CR Talk - The myth of the ethical consumer

A RECENT report from Kano, Nigeria shows how a leather tannery has been supplying products to some of the largest retailers for years. At the tannery, workers dip animal hide into vats of chemicals wearing plastic bags as aprons. It is not clear if any health and safety or environmental standards were adopted.

The impact of the tanning industry is multi-fold. National Geographic did an in-depth study in Kanpur, India where leather tanneries are ubiquitous. Tanneries have been severely criticised for polluting water supplies with heavy metals like chromium, a hardening agent in leather production. Improperly handled, chromium is said to be linked to lung cancer, liver failure, kidney damage, and premature dementia. Similarly, in Kentucky, United States, residents living near a leather tannery were found to have incidence of leukaemia five times above the national average in a study by the US Centres for Disease Control and Prevention.

Leather tanneries such as these are at the back end of the global supply chain of the largest fashion brands and retailers of clothes, furniture and other lifestyle products.

The consumer only sees the brand and not the input.

Most of us are vaguely aware that products and services that we buy in retail stores have a wide and meandering supply chain. The above example is another case of "out of sight, out of mind". Similar opaque supply chains abound in industries ranging from agriculture, electronics, textiles and all manner of manufacturing.

There is now a prevailing myth that the ethical consumer will be able to drive change for good in all industries. Such a theory holds that consumers, through their purchasing decisions, oblige corporations to produce the goods they require in the largest quantities at the lowest possible price which at the same time, is ethically sourced and made.

What is scary is how the CR (corporate responsibility) movement uses consumer power in an all-or-nothing manner.

As well as making claims about the efficiency of supplies and demands, such an idea subscribes to the idea that consumer needs drive the market. The argument is to simply let the marketplace decide what is right. Corporate behaviour is thus believed to be no more than a reflection of popular will, expressed via individual and group purchase decisions.

This perspective is too simplistic and also places the burden of power in the hands of consumers. The power argument perpetuates the notion that consumers are not only aware but are also strategic about their purchasing decisions. At some level, this is true. Consumers have become more savvy and aware of their decisions, aided largely by information and ideas available online, particularly via social media.

The notion, which can be called a "marketplace of ideas", finds its classic expression in John Stuart Mill's On Liberty. Mill argues that the most effective way to achieve truth is to allow competing ideas and theories to struggle in the court of public opinion. The CR movement basically tells companies to be responsible because consumers will reward you. Consumers will vote through their wallets.

Such a broad perspective is however misleading and downright dangerous. There is no "equality" in consumer votes. Consumer wallets may gravitate towards ethical consumerism but the reality is that ethical buying is a relative thing. Consumer interests tend to be topical and dependent on popular culture. So, going down the supermarket supply chain, Kiko the "cute" dolphin is an easier target to save under the label of "sustainable fishing". Try then to tell a moneyed consumer that the branded handbag that they fancy was made by exploiting child labour in leather tanneries in Third World countries. There are no cute and furry stories to tell here about a vast and almost hidden supply chain.

Even when well-informed, for most consumers, marketers sell us many ideas, however incredulous. One notorious example where marketing went very wrong surely must be the case of "Little Mr Pluto". In the 1990s, the Japanese Power Reactor and Nuclear Development Corporation created a cartoon called "Little Mr Pluto" whose job it is to teach children that nuclear power is safe. "If everybody treats me with a peaceful and warm heart, I'll never be scary or dangerous", says the Smurf-like creature who was discontinued very quickly following an uproar and ultimately died following the shutdown of the parent company.

Although there is a small market that proactively rewards ethical business, this is not enough to outweigh the price advantage. The majority of consumers still gravitate towards cheaper products and not the fair trade, organic or locally produced products. All this boils down inevitably to the essential commercial driver, dollars and cents.

Ethical consumerism data shows some growth over the past five years. The 2015 Nielsen's Global Corporate Sustainability online survey finds that when it comes to sales, commitment to the environment has the power to sway product purchase for 45% of consumers surveyed. Commitment to social value (43%) and the consumer's community (41%) are also seen as purchase drivers. Brands that actively reinforce societal commitment must amplify and socialise their message using multiple sources and distribution channels.

The problem starts when companies use such data to push their brands as "doing good". How brands amplify and socialise their CR message can be seen in the case of Volkswagen and BP. Volkswagen has been engineering the truth about its green credentials for many years, as seen last year. When BP was involved in a series of health and safety offences including an explosion in its Texas City oil refinery in 2005 and oil leaks in its Alaskan pipeline in 2006, the CEO of BP was touring the globe as a leading voice of CR.

We need to resist the idea that ethical business is "good business". For example, when a company says that human rights is "good for business", it commodifies basic principles of human dignity. Beyond that and more dangerously, it becomes a line of argument with a double-edged sword simply because it reduces human dignity into monetary terms. This is particularly so when it becomes more profitable to just cut down rainforests, displace indigenous people and use cheap child labour instead.

In the infamous Ford Pinto case, a compact car produced in the 1970s, it was discovered to have a tendency to leak fuel and explode into flames in rear-end collisions. More than two dozen people were killed or injured in Pinto fires before the company issued a recall to correct the problem. Why did it take them so long to do a recall?

Simply because a formal cost-benefit analysis – involving putting dollar amounts on a redesign, potential lawsuits, and even lives – showed that it was cheaper to pay off lawsuits than to make the repair.
The basis of responsibility should not come from external demands. It needs to be an internally driven mechanism that supports the fundamentals of a company. The internal driver is a combination of leadership and culture that must be institutionalised into sustainability processes and practices.