Research on Ethical Consumerism

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Information about Research on Ethical Consumerism
Business & Mgmt

Published on November 3, 2008

Author: timkitchin

Source: slideshare.net

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A useful collection of datapoints on the growth of ethical consumerism...

Ethical Consumerism and its Commercial Future November 2007

The Glasshouse Philosophy Being good has taken the place of looking good. The role of the corporation has changed, and companies looking to manage their corporate reputations effectively must integrate CR policies across their business offering and as part of a sustainable business strategy. Focus on what matters. Glasshouse recognises that companies must remain commercially viable. We focus on how each policy can actually improve a company’s business offering in a fiercely competitive marketplace.

Our Areas of Expertise Information and communications technology providers Strategy Public Affairs Online and Offline Media Relations Community Relations Standards setters and assurers International non-profits and research institutes Sporting groups Extractive industries

Information and communications technology providers

Who We’ve Worked With CR strategy and materiality assessment Brand strategy and environmental thought leadership Global positioning and thought leadership based on social vision Public affairs, media relations, brand strategy, and partnerships with this ethical think-tank Brand strategy and rebranding for sustainability NGO Reputation strategy focused on extractive license to operate and consumer ‘permission to purchase’ UK Stakeholder engagement and philanthropy around environmental issues Development of communications strategy to promote biodiversity

What Assures Consumers on Climate Change? Consumer survey of 2734 people Covers the US and UK markets Conducted by Globescan in March 2007 on behalf of AccountAbility and Consumers International

Consumer survey of 2734 people

Covers the US and UK markets

Conducted by Globescan in March 2007 on behalf of AccountAbility and Consumers International

“I am very concerned about global warming.”

“There is no consensus that global warming is real.”

“ I am a more environmentally responsible person than average in this country.”

“ We in this country will have to change our lifestyles significantly if global warming is to be stopped.”

“ I would rather do business with companies that are working to reduce their contribution to global warming than with other companies.”

Who Do Consumers Trust to Provide Information on Climate Change?

More General Concern than Individual Responsibility 51.6% 15.1% of respondents have sought out information on climate change, BUT… of respondents have assessed their own impact with a carbon calculator

How are Consumers Acting? 79% 53% 37% 87% 62% 18% 66% Bought energy-efficient light bulbs Bought an energy efficient appliance (e.g. fridge, washing machine) Bought 'green energy' from your electricity supplier Decided to travel in a more energy efficient way (public transport, car-pooling, walking, cycling etc.) Decided to travel a shorter distance (e.g. on a holiday/vacation) Reduced energy consumption in your home by turning things off more Decided to buy a product produced locally rather than one that has come from far away

Recognition and Use of Labels Targeting Third World Development (e.g. FairTrade)

Consumers are Looking for Collaborative Approaches Only 12% of consumers disagree that businesses, governments, and environmental groups should work together to help them make more sustainable purchases. (72% actively agree; 16% have no strong opinion)

Only 12% of consumers disagree that businesses, governments, and environmental groups should work together to help them make more sustainable purchases. (72% actively agree; 16% have no strong opinion)

The Call for Independent Verification There is a serious lack of trust in businesses Risk of greenwash Only 5.5% of consumers disagree that businesses should have their green claims independently verified by a third party.

There is a serious lack of trust in businesses

Risk of greenwash

‘Help us’ They Say 69% believe that every individual needs to take more responsibility for their role in climate change. The same number ( 69% ) believe that businesses need to take global warming more seriously. More than half ( 52% ) believe that government should ban certain products to remove bad choices from consumers.

69% believe that every individual needs to take more responsibility for their role in climate change. The same number ( 69% ) believe that businesses need to take global warming more seriously. More than half ( 52% ) believe that government should ban certain products to remove bad choices from consumers.

Socially Responsible Investing (SRI) in the UK FTSE4Good incorporates CO2 emissions and climate change for the first time – one quarter of listed companies at risk of being delisted (Feb 2007, Guardian ) UK Growth of SRI size and number of investors

FTSE4Good incorporates CO2 emissions and climate change for the first time – one quarter of listed companies at risk of being delisted (Feb 2007, Guardian )

Points of Leverage in Behaviour Change Carrot: market opportunities, enhanced reputation, access to financing, staff recruitment and retention – whichever components of “the business case” resonate. Stick: legislative or regulatory sanctions, consumer boycotts, cost of compensatory community investment or additional security. Awareness: understanding of the impacts that business can have on human rights and how societal issues can impact business. Capacity: time, money and expertise. Tools: training materials, guides to integrating human rights into company activity, learning forums within and across industries. Source: Ethical Corporation, http://www.ethicalcorp.com/content.asp?contentid=5428

Carrot: market opportunities, enhanced reputation, access to financing, staff recruitment and retention – whichever components of “the business case” resonate. Stick: legislative or regulatory sanctions, consumer boycotts, cost of compensatory community investment or additional security. Awareness: understanding of the impacts that business can have on human rights and how societal issues can impact business. Capacity: time, money and expertise. Tools: training materials, guides to integrating human rights into company activity, learning forums within and across industries.

Ethical Consumption Survey – Nov 2006 In 2005, ethical consumption in the UK was worth £29.3 billion This represents a year-on-year increase of 11% (vs. increase in household expenditures of only 1.4%) Ethical food spending increased 18% from £4.6 billion to £5.4 billion, yet still are only 5% of a typical shopping basket Green home expenditure, which incorporates energy-efficient electrical appliances, green mortgage repayments, small renewables (such as micro-wind turbines) and green energy was up from £3.8 billion to £4.1 billion. Market leaders (such as energy-efficient refrigerators) are often supported by clear labelling, choice editing, and/or subsidies. Spending on personal products, such as humane cosmetics and eco-fashion, was up 5 per cent to £1.3 billion.

In 2005, ethical consumption in the UK was worth £29.3 billion

This represents a year-on-year increase of 11% (vs. increase in household expenditures of only 1.4%)

Ethical food spending increased 18% from £4.6 billion to £5.4 billion, yet still are only 5% of a typical shopping basket

Green home expenditure, which incorporates energy-efficient electrical appliances, green mortgage repayments, small renewables (such as micro-wind turbines) and green energy was up from £3.8 billion to £4.1 billion. Market leaders (such as energy-efficient refrigerators) are often supported by clear labelling, choice editing, and/or subsidies.

Spending on personal products, such as humane cosmetics and eco-fashion, was up 5 per cent to £1.3 billion.

Changes Affecting Corporate Responsibility in the UK April 2006: United Nations Principles for Responsible Investment is sgined by companies with aggregated asset value of over £4 trillion October 2006: 3 rd edition of Global Reporting Initiative is unveiled November 2006: Royal Assent for the Companies Act is established. This requires quoted companies to codify directors’ responsibilities to employees, the environment, and the communities they affect.

April 2006: United Nations Principles for Responsible Investment is sgined by companies with aggregated asset value of over £4 trillion

October 2006: 3 rd edition of Global Reporting Initiative is unveiled

November 2006: Royal Assent for the Companies Act is established. This requires quoted companies to codify directors’ responsibilities to employees, the environment, and the communities they affect.

Trends in Corporate Responsibility in the UK Materiality Stakeholder Engagement Integration of financial and non-financial performance

Materiality

Stakeholder Engagement

Integration of financial and non-financial performance

Predictions in Corporate Responsibility in the UK Boards will increasingly recognise the value of CR reporting as an internal management tool Boards will pay more attention to the accuracy of CR-related information Companies will improve internal communication of CR. Compnaies will tailor their CR messages to specific stakeholders better. Boards will increasingly use the Annual Report to demonstrate accountability as well as returns Compnaies will increasingly report material issues in Business Review but keep a separate CR section CR managers will increasingly be pulled internally instead of pushing externally. Companies will take a systematic apporach to integrating stakeholder interest into account when making decisions. Compnaies which engage in dialogue will be better positioned to take advatnage of value creation opportunities around their CR commitment.

Boards will increasingly recognise the value of CR reporting as an internal management tool

Boards will pay more attention to the accuracy of CR-related information

Companies will improve internal communication of CR.

Compnaies will tailor their CR messages to specific stakeholders better.

Boards will increasingly use the Annual Report to demonstrate accountability as well as returns

Compnaies will increasingly report material issues in Business Review but keep a separate CR section

CR managers will increasingly be pulled internally instead of pushing externally.

Companies will take a systematic apporach to integrating stakeholder interest into account when making decisions.

Compnaies which engage in dialogue will be better positioned to take advatnage of value creation opportunities around their CR commitment.

Climate Group survey – the 6 ‘tribes’ of climate consumption Campaigners are deeply committed, but pessimistic that climate-change problems can be solved, and need to be convinced that solutions are authentic and effective. Optimists are also committed but upbeat about solving the problem. Their motivation is more social. Confused consumers are open-minded and looking for clarity about the issue and what they should do. Followers are less sure on the issue but remain ready to join. The non-willing accept the issues but are unwilling to act. The non-believers rejected the issue completely. Source: The Climate Group Survey “Consumers, Brands, and Climate Change” as quoted in the Guardian 16 October 2007

Campaigners are deeply committed, but pessimistic that climate-change problems can be solved, and need to be convinced that solutions are authentic and effective.

Optimists are also committed but upbeat about solving the problem. Their motivation is more social.

Confused consumers are open-minded and looking for clarity about the issue and what they should do.

Followers are less sure on the issue but remain ready to join.

The non-willing accept the issues but are unwilling to act.

The non-believers rejected the issue completely.

Fairtrade Sales 2006 global sales of Fairtrade products increase 42% (£1.1 billion) Average growth of 40% per year over the last five years In the UK alone, 2006 sales were £290 million and 2007 sales running at annualized rate of £400 million UK adult recognition of Fairtrade Mark increases to 57% UK supermarket chain Sainsbury’s has changed (or announced) all of its own-brand teas, coffees, and bananas will be Fairtrade

2006 global sales of Fairtrade products increase 42% (£1.1 billion)

Average growth of 40% per year over the last five years

In the UK alone, 2006 sales were £290 million and 2007 sales running at annualized rate of £400 million

UK adult recognition of Fairtrade Mark increases to 57%

UK supermarket chain Sainsbury’s has changed (or announced) all of its own-brand teas, coffees, and bananas will be Fairtrade

Marks & Spencer – Plan A – Healthy Eating “ Today, over half of all British adults are either overweight or obese, while obesity in children has trebled since the 1980s and is still rising. In fact, there are concerns that children born in the 2000s will be the first generation to have a lower life expectancy than their parents.” – M&S website

Marks & Spencer – Plan A – Healthy Eating Selling the healthiest food increase the amount of 'Eat Well' nutritionally balanced food from 30% to 50% within a year, use only natural colours in kids' sweets and cakes continue to lead the sector in reducing salt and meeting the 2010 Food Standards Agency targets ahead of time continue to be the only major retailer which does not use hydrogenated vegetable oils in any of the food that we sell ensure all our fresh salmon has increased amounts of important Omega-3 fats by the end of the year Making labelling simple using our 'Eat Well' sunflower logo to show you healthy, nutritionally balanced options at a glance introducing a 'Traffic Light' system on the front of packs in line with Food Standards Agency recommendations extending our '5 a day' and GI labelling to all products with these benefits Helping you make healthy choices have 1,500 trained Healthy Eating Assistants in our stores and extend training to all our food hall employees within three years run a trial of qualified nutritionists in five stores launch a Health and Lifestyle section on our website for employees and give employees health and lifestyle support and advice

Selling the healthiest food

increase the amount of 'Eat Well' nutritionally balanced food from 30% to 50%

within a year, use only natural colours in kids' sweets and cakes

continue to lead the sector in reducing salt and meeting the 2010 Food Standards Agency targets ahead of time

continue to be the only major retailer which does not use hydrogenated vegetable oils in any of the food that we sell

ensure all our fresh salmon has increased amounts of important Omega-3 fats by the end of the year

Making labelling simple

using our 'Eat Well' sunflower logo to show you healthy, nutritionally balanced options at a glance

introducing a 'Traffic Light' system on the front of packs in line with Food Standards Agency recommendations

extending our '5 a day' and GI labelling to all products with these benefits

Helping you make healthy choices

have 1,500 trained Healthy Eating Assistants in our stores and extend training to all our food hall employees within three years

run a trial of qualified nutritionists in five stores

launch a Health and Lifestyle section on our website for employees and give employees health and lifestyle support and advice

Ethical Consumer Poll – Nov 2006 Public confidence in business ethics has increased slightly - 58% are confident in the ethics of business, up 10% in the last three years. However a meagre 4% feel strongly that companies behave ethically. 93% say companies should be responsible for improving the social impacts of their products and services. 92% believe companies should ensure responsibility along their supply chain. 38% have in the last year made five or more ethical purchases, such as free range eggs (70%), products with recycled content (65%) or Fairtrade goods (62%). 83% say that a company's social responsibility is an important consideration when purchasing, and 38% feel strongly about this. 16% boycott products on ethical grounds and 18% had chosen a product based on the company's ethical reputation. Previous Ipsos Mori research found that 44% (34% in 2001) of people want the environment to be a priority focus for companies, while 29% (13% in 2001) picked energy conservation. 92% of employees surveyed felt that their own employer is responsible to society and the environment, and six in every 10 feel strongly about this. 83% think their employer takes its social and environmental responsibilities seriously or fairly seriously. Only 2% believe that these issues aren't taken at all seriously at work. Only around a third could, without prompting, name a company with an ethical stance or give an example of corporate support for the community. Three-quarters say that more information on corporate responsibility could have an impact on their purchasing. (Ipsos Mori poll of resentative sample of 2,063 adults at 174 sampling points. Face-to-face interviews were conducted between August and September 2006.) Source: http://society.guardian.co.uk/givinglist/story/0,,1939148,00.html

Public confidence in business ethics has increased slightly - 58% are confident in the ethics of business, up 10% in the last three years. However a meagre 4% feel strongly that companies behave ethically.

93% say companies should be responsible for improving the social impacts of their products and services. 92% believe companies should ensure responsibility along their supply chain.

38% have in the last year made five or more ethical purchases, such as free range eggs (70%), products with recycled content (65%) or Fairtrade goods (62%).

83% say that a company's social responsibility is an important consideration when purchasing, and 38% feel strongly about this.

16% boycott products on ethical grounds and 18% had chosen a product based on the company's ethical reputation.

Previous Ipsos Mori research found that 44% (34% in 2001) of people want the environment to be a priority focus for companies, while 29% (13% in 2001) picked energy conservation.

92% of employees surveyed felt that their own employer is responsible to society and the environment, and six in every 10 feel strongly about this. 83% think their employer takes its social and environmental responsibilities seriously or fairly seriously. Only 2% believe that these issues aren't taken at all seriously at work.

Only around a third could, without prompting, name a company with an ethical stance or give an example of corporate support for the community. Three-quarters say that more information on corporate responsibility could have an impact on their purchasing.

(Ipsos Mori poll of resentative sample of 2,063 adults at 174 sampling points. Face-to-face interviews were conducted between August and September 2006.)

Ethical Consumer Research Association (2007): “… as many as 20% of consumers buy ethically all the time with up to 70% of customers ‘reacting to things they do not like'. In the past price and quality have been the only issues but ethics is now a firm third.”

“… as many as 20% of consumers buy ethically all the time with up to 70% of customers ‘reacting to things they do not like'. In the past price and quality have been the only issues but ethics is now a firm third.”

2007 Top 5 Consumption Trends Status Lifestyles : transience (anti-consumer), participative, connective, eco-active Transparency Tyranny : in prices, quality, deals, etc Web N+1 : aligning the internet to meet consumer needs Trysumers : without scarcity and immune from traditional advertising, trying new products is easier The Global Brain : competition for creative talent for global brands Source: http://www.trendwatching.com/trends/2007top5.htm

Status Lifestyles : transience (anti-consumer), participative, connective, eco-active

Transparency Tyranny : in prices, quality, deals, etc

Web N+1 : aligning the internet to meet consumer needs

Trysumers : without scarcity and immune from traditional advertising, trying new products is easier

The Global Brain : competition for creative talent for global brands

“ The Glocalised Consumer” As Europe becomes more globalised, the role of consumers’ communities and networks is strengthened rather than weakened. Consumption as an affirmation of personal values Source: Future Foundation Positive Perceptions of Globalisation in Europe

As Europe becomes more globalised, the role of consumers’ communities and networks is strengthened rather than weakened.

Consumption as an affirmation of personal values

Harvard study on social product labelling (Hiscox and Smyth) : well-off people will pay premiums and pay more often for ethically sourced goods “ First, the researchers recorded the weekly sales of the towels and candles without labeling any of them as fair-labor certified, measuring purchasing decisions based solely on taste. After a few weeks, Hiscox and Smyth spent the night at ABC sticking fair-labor labels on one brand of towels and one brand of candles. When the store reopened, sales of the now-labeled fair-labor towels jumped by 11 percent relative to sales of the unlabeled brand. For candles, the effect was even greater—an increase of 26 percent. A few weeks later, Hiscox and Smyth were back in the stockroom, marking up the prices on the labeled towels and candles by 10 percent. Quite remarkably, this increase made people buy even more towels and candles (a 20 percent increase for towels and 30 percent for candles). The authors suggest this may be because the higher prices made the products' fair-labor claims more credible. By looking at both towels and candles, the researchers deliberately contrasted a mundane, anonymous household item (towels) with a luxury good that was much more likely to be purchased as a gift (candles). And they think that helps explain why the fair-labor sticker boosted candle sales more. Virtuous towel purchasers are anonymous in their good deeds. When you give a fair-labor-certified candle, others also bask in the warm glow of your goodness.” Source: http://www.slate.com/id/2175923/fr/flyout http://www.people.fas.harvard.edu/~hiscox/SocialLabeling.pdf

“ First, the researchers recorded the weekly sales of the towels and candles without labeling any of them as fair-labor certified, measuring purchasing decisions based solely on taste. After a few weeks, Hiscox and Smyth spent the night at ABC sticking fair-labor labels on one brand of towels and one brand of candles. When the store reopened, sales of the now-labeled fair-labor towels jumped by 11 percent relative to sales of the unlabeled brand. For candles, the effect was even greater—an increase of 26 percent.

A few weeks later, Hiscox and Smyth were back in the stockroom, marking up the prices on the labeled towels and candles by 10 percent. Quite remarkably, this increase made people buy even more towels and candles (a 20 percent increase for towels and 30 percent for candles). The authors suggest this may be because the higher prices made the products' fair-labor claims more credible.

By looking at both towels and candles, the researchers deliberately contrasted a mundane, anonymous household item (towels) with a luxury good that was much more likely to be purchased as a gift (candles). And they think that helps explain why the fair-labor sticker boosted candle sales more. Virtuous towel purchasers are anonymous in their good deeds. When you give a fair-labor-certified candle, others also bask in the warm glow of your goodness.”

Examples of Transparency Initiatives to Inform Consumers SOCIAL NETWORKING: www.actics.com helps companies who act responsibly to post info on themselves for consumers WEB 2.0: Ma Jun, a Chinese environmentalist and head of Institute of Public and Environmental Affairs has set up a Water Pollution map holding businesses in China to account for their environmental activity: http:// www.ipe.org.cn / BEST PRACTICE DIALOGUE: ChinaDialogue.net is a bilingual (Chinese-English) website discussing the Chinese environment BLOGGING: Information and opinions on ethical consumption

SOCIAL NETWORKING: www.actics.com helps companies who act responsibly to post info on themselves for consumers

WEB 2.0: Ma Jun, a Chinese environmentalist and head of Institute of Public and Environmental Affairs has set up a Water Pollution map holding businesses in China to account for their environmental activity: http:// www.ipe.org.cn /

BEST PRACTICE DIALOGUE: ChinaDialogue.net is a bilingual (Chinese-English) website discussing the Chinese environment

BLOGGING: Information and opinions on ethical consumption

Mandatory and Voluntary Reporting Report According to the report, companies producing voluntary sustainability reports are likely to integrate them into their financial reporting in the future. The report also found that the harmonization of voluntary standards and mandatory regulation will lead to higher quality and more useful corporate sustainability reporting. Source: http://www.resourcesaver.org/file/toolmanager/CustomO16C45F76200.pdf

According to the report, companies producing voluntary sustainability reports are likely to integrate them into their financial reporting in the future.

The report also found that the harmonization of voluntary standards and mandatory regulation will lead to higher quality and more useful corporate sustainability reporting.

SustainAbility– Tomorrow’s Value report 2006 28% of the group’s leading 50 corporate reporters seek to identify opportunities for strategic innovation and market building compared to 60% who demonstrate a more conservative, risk focused approach. 70% of these companies report some interaction with investors on sustainability matters, many reports still lack the hard targets and forward-looking information that makes required reading for analysts. at least 80% of companies were rated as integrated on at least one aspect of their reporting, though this result leaves many gaps to be bridged. under half of corporate reporters fail to sufficiently discuss and link their sustainability initiatives and commitments to the lobbying activities they undertake — and to the wider influence they exercise, either directly or through lobbying and trade organisations. The Millennium Development Goals (MDGs) are used to link businesses with international frameworks by over 20% of the Leading 50 reporters, a trend SustainAbility thinks is likely to grow as the MDGs’ 2015 deadline nears. Source: http://www.sustainability.com/downloads_public/insight_reports/Tomorrows_Value_Exec_Summary.pdf

28% of the group’s leading 50 corporate reporters seek to identify opportunities for strategic innovation and market building compared to 60% who demonstrate a more conservative, risk focused approach.

70% of these companies report some interaction with investors on sustainability matters, many reports still lack the hard targets and forward-looking information that makes required reading for analysts.

at least 80% of companies were rated as integrated on at least one aspect of their reporting, though this result leaves many gaps to be bridged.

under half of corporate reporters fail to sufficiently discuss and link their sustainability initiatives and commitments to the lobbying activities they undertake — and to the wider influence they exercise, either directly or through lobbying and trade organisations.

The Millennium Development Goals (MDGs) are used to link businesses with international frameworks by over 20% of the Leading 50 reporters, a trend SustainAbility thinks is likely to grow as the MDGs’ 2015 deadline nears.

SustainAbility – top 20 business leaders in sustainability reporting Source: http://www.sustainability.com/downloads_public/insight_reports/Tomorrows_Value_Exec_Summary.pdf

SustainAbility and WWF – One Planet Business report 2007 Housing, transport, and food together make up 63% of the global Ecological Footprint, 65% of CO2 emissions, and 72% of material use The world currently uses 20% more of its biocapacity than is sustainable; at these rates, we will be consuming as if there were two (sustainably used) planets by 2050 Fresh water use in agriculture is predicted to increase by 60-90% by 2050 if no production innovations occur 2 billion hectares of soil have been degraded, leading to up to $400 billion in losses. Costs of desertification are estimated by UNEP at $42 billion.

Housing, transport, and food together make up 63% of the global Ecological Footprint, 65% of CO2 emissions, and 72% of material use

The world currently uses 20% more of its biocapacity than is sustainable; at these rates, we will be consuming as if there were two (sustainably used) planets by 2050

Fresh water use in agriculture is predicted to increase by 60-90% by 2050 if no production innovations occur

2 billion hectares of soil have been degraded, leading to up to $400 billion in losses. Costs of desertification are estimated by UNEP at $42 billion.

Stern Review on the Effects of Climate Change As much as 20% of global GDP per year is at risk (with a wide range of risks and impacts taken into consideration); a narrower range still produces estimated 5% decreases in GDP per year if no action is taken The cost of taking action can be limited to 1% of global GDP per year Projects that 10 years forward will be a ‘tipping point’ where irreversible and potentially cataclysmic changes would occur Stabilisation would require a 35% reduction in emissions by 2050 and ultimately an 80% reduction in current emissions to sustain it The BRIC countries are already responsible for 30% of global CO2 emissions

As much as 20% of global GDP per year is at risk (with a wide range of risks and impacts taken into consideration); a narrower range still produces estimated 5% decreases in GDP per year if no action is taken

The cost of taking action can be limited to 1% of global GDP per year

Projects that 10 years forward will be a ‘tipping point’ where irreversible and potentially cataclysmic changes would occur

Stabilisation would require a 35% reduction in emissions by 2050 and ultimately an 80% reduction in current emissions to sustain it

The BRIC countries are already responsible for 30% of global CO2 emissions

The Global “Consumer Class” By 2015, one-third of the global population will belong to this class (assuming growth rates in India and China continue) Half of these consumers will live in developing countries as intranational inequalities increase Source: taken from Sustainability 2007

By 2015, one-third of the global population will belong to this class (assuming growth rates in India and China continue)

Half of these consumers will live in developing countries as intranational inequalities increase

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