tackle climate change” without its “active participation”.

"Secondly, the nature of private equity’s business model gives it a “clear advantage” in implementing sustainability; even when it doesn’t hold 100% shareholding, private equity firms have one or more of their representatives on the board across their portfolio of companies.

"Just after RedBird Capital Partners acquired Italian Serie A football team AC Milan, Gerry Cardinale, its founder and managing partner, stressed that his organisation came with a business plan, not just cash. His objective, he said, is to add value to what he called an “undervalued asset”, and deliver a “value proposition” to three main constituents – fans, Serie A and the city of Milan.

"And, increasingly, a strategic approach to sustainability is a real value add for many of sport’s key stakeholders."

Campelli acknowledged private equity had its drawbacks, but said it’s here to stay.

" ... while sport should approach with caution (not all private equity firms are made equal), maximising the benefits of this private equity investment boom could – and hopefully will – see a greater push towards sustainability and ESG principles," he added.

Click here to read Campelli's article.