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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 a five-country study by GfK NOP research.
Do you agree with the study’s findings? How will the the research 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.
Are UK shoppers the most aware? Would you pay a 5-10 per cent price premium for ethical products or are you sceptical about ethical “hype”?
Further background reading and the expert panel’s short biography may be read below.
Q: To me it seems that ethical covers quite a multitude of remits. Even the two essential interpretations of environmental ethics and social ethics are very different. Although I believe that brands attempts to be socially ethical (Fair Trade etc.) it can be as much about convenient cause related marketing, thus benefiting the brand more than the causes they align themselves with. I can understand the good that this can promote. However, surely the very concept of branding is inherently environmentally unethical.
The emphasis given to the importance of the branded product manifests itself in excessive volumes of wasteful materials. Are there any more for products that were significantly low in carbonic impact does such brands that you see are already pioneering better carbon balances for their products? Also does your research show that people would be prepared to pay a thought even affect the average consumer?
Tom Byam-Cook, London
Rita Clifton: These days, the word and concept of ‘brand’ can be as much applied to football teams, utilities, charities and even individuals as it can to boxes and bottles and packets and cans. Brands can be, and often are, branded experiences like holidays, restaurants, financial advice, as they are products. And, of course, some of the world’s most recognised and trusted brands are in the charity sector like Oxfam and the Red Cross.
Also, people want brands, whether product, service, product or corporate, because they want reliability, consistency of quality – and yes, some emotional reward, too. That’s a normal and understandable part of the human condition. The important recent development is the explosion of so many brands which seek to solve some of the biggest issues facing society – whether in the energy, food or technology sector. Whichever way you look at it, they are important instruments for change.
Chris Davis: You’re right that the ethical agenda spans a panoply of social issues. As we’ve said before, ethical brands have become successful because consumers value what they are doing. This hopefully then rewards both the consumer and the ethically-inclined company. Products without a brand are very difficult to prosecute. As Clifton herself has stated, “...every organisation’s need to protect its reputation (and so its corporate value) is a rather efficient impetus for them to behave well”.
Q: Successful brands create aspirational demand on a global basis. In many instances, this leads to product substitution - e.g. counterfeits - on the basis of consumers ability to pay, particularly in emerging markets. What responsibility do you think Brands have in the way they generate demand with regard to minimising the opportunity for this activity, and the inherent risk it causes for the consumers who buy counterfeit product which is inherently sub standard, and may be dangerous?
Richard Merrick, Duffield UK
Rita Clifton: This is a very aggravated topic for brand owners and producers, and they have the greatest incentive to ensure that goods sold under their brand name are real and authentic. Otherwise, not only do they run the risk o f brand reputation damage, but also they will have lost a sale – and lost the ability to recoup the investment they would have put into the design and development of the product.
There are many technical initiatives to help stop the counterfeiters, but both some governments and consumers can give ambiguous signals about the acceptability of counterfeit. While some consumers feel that buying ‘knock-off/rip-off brands’ is somehow a fun and savvy thing to do, there will be plenty of illegal producers willing to oblige. Companies could certainly make more of the dangers of counterfeiting, as could governments and opinion formers, but in the end it is up to consumers and the authorities to stop the practice.
Chris Davis: The responsibility of an ethical brand in this respect is not greatly different from that of other brands - other than the fact that ethical brand claims may be regarded as more socially important other types of brand claims (and that’s a subjective view). All companies need to exercise caution when it comes to delivering on their brand promises. The government is also part of the equation insofar as it must protect Intellectual Property. IP legislation is quite well enforced in the West but considerably less so in some developing markets, such as China.
Q: To what extent do consumers understand the difference between clever marketing and those brands which are ethical to their core such as Cafedirect whose ethics are derived from their unique ownership structure with producers on their Board?
Jayanti Durai, London
Rita Clifton: In the main, we are dealing with very marketing savvy and sceptical consumers in developed markets these days – and they are aided and abetted by formal and informal media channels, including blogs and ‘anti’ web sites. However, what we also find in research is that the majority of consumers just don’t have the time or inclination to think in depth about all their purchases and behaviours, and so look at ‘life editing’ brands like the best retailers to do their choosing for them.
Retailers really do have a critical educational and choice editing job to do, and many, like M&S and Waitrose, as well as some of the independent sector, see it as a way to earn stronger and stronger customer loyalty.
Chris Davis: Interestingly, British consumers are the most ethically aware and discerning of the distinction between the ethical brand posturing and genuine ethical business practices. What we have seen is that there is a minority group of ‘active ethical consumers’ who do the due diligence (i.e. investigate all the facts and activities behind what companies are doing) and then spread the word through online and other word of mouth forums - helping mainstream consumers ‘short-cut’ to the truth.
Q: How should I act as an ethical consumer on the stock market? Is it ethical to buy shares in companies active in less democratic countries? Example: A company drilling for oil in the deserts of war-torn Sudan. Is that doing Sudan good, in the long run, or is it just bad, stupid and unethical?
Ola Hjelm, Hammarstrand, Sweden
Rita Clifton: One could drive oneself quite mad in making value judgements about the range of factors here – and about the relative merits of boycotting or at least staying in dialogue with difficult regimes and companies. Unless you are going to go into deep research individually on every issue, it is probably easiest to research specialist ethical investment companies to find one that comes closest to your views and values. Ethical investment is a growing and increasingly competitive area, and shows all the benefits of healthy competition itself.
Q: Surely in 2007 we shouldn’t be in a situation where some companies are allowed to exploit poor farmers for their produce. Companies such as Cafedirect and Divine do a fantastic job in paying fair prices and working with the farmers to help them become sustainable. Why is it always up to us consumers to make good the damage done by the big multi-nationals.
Janette Dunn, Sussex, UK
Rita Clifton: What we need to remember is that any company in its right mind is going to want to do the ‘right’ thing – if nothing else, because it wants to protect the value of its reputation. If a company behaves badly – and now, anywhere in the world, and throughout its operations – its consumers and opinion formers are going to know about it.
Unlike most political parties, consumers can ‘vote’ out companies that they do not like by refusing to buy their products, and affect their business very quickly. Also, companies will always respond to what their customers say and want – perhaps not always as quickly as we might like, but businesses have a delicate balancing act between current consumer desires, and taking a forward leadership stance ahead of where their customers might be.
The food debate is a very topical issue, where many consumers might posture in research and the media about the kind of food they would like to see and buy, and yet still but what is cheap and convenient in their real daily purchases. It’s obviously important to blend realism with idealism in the right way.
Chris Davis: Ultimately the power is with the consumer. The success of brands like Cafedirect can be attributed to the fact that consumers value what they are doing. In order to compete, other companies are being forced to follow suit - to use an ironic twist on a Thatcherism: “the rising ethical tide floats all boats”.
Q: Can companies producing products whose social responsibility is increasingly under question (oil, cars, etc) ever hope to claim to be genuinely ethical companies? Isn’t BP a warning to all?
James Miller, London
Rita Clifton: As we know, the problem is, while both societies and consumers still rely on cars and machines that in turn rely on oil and natural-resource-hungry products, the main thing that companies in these areas can do is to mitigate the impact of what they do socially and environmentally – while at the same time racing to develop alternative methods and products that have minimum.
No company is going to commit voluntary commercial suicide, and frankly, we as consumers and employees need a lot of what they do and produce. However, markets are very efficient Darwinian mechanisms for change and now there is a clear need and opportunity for overtly ethical propositions, change is happening faster than we may have thought possible both within big companies and at start up levels.
Chris Davis: This is a fair question. Automotive is an inherently polluting industry but most of us have come to accept that cars are a way of life and that we need fuel to run our lives. With that in mind, any credible initiatives by car companies, oil companies, or any other type of company, that can mitigate environmental damage should be seen in a positive light. These steps will have a net positive effect on the brand. However, they will do very little to offset major environmental damage or mishaps.
Q: Your thoughts please on positioning v branding and perhaps the former requiring much more attention and effort? As a reminder, positioning, let’s say the message - is the attempt to influence and manage consumer perception(s) of competing products or services. Branding - the response - is about perception(s) in the mind of the potential consumer.
Peter McNeil, London
Rita Clifton: Actually, when branding is used properly, it is used as a central organising principle for a business, and is a disciplined way of ensuring that you think about your competitive advantage in everything you do, make and say, across products and services, people and behaviour and channels and communications . When built properly, the brand is the most important and sustainable corporate asset in any organisation, and the most effective and efficient generator of sustainable wealth.
When branding is just used as a cosmetic, stick-on label, you are either missing a trick at best, or trying to paper over a bad or confused company at worst. Either way, it won’t work in the long term! Reputation is the outcome and perception in people’s minds as a result of doing and communicating the right or wrong things; reputation is usually reality with a lag effect.
Chris Davis: As you imply, the brand is defined in the mind of the consumer. Positioning speaks to the activities that the company has at its disposal to influence perceptions of the brand. Most consumers do not have the time or inclination to investigate the detailed facts and figures behind what companies are doing these days, but they want an assurance that the brands they are buying are making a positive difference in some tangible way.
From the standpoint of gaining consumer acceptance, how a company communicates its ethical credentials is as important as the initiatives themselves. Clarity of message and setting the right tone are critical to this. Some ‘active ethical consumers’ will undertake more thorough investigations of how certain companies are behaving, and then propagate their judgment of those brands through various online channels and other word of mouth forums. As the research demonstrates, in the end, the consumer is the arbiter of the brand’s reputation.
Q: The article on ethics in today’s FT covered numerous areas of consumer interest incorporated into the GfK NOP survey, such as the environment or treatment of staff and suppliers. Given this wide interpretation of ethics, can you distinguish business ethics from corporate responsibility activities generally?
Rita Clifton: I’m not sure it’s helpful to distinguish the two, although the language does currently suggest slightly different things. There’s no getting away from the fact that, in an all-seeing, twenty four hour digital world, an organisation has to be and do what it says it is and does – and at its core. I emphasise this because the term ‘Corporate Social Responsibility’ was for too long a proxy for cause-related marketing – i.e. looked after as a separate department like community affairs, which gave money to charities and local initiatives, but which did not have a central role or voice in the corporate scene.
Now, it would be more accurate to call it Core Social Responsibility, as so many companies found that, whatever money had been donated to charity or good works in the past, if consumers and opinion formers developed a problem with what the core business was doing, past donations acted as nothing more than a fig leaf.
Q: What evidence do you have that the majority of consumers care about ethical branding?
Edward Cotton, San Francisco
Rita Clifton: The best evidence is the success of ideas like Fair Trade, Green Blacks, Aveda, Ben Jerry’s – and the fact that major corporations have paid so much money to acquire them and absorb some of their best practices. Clearly, numerous surveys around the world quantify real concern for environmental and ethical issues, however they might be nationally interpreted and rated. The issue is how governments and organisations give the right examples, incentives, and attractive and convenient solutions to help people act on their concerns in a useful way.
Chris Davis: Our research suggests that growing consumer scepticism has occurred in spite of, and certainly not because of, the rise of ethical brands. Overall, consumers show a high degree of support for ethical brands but regard ethical branding as only a token effort. British consumers are the most convinced of the benefits of ethical brands, with nearly half of respondents agreeing that ‘ethical brands make businesses more accountable for their actions’. Of course, consumers also care about things other than ‘ethical credentials’.
The decision to buy an ethical brand over a conventional alternative is also influenced by a number of other factors including (i) brand awareness, (ii) the importance of other product/brand criteria, (iii) the extent to which buying an ethical brand implies an inconvenience or a ‘product compromise’ - if at all (e.g. in terms of quality, style, range of options available, etc.), and of course, price.
Q: I teach BA courses in organisational ethics and international marketing. We’d like to know whether the drive towards international ethical business standards, however noble in concept, is actually anti-competitive in effect and creating barriers to international market entry for smaller companies from the developing world because they cannot comply with the same expensive ethical labour and green procurement practices as the big suppliers to global brand companies?
Catherine Sweet, Solent University
Rita Clifton: This is a dilemma, I know, but it is a matter for thoughtful (not necessarily expansive) branding and telling the right story to potential consumers. What’s extraordinary about Fairtrade is that it tells the story about the farmers and communities it supports in a compelling way – and gives the lie to the belief that prices will always be driven down by market forces. People will pay more if they believe they are getting ‘more’ – and this can obviously mean as much to do with more social, environmental or emotional benefit as more product and price advantage.
Q: I’m a trustee of an office furniture recycling social enterprise called Green-Works. We have been going for 5 years, operate nationally, run on commercial lines, and will have a turnover of more than 1.5m in this financial year. We source furniture from many blue-chip companies but need to access many more, including SMEs, if we are to maintain the level of furniture supply we need to operate successfully. We are a quintessentially ethical brand. We need much improved marketing and PR if we are to do this, yet, as a charity technically, our resources are extremely limited. Can you/your organisations/people you know help us?
Tony Golding, Devon, UK
Rita Clifton: Clearly, it’s a real challenge to broaden your customer base without significant marketing funds, but if you are an ethical business with interesting and potentially popular ideas, then it should be possible to find a celebrity or opinion former to speak for you in editorials – particularly if you have a strong local base, and there is a suitable personality living in your area. And, of course, with on-line ‘retailing’ meaning that you don’t have to set up shops, looking at the opportunity of interest groups on the web, and intelligent use of search engines could really pay off.
Finally, it’s very important to think about the whole ‘brand experience’ as your marketing tools, rather than just the conventional advertising and promotional tools. For instance, how do you answer the phone, how do you treat ‘customers’ and follow up with them in a way that creates deep fans and supporters? In a business like this, behaviour is as much communication as the usual channels.
Chris Davis: The research did not specifically address your question but it would seem that ‘corporate responsibility’ goes wider than ‘business ethics’. If you asked about ‘corporate social responsibility’ (CSR), then the two would seem to be more similar. CSR is generally described as a company’s formal response to the ethical agenda. Business ethics is therefore what hopefully follows from a good CSR policy (and effective implementation of it). In short, the research suggests that consumers don’t readily distinguish between the two.
Q: Is it possible for brands to be ethical across all aspects of their business or is it better to just focus on one? For instance should a brand major on Fair Trade but not particularly focus on the green agenda? Is it impossible for one brand to execute across the entire ethical spectrum and if they did, would it be believable? Wouldn’t it be better to pick a relevant ethical agenda and execute it brilliantly across all aspects of their business?
Malcolm Wilkinson, Partner in Consulting, Deloitte, London, UK
Rita Clifton: It’s obviously easier for a ‘new’ business to stitch in ethics from the ground up across the whole chain of supply and services, as well as corporate behaviour in the round. Also, bearing in mind how priorities change on views of ethics, it’s sensible to bear current best practice in mind right across the whole social, environmental and sustainable piece.
However, there’s obviously a difference between what you actually do and what you might choose to focus on in corporate and marketing communications. For example, in the cosmetics industry, for a long time the ‘ethics’ debate (and a key consumer choice factor) was about beauty without cruelty/against animal testing. The problem is, if a company does not address the round of issues, any claims are in danger of being accompanied by critics and the media as ‘yes, but what about…’.
BP is a recent example, where even though having a very enlightened and industry leading view about the environment and diversity, was then criticised for taking its eye off the ball on the ‘core’ ethical grounds of health and safety.
Chris Davis: It depends on the type of ethical brand. For ethical brands whose identities are defined predominantly on the basis of ethical business (many of which appeared in the UK list of top ethical brands), there may be an opportunity to cover off a wider array of ethical issues. We know from the research that the credibility of ethical claims is key - and this is judged not just in terms of what companies are doing and the content of their communications, but also the style/tone of their communications (it must be level-headed and avoid hyperbole).
Mainstream brands may, as you suggest, be advised to focus on a select number of ethical issue that they know they can deliver well. The right issues to focus on will also depend on the category. For instance, automotive is an inherently polluting industry and so, not surprisingly, initiatives that avoid harming the environment will be most relevant. Food and grocery is dominated by organic and fair-trade claims. Suffice it to say, the ‘category context’ is key to defining the right ethical agenda.
Q: Is the growth of ethical branding an ‘ethical backlash’ against globalisation or a stealthy method of re-connecting with the consumer. Also, to what extent is the growth of ethical branding influenced by law or government policy?
Phil Couch, London
Rita Clifton: The growth of ethical branding is down to a number of factors, and played out in different ways in different countries. Ethical branding can mean organic products for some, fair trade for others, social and local community concerns, being a ‘decent’ employer in the round, as well as environmental sensitivity.
It is true that some consumers equate big/global companies automatically with low ethics, but this is a minority view. The biggest influence on the development of ethical branding is that ‘ethics’ have gone mainstream, and more consumers are asking for products and services that answer their concerns – and any organisation that doesn’t produce what consumers want will lose out, or go out of business.
The only thing companies have to be mindful of is that consumers can be radical at the research questionnaire and reactionary at the checkout. I.e. they may say they’ll pay extra/inconvenience themselves for ethical issues, but not when it comes down to the reality of daily life.
Chris Davis: Your question does not lend itself to a black and white answer. I think we have to recognise that most companies are in the business of making money. Ethical branding is a business-led response to consumers’ concerns about how companies are behaving. The research shows that people’s concerns about corporate ethics have only magnified over the past five years. With a few notable exceptions, most companies are looking at the ethical agenda as a business opportunity that, if addressed properly, can have a positive impact.
It’s doubtful that brand stewards are honestly trying to take on the wider phenomenon of globalisation. That’s a mighty challenge and not necessarily aligned with their best interests anyway. Indeed, it has been argued that the globalisation of brands has made them more accountable. From a consumer standpoint, you might argue that buying ethical brands is a way of tacking some of problems of globalisation.
We also wouldn’t describe ethical branding as ‘corporate stealth’ either. Brands that have demonstrated a genuine commitment to ethical business and are honest and upfront in their communications, should be rewarded by consumers.
New legislation has helped to avoid the squandering of pension schemes (à la Enron) but has done nothing to abate the astonishing pay bonanza for top executives running underperforming companies. As reported in The Economist, “even those sympathetic to business are unsympathetic to its leaders”. Legislation establishes a fairly low ‘water mark’ and there is great scope for companies to go beyond these minimum requirements. Those brands that do, and are also able to connect with consumers, are likely to succeed.
Q: In searching for ethical business principles, how much attention do business leaders apply to the issue of human rights? Conflicting national attitudes could be overcome by establishing ethical principles within the framework of human rights standards. Since existing hierarchies of principles and precedents could be used to address conflicting demands on businesses, international and domestic human rights legislation is sufficiently pervasive to provide a sophisticated legal basis for guiding corporate behaviour.
If they are serious about ethical business practices, perhaps adhering to international human rights standards would be a way for companies to avoid their CSR programmes being perceived as mere PR ‘fluff’.
Andy Joyce, London
Rita Clifton: This is, of course, an extremely complex and emotive issue. Any responsible company that wants to retain consumer goodwill and licence to operate is going to take human rights into consideration, and want to avoid bad publicity. However, they also need to recognise the challenges posed by different views of governments around the world, and the need to enter markets with goodwill and support. In this area, the only thing that will protect a company from criticism (and even then not completely) is to adopt the highest common factor approach across all its markets.
Chris Davis: In the research, we see that two-thirds of consumers place the upholding of basic human rights as an important criterion of an ethical brand. Economists often refer to the negative by-products of production as ‘externalities’. Externalities create more than merely an ethical problem; they can also distort the real costs of trade and the relationship between supply and demand. As economic theory goes, if a company decides to internalise these externalities, it then must bear a higher cost than that of its competitors, which ultimately weakens the firm’s position in the marketplace. This might imply that pollution and other social costs of production are not solved by competitive markets.
Alternatively, the internalisation of costs can be borne by the government or the end user. This is not an abstract concept but indeed written into a number of trade and/or environmental related agreements (e.g. GATT 1992; the WTO’s CTE 1997; Rio declaration 1992). Government efforts to internalise externalities - i.e. make the polluter pay - usually take the form of a pollution tax/surcharge or government subsidies aimed at encouraging environmental protection.
Although the theory of externalities is still widely relevant to the supply and demand relationships affecting (undifferentiated) commodities, it does not account for the fact that, more and more, consumers are rewarding brands for internalising externalities (e.g. a decision to buy from a supplier with an ethical track record, not necessarily the lowest cost) - allowing many of these brands to become very successful. So this would suggest that the market is working well in many respects to address the ethical concerns of the day, and reward the most well behaving companies in the process.
About the experts:
Chris Davis has management responsibility for one of the GfK NOP’s largest business areas. He has been actively involved in the development of brand strategies worldwide across a number of industries and new product launches for many leading companies.
In addition to his research and consulting work, Chris has developed new branding and product innovation methodologies, and presented conference papers on a host of strategic marketing topics.
He holds an MA in Law from Oxford University and an undergraduate business degree from Queen’s University (Ontario).
Rita Clifton is head of Interbrand and inspiring leader in brand strategy. She was Vice-Chairman & Executive Planning Director at Saatchi & Saatchi, and in 1997 joined Interbrand, where she became chairman in 2002.
Her writing has included Interbrand’s publication ‘The Future of Brands’, the APG’S ‘How to Plan Advertising’, and most recently, The Economist book ‘Brands and Branding’.
“If brand management were a religion, Rita Clifton would be a deity” Time Magazine