News that Cadbury, the UK’s best-known chocolate brand, was halting its Fairtrade certification hit the headlines recently (Rodionova, 2016), and raised industry concerns around the future of Fairtrade – but will it affect sales? Do consumers really care whether their purchases are ethically sourced?
Most large companies have ethical trading policies, placing responsibility on retailers, brands and suppliers to maintain and improve working conditions, particularly those whose manufacturing is based in developing nations where often legislation to prevent exploitation is inadequate.
Committing to ethical trading essentially risks putting a business’s cost-base up as they seek to enforce legislation regarding wages, working hours, health and safety and freedom to join trade unions (EthicalTrade, n.d.) so the economic upside of this decision has to be clear.
Research carried out by Morgan Stanley (2016) suggests 51% of respondents regarded ethical credentials as somewhat or very important in clothing retail, compared to just 13% who considered them unimportant. Females in the youngest surveyed demographic (16-24) were the most concerned about ethical trading. Younger consumers, as a whole, proved more ethically-conscious, with 58% of 16-24-year-olds considering ethics very or somewhat important, compared to 49% of those aged 55 or older. This is mirrored by the percentage that viewed ethical credentials as unimportant rising in the older age groups (Morgan Stanley,2016). Clearly, if this trend continues over time the vast majority will consider ethical trading as important.
Some companies go further and appeal directly to the needs of the ethically conscious younger buyer by creating a positive corporate social reputation (Castaldo et al., 2008). Shoe company Toms ‘One for One’ business model ensures that for every pair purchased, a child in need is given a new pair of shoes (TOMS, 2006). Since launch in 2006, the company accounted for 3% of the women’s $16bn casual footwear market in just 8 years (Chassany, 2014), appealing to the younger female ethically conscious consumer, highlighted by Morgan Stanley’s research. Rather than seeing it as compliance, Toms view being ethically conscious as an opportunity for brand differentiation.
Another problem for businesses is attracting and retaining great talent. With that in mind, a Deloitte Millennial survey (2016) conducted this year found that 26% considered employee satisfaction and fair treatment to be most important value for long-term success, with ethics and integrity a close second. Only 5% considered profit focus as most important for long term success.
Ethical values greatly impact millennial’s judgement as 49% of those surveyed didn’t undertake a task at work because it “went against their personal values or ethics”, increasing to 61% among senior positions (Deloitte, 2016). By 2020, 50% of the global workforce will be dominated by millennials (PricewaterhouseCoopers, 2013) and ethical trading policies will be a measure not just for consumers, but for top talent.
Some companies, such as Primark, thrive off profit focus, with employee focus being a low priority, hence continued investigation into their supply chain (Goldsmith, 2016) and the ‘cry for help’ sewn into a pair of trousers scandal (BBC, 2014). Primark isn’t the only offender. Amnesty International (2016) recently implicated Apple over human rights abuse with regards to child labour in the Congo cobalt supply chain, this perhaps illustrates that ethical trading remains a concern within many retail industries.
While some companies might survive based on brand alone, fairness towards consumers has the greatest impact on consumer attitudes (Page and Brown, 2005). Therefore, ethical treatment of employees is required, along with transparency between the company and consumer for long-term success to be possible, otherwise, companies will face substantial losses at the hands of ethically conscious consumers.
The views in this article are those of the author. This article is part of our ‘Making Work Real’ series.