Can a successful business be Ethical?
The world is full of people who run businesses to the highest ethical standards – and fail. Many of these people look at successful small and large businesses and perceive an element of ruthlessness in business which they lack. They comfort themselves with the higher moral ground of their ethics, thinking that if their successful rival prosper then someone, somewhere must be suffering. Were this to be the case then big successful businesses must surely create havoc amongst their suppliers, staff and customers. Do they merely pay lip service to their fancy ethical statements? After all Enron (apparently) had a 64 page "Code of Ethics".
The companies that throw themselves open to the most detailed examination are those that wear their ethics as the badge of their trade. Were I an oil / nuclear comany executive feeling a little heat of publicity then what better to get off the front page than to send out some investigators to dig some dirt on the squeaky clean?
Or why not simply buy into ethics? Who might I choose as a target? A company like Body Shop perhaps…
In April 2006 came the headline in The Independent "Body Shop’s Popularity Plunges after L’Oreal Sale" "An index that tracks public perception of more than 1,000 consumer brands found that "satisfaction" with Body Shop had slumped by almost half".
The big ethical ‘thing’ with Body Shop is animal testing. None of its products or ingredients are tested by Body Shop or its suppliers on animals. Even though L’Oreal itself had stopped animal testing in 1989, it does admit that some of its suppliers test ingredients on animals……
Another trigger in this slump in Body Shop satisfaction was apparently that L’Oreal is owned to the tune of 26% by Nestle – corporate evil incarnate "voted the world’s least responsible company in an internet poll". Anti Nestle campaigners (principally on the baby milk to third world issue) used this as another stick to hit Nestle with and Body Shop’s reputation was a casualty.
(Incidentally, the internet poll is the UK’s YouGov survey BrandIndex -possibly a nice guide to who the saints and sinners of the corporate world are perceived to be. However – its not measuring ethical performance – Chanel and Dior’s position at the top of their relevant league is largely down to their product smelling somewhat better than Body Shop’s. At least that’s the perception).
But Body Shop is a separate entity to L’Oreal or Nestle. The better it does then the more money passes up the chain and the more the owners of the bigger businesses will notice that ethical branding and action actually pays. Hard headed people running these businesses will know better than to meddle with the ethical position of Body Shop and look to strengthen their own ethical positions. In today’s environment, that is a real possibility rather than just wishful thinking.
Body Shop are back near the top of all the tables in the BrandIndex survey. They will continue to be known as the company that is "Against Animal Testing". They were awarded 2006 Best Cruelty-free Cosmetics by PETA (People for the Ethical Treatments of Animals).In terms of fair trade sourcing they have "31 community trade suppliers in 24 countries" (see their Principle and Policies) and perhaps they could do better here because £5m (Body Shop’s figure from July 2006) is spent on supplies from this programme against retail sales of £486m, and cost of those sales of £167m (source the 2006 Annual Report). What happens further down the supply chain in this area is more opaque than Adidas (say) because the emotional edge of ethics in the cosmetics industry is Animal Testing while in the clothing industry it’s Child Labour. It’s to Body Shop’s credit here (and clever too) that they set the agenda for the whole cosmetics industry while for Adidas they were the victims (the child labour sewing footballs episode of 2002). But Adidas are doing many things right and they top BrandIndex’s sports industry’s league.
Back to the question, can a successful business be ethical? Unquestionably yes – and more so today than ever previously it’s becoming a requirement. Big corporations with dubious activities no doubt look for peripheral areas in which they can appear ethical but at least today ethics are there at the table.
Tags: energy, environment, finance
February 20th, 2008 at 2:11 pm
Scott, it’s an interesting point you raise and one which we all (consumers responsible for our individual pounds and pennies) have a vote on. Ultimately ethics cost money and many companies and individuals talk the talk without quite walking the walk as convincingly.
Body Shop is a classic example of a business seemingly started with great and noble intentions, where the shortage of cash ultimately led to a ‘watered down’ (excuse the pun) power of the real decision makers in the business. The real decision makers are always the shareholders, as they’re the ones who have risked their money investing it in the business.
Our own example has put us in an incredibly difficult position of trying to move a bottled water market away from plastic or glass towards paper cartons. My background in ‘water’ meant I was morally obliged to source truly pure water (even suitable for babies) which ultimately costs more. With regards to the paper used in our package, it was important for our suppliers (Tetra Pak) to use truly sustainable forest sourced paper for our cartons.
Buyers now love what we’re showing them and the efficacy of our water is unquestionable, but it’s only the genuinely independent retailers who distinguish value from cost and retail our product to their customers. There are many others who simply will not sacrifice any margin for an ethically and ecologically aware product and we’re talking about an industry that’s not short on margin.
To answer your question, I absolutely believe we can become completely successful, without sacrificing our ethics. That’s perhaps not the same as an already successful business becoming ethical, as it depends on their starting point.
Whenever a business sets out its stall as even trying to ‘be good’, human nature is such that it looks for any weakness rather than embracing the commitment that business is seeking to make. The inevitable weakness is then used as justification for knocking it and ‘business as usual’ with whoever has kept their head down.
I am a little sceptical about the whole brandindex thing, as brands are built with huge marketing spend, which can ultimately overcome most objections people have. My view is that if seen often enough, something becomes familiar and gradually, at a sub-conscious level it becomes trustworthy in consequence.
A more worrying trend is the green wash, which is now spreading to an ethical wash in return for a charity donation – you make a great point about Enron, lest people forget. You can read my blog at http://aquapax.wordpress.com
February 21st, 2008 at 8:54 am
Neil, I think it was the Observer a week or two ago that had a two page spread on the problems of bottled water. I did not take it all in but it’s interesting to find that there is an alternative product out there!
February 21st, 2008 at 11:21 am
Very interesting and very true. The conviction to work out being truly ethical is challenged many times in day to day running of a company where compromise constantly knocks at the door. This is even more so where, as in our case, http://news.bbc.co.uk/2/hi/programmes/working_lunch/2336635.stm we try to include the human ethics side. We maintain, successfully, the ethos of every employee having the same wage, from order picker, cleaner, to manager, all on the same wage. We also try to give opportunity to those with disabilities of some kind, both physical and emotional. This can really slow down production and give rise to an abnormal error rate. It, at times, is difficult to hold our ethics above economical good scence, but so far we have managed it. Will keep you posted.
February 22nd, 2008 at 11:37 am
Hi Scott, thanks – yes I did see the article. The Observer article was idealistic because people are people first and being people we get thirsty when we’re not near taps. It’s a complex message we’re promoting (drink tap or buy pure & ecologically aware) and one best explained when someone has the time to digest it. I won’t knock tap water because there’s fundamentally nothing wrong with it that could harm a healthy adult.
I’ve been doing demo’s/tastings with retailers who stock Aquapax and did another one yesterday at Whole Foods Market. The reception is so incredibly energising. Just off to Brighton now for another demo at Infinity Foods.
February 22nd, 2008 at 11:47 am
Lesley, it’s great to hear from you and your Principles before Profit business model is incredible. I’m about to go out for another demo, but I’d love to talk to you about maybe selling Aquapax. We have lots of people asking us for direct delivery and we’re simply not geared up for it. It would be great to have an ethical company like yours to direct customers towards & I think most of our customers will accept an occassional error considering the challenges you must be working with.
I’ll try calling you when I get back later today.
N
February 22nd, 2008 at 4:20 pm
Hi Neil, yes we are always on the lookout for new, truly ethical products. The best idea would be if you could complete the potential supplier survey found on our website: http://www.goodness.co.uk under the supplier section.
Thanks alot
Lesley
February 24th, 2008 at 9:53 am
Hi Lesley, Very interesting to read about your pay structure! Reminds me of City Limits magazine in London in the 80’s who had the same outlook – paying cleaner to editor the same. Their driving force was purely socialist idealism, something which has gone rather out of fashion!
Scott
February 25th, 2008 at 9:49 am
Yes, I guess if you rely on the fashionable thoughts of the day, that is what happens. With us the conviction that equality matters is a little deeper than that. We have run the business on these foundations for 30 years now. It has become very established, though not always easy. It’s good to know that others have had a go at working this way tho’.
October 21st, 2009 at 5:17 pm
Hi there, I am researching a fictional pub chain as part of my Business Management Degree and have got to assess the ethical position of this firm, commenting on its aims and policies, corporate governance, corporate social responsibility, corporate social reporting and its trading position, simply by analysing its annual report and accounts. I would appreciate if anyone could give me any guidance towards this. My email is scrumpyjackflash@hotmail.com
Please help me!
Thankyou
Jack Barker