CSR — February 27, 2012 at 12:45 pm

Do Consumers Really Care? The Myth of the Ethical Consumer

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Katy Perry, singer of ‘I kissed a girl’, declares herself a ‘Red artist’. Georgio Armani, American Express, Starbucks, Apple, Dell – all these companies consider themselves to be ‘Red’, as do Converse, Bugaboo and Hallmark. They have pledged themselves to the Red initiative, spearheaded by U2’s Bono and politician Bobby Shriver. They have specified that 50 percent of the profits from designated ‘Red’ products and services will go towards buying and distributing antiretroviral medication to AIDS patients in Africa.

Since its inception in 2006, the Red initiative claims it has raised more than $140 million for its partner The Global Fund so that this fund, in turn, can provide medication to nearly 80,000 people in Ghana, Lesotho, Rwanda and Swaziland. As Katy Perry says: ‘It’s not just like they are coming to my concert: when they purchase a ticket, they are helping out someone across the world – someone who needs medication, who doesn’t have resources; someone to help in the fight against HIV and AIDS.’

Inspirational stuff.

With numbers like those, it would be churlish to argue that initiatives such as Red are not worthwhile. Yet such high-profile activities hide the fact that products with ethical or social dimensions have far more limited uptake than many executives and social activists might hope, leaving many in business expressing uncertainty, in private, about the financial efficacy of ethical consumerism and the role their customers play in sharing obligations to social ethics. Despite the hype it has generated, there is strong evidence to suggest that even Project Red hasn’t had the impact on consumers its partners had hoped for.

In fact, our research shows that the ideal of the ‘ethical consumer’ – that person who is guided in their purchasing decisions by broad ethical or moral concerns – is a myth. That doesn’t mean people aren’t influenced by issues other than price and product – they are. But we find that when you look carefully at people’s purchasing behaviour, it does not tally with what those who promote the idea of the ethical consumer would expect. All too often, survey radicals can turn into economic conservatives at the checkout.

Horses for courses

The ethical consumer, as an ideal, fails to match reality in a number of ways. When you examine how people purchase, you find that they do so in a much more utilitarian way than promoters of the idea of the ethical consumer claim. As our coffee-shop experiment shows (see Fair Trade Coffee, Sir, page 27) how ‘ethically’ people decide to consume is a socially determined factor, and a subsidiary one at that.

People may care about a variety of issues that form part of a broad ethical agenda: third-world debt, child labour, pollution, animal welfare and so on. But they tend to be hard-nosed when they trade these things off against matters that are more salient, immediate and mundane: children’s schooling, healthcare, their mortgage – even simply spending less time at the checkout counter.

The question, it seems, is a relative one: ‘How important are social issues when compared with other economic issues?’

Consumer social responsibility

These findings might tempt strategists to side with the financially driven sceptics. If ethical consumers are a myth, why cater to them – particularly if it is going to cost you money? It may be true that the ‘ethical consumer’ is a myth, but consumers are influenced nevertheless by their social concerns, in the same way that they are influenced by other aspects of the consumption landscape: price, branding, taste, positioning and the context within which consumption occurs. It’s just that you can’t rely on a simple conception of ‘ethicism’ in your marketing strategy.

Instead of conceptualising an ethical consumer, it may be more helpful to think about ‘consumer social responsibility’. This differs from the ‘ethical consumer’ construct because it recognises that consumers’ decisions are influenced by many factors and that the social component of a product is just one. What’s more, it doesn’t attribute a broad and generic ‘ethicism’ to individuals, who are likely to have far more subtle social preference delineations than we give them credit for.

Individuals reveal their social preferences through their patterns of consumption; in fact, it would be almost impossible for them not to do so, since social preferences are an inherent aspect of consumerism.

But you can not determine from their consumption patterns whether or not someone is ‘ethical’.

One person may reveal that he cares deeply about animal rights but is indifferent to the ‘right-to-life’ cause. Another may be a passionate right-to-lifer but have no position on the destruction of the Amazon rainforest. Which of these people is ‘ethical’? Both, surely.

People actively decide the extent to which they will support one social cause over another, and these decisions are reflected in their consumption behaviour. But you can’t use these decisions to predict from one social category to another. Ethicism is not generic.

Nor are people’s ethical concerns strongly influenced by their cultural heritage. Europeans do not appear to be significantly more socially aware than Americans. Consumers from developing countries seem to be no less concerned about environmental issues than those hailing from richer countries.

The reality is more complex than that: our research shows that the rationalisation of behaviour and a person’s understanding of the idea of ‘ethical consumerism’ are culturally informed – but behaviour is remarkably similar.

Ethics is a much more granular subject than the proponents of the ethical consumer would have us believe. It does a disservice to the human race to categorise some aspects of consumption as ethical or unethical.

Instead, it’s better to think about individuals revealing their social preferences through their behaviour. In turn, these preferences are useful in understanding how marketers can influence behaviour.

The socially responsible corporation

Understanding that social ethics is a complex and relative concept that differs markedly among individuals and communities sheds much light on the idea of the sociallyresponsible corporation. Many commentators have promoted the idea that companies can ‘do well by doing good’.

But if we understand that ethics are a complex and individually determined phenomenon, we realise that the idea that corporations can determine what is ‘good’ is naïve.

In fact, taking this argument to its logical conclusion reveals that handing over social policy decisions to corporations would lead to what most would consider to be an unacceptable loss of democratic rights.

To see why, it’s only necessary to take a walk down my street. I have neighbours who were born in China, Korea, India, Syria, Japan, the Netherlands, Croatia and 10 or so other countries. The local election ballot has to be printed in more than 20 languages. Yet, in the same street where several wives were imported for arranged marriages lives a lesbian couple and a dozen individuals cohabiting in de facto relationships, some with ‘illegitimate’ children.

Would corporate policies and choices that appeal to one of these families be likely to appeal to all? Certainly not. Any attempt to do well by doing good among my neighbours would get bogged down immediately in an energetic debate about what was and wasn’t ‘good’.

Corporations, by their very nature, have conflicting virtues and vices that ensure they will never truly be socially responsible, even by the broadest of definitions.

Would you want Walmart running society? The answer is, ‘Probably not’, for two reasons: firstly, because you can’t guarantee that what Walmart decides to do for society will in any way match your conception of a social good; and secondly, because there is a strong likelihood that instead of the corporation being forced to act in ways society deems ‘good’ (even if we could define such an idea), society will be forced to act in a way the corporation thinks is good. What’s more, you can’t vote Walmart out of office – there is no governance mechanism limiting the actions of a corporation in the way there is around a democratically elected government.

As Elizabeth Taylor said:

‘The problem with people who have no vices is that generally, you can be pretty sure they’re going to have some pretty annoying virtues.’

Social marketing

From an overall strategic perspective, it is important for corporations to understand that there are social responsibilities within all aspects of their businesses – whatever that means for the societies in which they are operating. Better companies work to enable these responsibilities to be fulfilled, however they arise (not simply through giving to select charities or enabling particular programs favoured by the CEO).

Corporate social responsibility, as it is traditionally defined, implies that there is a responsibility at the level of the corporation as a whole. But the company is not a being; it is simply an entity that allows humans to interact. It is the humans who have social preferences and responsibilities – as individual customers, workers, owners, investors and executives. Companies that put out glossy brochures proclaiming their extensive environmental, social or ethical activities are not being socially responsible – they are engaging in public relations.

More important is understanding the social links that exist across the corporation, understanding their interplay, and being able to understand and act upon the opportunities that arise from them.

This means enabling workers to have fulfilling lives and time with their families, customers to contribute to a variety of social causes through their consumption decisions, executives to create value for shareholders and investors to contribute to economic growth. The most ethical companies enable all of these and more, in concert, and profit over the long term as a result.

Fair trade coffee, sir?

One experiment we undertook in investigating whether or not the ethical consumer exists took place at a coffee shop in central Sydney over a period of several weeks.

This coffee shop displayed a large and prominent sign indicating the products available, their prices and active specials. To this we added, quite obtrusively, another special, indicating: We have Fair Trade coffee! No extra charge. Just ask.

Unprompted, with only the sign to notify them of the availability of the ‘ethical’ alternative, less than one percent of customers bothered to ask for Fair Trade coffee, even though it was free.

When we opted for the McDonald’s strategy – prompting customers with a reminder that the ‘ethical’ alternative was available – the number of customers opting for the Fair Trade option rose to 30 percent.

We then went a step further and took the customer’s privacy away: each time the clerk prompted a customer with the Fair Trade option, we ensured there was someone standing next to that person at the counter. In this situation, the number of ‘ethical consumers’ rose to 70 percent.

Throughout the experiment, we gave different coloured cups to customers who indicated that they wanted the Fair Trade product. We then questioned those remaining in the coffee shop about the meaning of fair trade and what they thought they were doing by purchasing, or not purchasing, Fair Trade coffee. On the whole, we received informed and insightful answers: customers talked about fair trade; they talked about the conditions of Guatemalan farmers; they could cite many reasons why they had opted for Fair Trade coffee.

None of this meant anything, however. When a customer chose the Fair Trade alternative, his or her decision was based entirely on the context we had created; it had nothing to do with that person’s values or preferences.

What this reveals is the degree to which ethical consumerism, like all consumerism, is strongly determined by the social context in which it is served up: something the marketers behind the Red campaign, and Katy Perry, are likely to have taken into account.

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