News Analysis: CSR trails ethical route to market

CSR has a place in the lexicon of big business, but some bosses still think consumers regard it as a small factor in purchasing decisions. Tom Williams reports.

If corporate social responsibility was the corporate buzzword of the 'caring Nineties', the shine of its promise would appear to fading.

In a survey conducted by the Economist Intelligence Unit which Hill & Knowlton published last week, only nine per cent of Europe's senior executives mentioned CSR as important to customers and only four per cent saw CSR as important to their customers.

Yet the ethical product market is booming. It was revealed in February that the fair-trade market had grown by between 40 and 90 per cent over the last decade and had annual sales of £100m. Ethically-based firms such as The Body Shop have prospered, while new players such as clothing retailer American Apparel are capturing a strong foothold in what they believe to be a lucrative market.

Other statistics show that a company's policies are still very much in customers' minds. A 2000 MORI survey found that 41 per cent of those interviewed believed CSR was important in their purchasing decisions, while 16 per cent of the British public were CSR activists.

Why then, when faced with these statistics as to the power of the ethical market, do so many executives seem to feel that it is not worth exploring?

For many corporate executives, says H&K corporate affairs head Andrew Pharoah, CSR initiatives appear too often to be a leap in the dark that appear to pay small dividends: 'We know that if something hits a company's reputation, customers will walk away. What we don't know is to what extent customers will reward a company for good behaviour.'

Ethical activities

While Pharoah and the EIU are working on a survey that he hopes will examine this issue, he and others agree that companies need to do more to shout about their ethical activities, though opinions differ about the best way to do this.

It is interesting, for example, that brands that have used ethics to define themselves do not always aggressively market themselves on this angle, while brands such as American Apparel wear their ethical policies, sometimes literally, on their sleeves.

Trainer company New Balance, for example, prefers to market itself as a 'Discovery Brand' whereby customers find out about its ethical policy of sourcing most production in developed countries or through ethically audited joint ventures. New Balance, whose mainline products include retro versions of once technically superior running shoes, actually prides itself on how little it markets itself while relying heavily on PR.

'If you market yourself as an ethical brand, you can lose that ethical edge,' says New Balance EMEA general manager Alistair Cameron. 'Many multinationals have consultants advising them on how to talk to their consumers but consumers are more intelligent than that. We consciously want our marketing to be quiet and try to reduce the noise level.'

Greg Sturmer, founder of London fashion label Romp, which is enabling customers to trace the origin of all its products' components right through the supply chain (PRWeek, 24 September), says that to talk about companies like his as ethical is really missing the point.

'Customers only don't care because they don't know,' says Sturmer, who points to changes in legislation that have already made the use of some chemicals in leather production illegal as evidence that ethical production is simply part of a wider evolution. 'The idea that you can market with pretty girls something that is illegal as well as unethical is going to die,' he adds.

Aspects of Romp's approach can already be seen in the CSR policies of other, much larger, companies. DIY retailer B&Q's timber is labelled with a Forest Stewardship Council badge to indicate that the wood has been vetted independently, while Vodafone is in the process of kicking off its own Code of Ethical Purchasing, designed to police the ethics of its handset suppliers and assembly partners.

Supply chain

Pharoah says this is the kind of area where companies really need to be aware, but is unsure of whether this can translate into something more positive. 'If you have a long supply chain, you have to understand that is where you will get into trouble. Whether you can use communications about that supply chain to build brand preference is another question,' he says.

But the positive nature of the ethical offering, as the success of brands such as the internet bank Smile and The Body Shop attest, is most definitely there. If this power is growing it may be because ethical business practice works better not as a policy that defines a business, but is embedded in the very nature of the business. This approach, says Good Business co-founder Steve Hilton, means that businesses have an added dimension that they can show to customers in a market where rival companies are increasingly homogeneous.

'I have never said that CSR policies are more important than the quality and service you give to customers,' he says. 'But as quality and service become easier for competitors to replicate, CSR has become more important for companies to differentiate their brand.'

If this trend continues then it seems logical that ethical conformity and good corporate behaviour itself will no longer be a selling point. It will become part of what all consumers want and expect from the companies that make the most desirable products.

In this way, the ethical company will cease to exist.

Senior executives are right when they say their customers do not care about their company's ethical policies. They care about the products.

But getting consumers to feel good about choosing your product over another brand is still a key way of shifting stock off the shelves.

'ETHICAL' BRANDS

American Apparel - Set up in 1994 by its Canadian senior partner, American Apparel makes and sells unbranded 'classic American' styleclothing and is the biggest maker of T-shirts in the US. The vast majority of its products are sold wholesale but it has some retail outlets in the US and Europe including a London branch in Carnaby Street, which opened three weeks ago. Using the taglines 'Made in Downtown LA' and 'Sweatshop Free' the company's garments are made by workers at its LA factory.

Romp - Founded by leather merchant Greg Sturmer, Romp's first collection launches next February. The label enables customers to trace the origin of all parts of its organic denim jeans, leather and pigskin products through its various suppliers. Sales have reached £30,000, which the company says is 300 per cent ahead of its business plan.

New Balance - The world's fourth largest footwear seller and second only to Nike in the US in terms of footwear sales, New Balance makes running shoes at its five plants in the North-Eastern US and one factory in Cumbria in the north of England. Although around 30 per cent of its shoes are made in the Far East through ethically audited joint ventures in the UK, the company promotes the First World sourcing of its products. It claims 85 per cent of trainers it sells in the UK are made in the UK.

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