by: Jonathan Salem Baskin

Consumers are willing to pay more for ethically produced products, according to a study published in yesterday's Wall Street Journal and the MIT/Sloan Management Review.

The researchers, both Canadian academics, defined "socially responsible" companies as those which are:

  • Considered to have progressive stakeholder relations, such as diversity hiring programs
  • Believed to follow eco-friendly practices, like using green tech
  • Seem to demonstrate respect for human rights, so no child or forced labor in factories

Consumers were then asked how much they'd pay for, say, a cup of coffee from one of these "good guy" companies, and then how they'd price a similar cup from a socially irresponsible business.

Poll participants picked higher prices for the white hat products; ergo, investing in social responsibility is smart business, as it'll be rewarded by consumers. In fact, they thought irresponsible products should make less, almost as a punitive tax for being evil.

If only market research were so easy.

There's an obvious, and often-times insurmountable difference between what people say they'll do, and what they actually do. Usually, the former is influenced by absolutes of righteousness and justice, while the latter is the domain of circumstance and expediency. 

Asking consumers what they value needs to get correlated with how they actually spend their money, or the research is really no more directionally insightful than an entertaining cocktail party conversation. Of course I'd pay more for ethical products. I always recycle. And I drive the speed limit, when I'm not taking public transportation. 

Now, to the details of the ethics issue.

I absolutely want ethical business to pay. I think if most people knew how their clothing was made, or what went into Chicken McNuggets, we'd see revolutionary change in the how, where, and by whom many products are manufactured. 

But most consumers either don't know or, just as likely, don't really care. 

And what's ethical, anyway? Kids working in a factory sounds to me like a crime, but when their option is to work in prostitution, or to simply starve, maybe the answer is a little more complicated. Is it socially responsible to rely on electricity instead of oil, when coal fuels much of the former? 

Beyond Thou Shalt Not Kill and 9 other famously declarative prohibitions, ethics really reside in a definitional construct between people or, in this instance, companies and the communities they serve:

  • From which they take employees
  • With whom the rely upon for parts and service
  • To whom they sell finished products, and
  • Near which they impact, whether directly or otherwise

It isn't that ethics are relative, but rather that once you get past the broad rules, they're made real within specific contexts. Kind of like brands.

As such, I wonder whether the value in social responsibility is for companies to recognize the attributes that matter to their customers, correlate them with what matters to the other constituents they serve (as well as to the management and owners), and act accordingly.

Maybe the opportunity is for businesses to fairly and truly participate in establishing and evolving said ethics in their industries

The more they rely on feel-good, generic definitions like the ones perpetrated by the Canadian researchers, the less likely they're going to reap any real pricing benefits from it. Over time, I think businesses will get punished not so much for being unethical, but rather for being disingenuous about the entire shebang.

Ethics are an ongoing conversation, not a static brand attribute. Can anybody say social media?

Original Post: http://dimbulb.typepad.com/my_weblog/2008/05/the-ethics-of-e.html

Leave a Comment