Ethical consumption makes mark on branding

Consumers in five of the world's leading economies believe business ethics have worsened in the past five years and are turning to "ethical consumerism" to make companies more accountable, according to research seen exclusively by the Financial Times.

A five-country study by GfK NOP, the market research group, found widespread pessimism about corporate practices, with 64 per cent of respondents in Germany and 55 per cent in the US perceiving the worst deterioration in standards.

Almost half of the 5,000 consumers, also surveyed in the UK, France and Spain, judged that ethical behaviour from corporations had worsened.

In contrast, 43 per cent of respondents across all five countries judged that brands with "ethical" claims - on environmental policies or treatment of staff and suppliers, for instance - would make business more answerable to the public.

About a third of respondents told researchers they would pay a 5-10 per cent price premium for many ethical products, though in practice such brands command tiny market shares.

The findings highlight the challenge for international groups, including Toyota, L'Oréal/Body Shop and Tesco, which have publicised their ethics more than traditional corporate social responsibility commitments.

Multinationals hoping to tap this market will have to address conflicting national definitions and attitudes towards ethical brands and a recurring tendency to equate ethical with local operators.

UK shoppers emerged as the most aware, most critical and most likely to see national brands such as Co-op, the financial and retail group, or Innocent, the smoothie drinks brand, as standard-bearers. Spaniards were most sceptical about ethical "hype".

In a striking difference, Nike, the sportswear group heavily criticised in the 1990s for its supplier relationships, was among the most ethically rated brands in four countries. It did not feature at all in the UK. There was a similar pattern with Nestlé, which has historically been linked to controversies over its marketing in developing countries.

Chris Davis, head of GfK NOP's brand strategy centre of excellence, said: "The UK is the hothouse for what is coming. If a brand is going to do well in the ethical market, it should probably look at the UK."

Jonathan Banks, business insight director at The Nielsen Company, the research group, agreed Britons had a distinct position on ethical brands, citing their high consumption of organic foods and awareness of climate change.

Source: GfK NOP