BUSINESS MONITOR
NEED TO KNOW: Customers increasingly want to know how and where their garments have been made and how far they have travelled.
which have virtuous status: Ben and Jerryʼs ice cream, Innocent Smoothies and Timberland boots. These three have all been bought out by major corporations – Unilever, Coca Cola and VF Corporation respectively. (The Timberland deal is in process currently). It seems unlikely that those hard-nosed multi- nationals bought them for their ethical standpoint as such. What they did buy was customersʼ long-term loyalty to the brands. Ethical businesses take a position that isnʼt all about ROI, that isnʼt always logical, that is often a bit quirky. People like that; the brand owners are acting much like they do themselves. Such an affinity creates loyalty and thatʼs bankable. Take a look Ethisphere Institute, an American organisation that ranks the worldʼs most ethical businesses. Dan Amos, chairman of Aflac a medical insurer makes a telling point: “In essence, we sell a promise and we rely on the fulfilment of that promise as do our customers. For every promise kept we enhance our ability to reach out to potential consumers. A trust broken could close those same doors, which is why we place such a high standard on keeping our principles intact.” That applies to almost every business.
Likewise Bob Lane chairman of John Deere says ʻethical talk needs the muscle of deedsʼ. He instances changing a supplier or avoiding business opportunities in countries where business cannot be conducted in the right way. It is his experience that walking away from
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some sales does not damage a business, rather it enhances it long-term. What are the benefits of an ethical business culture? In truth this is where it tends to get a bit nebulous and airy fairy. That said there are some solid advantages. Staff morale and lower staff turnover is mentioned by everyone. Demand is rising for ethically sourced product. Co-op Bankʼs annual survey says sales of Fairtrade product have risen 18% in the past two years despite everyone tightening their belts. Large businesses increasingly dig deep into a supplier before contracts are awarded and corporate social responsibility is rising on their agenda.
Premium
Lee Coates of Ethical Investors stresses the importance of customer loyalty. A business which has responsible principles at its heart will seek out other of a similar nature to trade with. Telling your customers that you are prepared to pay a premium for this makes clients think better of you.
Through their Ethical Screening business, Ethical Investors also do an increasing amount of consultancy work to recommend to companies ways to improve ethical standards that are affordable, logical and a protection against negative publicity. Coates says that this is as much about articulating what you already do rather than wholesale change. That, incidentally, is a recurring theme from everyone I spoke to; most small businesses are already
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ʻdoing the right thingʼ but they are wary of saying so, largely because there are no specific criteria to define ethical. The Co-operative has a programme called Join the Revolution, which aims to show people how to set up their own co- operative businesses, fund community projects and purchase ethical products and services. Group chief executive Peter Marks says: “The Co-operative Enterprise Hub is helping new co-operative businesses to set up at the rate of one a day.” In the middle term that is a large number of business customers looking for like-minded ethical suppliers. Note too that the Co-op has enjoyed a strong commercial renaissance over the past three years. Theyʼve doubled membership, doubled revenues and doubled profits. Not bad in a recession. This must reflect customers buying into their “Good for everyone” slogan. The company has an Ethical Plan which includes the following pledges: grow membership from 6m to 20m by 2020; the most radical Fairtrade conversion programme ever undertaken; doubling financial support for renewable energy and energy efficiency projects to £1bn.
ontinental Clothing recently won the Outstanding Performance Award from Climate Week Awards. MD Mariusz Stockaj says that most businesses are still driven by price and those required to address statutory social compliance merely want a pass mark rather than engaging with the opportunity. For Mariusz the UK attitude to the ethical agenda squares with social issues in the sector: child labour, living wage and safe working conditions in that order. The award was ʻa very big dealʼ to Continental and unexpected as they were up against some multi-nationals. The judges recognised the companyʼs real achievements, tangible improvements and example to the whole sector. Mariusz says that an ethical standpoint means that there are certain supply chains they avoid because acceptable social conditions are demonstrably lacking, likewise they do not compete for business where ethical issues are swept aside and price is the only criterion. On the other hand, he says that those added social values can and often do swing the vote because customers would always prefer to be ʻcleanʼ.
About the author Paul Clapham is a marketing consultant
with more than 25 yearsʼ experience covering a broad range of business sectors and a full spread of marketing disciplines. He works with small, medium and large companies alike to increase their profitability.
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