“Ethically-produced” will become the norm, soon enough
The Wall Street Journal ran a piece today about social responsibility asking, ‘Does being ethical pay?‘ (subscription required). There are a couple of bits worth repeating here. The first is a succinct definition of “ethically produced” goods:
“For our purposes, “ethically produced” goods are those manufactured under three conditions. First, the company is considered to have progressive stakeholder relations, such as a commitment to diversity in hiring and consumer safety. Second, it must follow progressive environmental practices, such as using eco-friendly technology. Finally, it must be seen to demonstrate respect for human rights — no child labor or forced labor in overseas factories, for instance.”
This definition underpins a broader shift towards a more conscious/benevolent capitalism here in America, which comes as a welcome change after a long, myopic focus on profit only…
The second interesting bit in the WSJ article relates to the findings of a study conducted by the authors which looks the impact of a company’s perceived social responsibility on its relative pricing power:
“In all of our tests, consumers were willing to pay a slight premium for the ethically made goods. But they went much further in the other direction: they would buy unethically made products only at a steep discount.
What’s more, consumer attitudes played a big part in shaping those results. People with high standards for corporate behavior rewarded the ethical companies with bigger premiums and punished the unethical ones with bigger discounts.
Finally, we discovered that companies don’t necessarily need to go all-out with social responsibility to win over consumers. If a company invests in even a small degree of ethical production, buyers will reward it just as much as a company that goes much further in its efforts.”
For the time being, it seems, just taking an earnest step towards socially responsibility is enough for brands to win over fickle, ethically-minded consumers (ignoring social responsibility altogether is a risky proposition).
However my sense is that the “ethics bar” keeps rising each year, driven largely by widespread adoption of Lohas-type values among numerous influential consumer groups (even in a recession), suggesting that affordable, “ethically produced” goods will become the price of entry in most sectors, soon enough.
