Can sponsoring the Olympics Cost Firms their Reputations?

Before they’ve even begun the 29th Olympic Games in Beijing are breaking all sorts of records, especially in the realm of finances. An Olympic host city has never invested so much money into the event. Beijing has put 40 billion US dollars into improving the city’s infrastructure and building stadiums. Sponsoring has also reached sky-high amounts.

The 12 top sponsors reportedly paid up to 100 million dollars to the International Olympic Committee for the privilege of using the Olympic logo on their merchandise for four years. And separately, the Beijing Organisation Committee has received another billion dollars. The German companies Adidas and Volkswagen are among the sponsors.

Stefan Schröder from the German market research company ‘Sport and Market’ explains why sponsors are willing to invest such enormous amounts into the Games: “The Olympic Games are still the most important world event when it comes to sport and values. The Games have an incredibly positive image. But they have also inherited the problem that in the past they have been used by various activist groups to highlight political issues. So sport has become instrumentalised. Which is somewhat unpleasant for the sponsors.”

Role of sponsors

It was a bit more than “somewhat unpleasant” in mid-March when protests and riots took place in Tibet. The Chinese army cracked down on them and China came under the spotlight once again for human rights violations and persecution of minorities. The Olympic sponsors also came under a lot of pressure. But they didn’t pull out and Stephan Grühsem, Volkswagen’s communications head, explains why: “The Olympics stand for freedom, understanding between peoples and dialogue. And that’s what Volkswagen is sponsoring. That’s why we’re committed to our role as sponsor."

China is a growth market. By the end of 2008, Volkswagen will have sold a million cars in China -- more than anywhere else in the world. And for Adidas, China is the second market after the United States. The sports firm manufactures half of its goods in China. CEO Herbert Hainer does not want to jeopardise his ambitious plans in China by making political demands. He recently told the Financial Times that if he criticised the Chinese government he would also have to talk with the US administration about Guantanamo. “It is not the role of sporting goods firms and Olympic Games sponsors,” he said.

Human rights concerns

And yet, many NGOs see things differently -- including Human Rights Watch whose director in Berlin is Marianne Heuwagen: “The sponsors can always talk to their Chinese partners and remind them that promoting human rights is a significant part of free and fair trade. Maybe then one day it won’t fall on deaf ears.”

Freedom and fairness was not really the message put across by the Chinese security forces during the torch relay fiasco. Dressed in Adidas outfits, they even used violence against some protesters. The fact that Adidas is dressing about 100,000 helpers and 3,000 athletes in Beijing and Volkswagen has supplied the cars for the Games and the whole torch relay has been interpreted as bowing down to the communist regime.

Could the firms’ image be tarnished? Michael Vesper from the German Sporting Association doesn’t think so: “I think the firms have made it clear and will continue to make clear that they of course are on the side of human rights. There is a close partnership and cooperation with China, which is one of our most important trading partners. But anyone involved in an economic partnership won’t avoid explaining which values are important. Volkswagen and Adidas will have to juggle things and get the balance right.”