Consumers Taking CSR in Their Wallet

Consumers are voting with their wallets on corporate social responsibility. Purchasers need to respond swiftly to protect brand reputation and the bottom line, says Rosey Hurst.

For the past 10 years there has been a steady increase in consumer awareness, campaigning and media coverage on ethical issues. The growth of Fairtrade and campaigns such as "Make Poverty History" have increased public awareness of the challenges of global trade.

Those brands which have been targeted by campaigners have suffered damage to their reputations, and investors have been asking questions about whether firms are adequately protecting their reputations. This is starting to influence consumer attitudes. According to a survey carried out in January by YouGov on behalf of Marks & Spencer, almost 90 per cent of consumers think retailers should ensure their products are manufactured in a fair and humane way.

Thirty-one per cent said they had decided not to buy an item of clothing because they were concerned about the conditions it had been made under, while 78 per cent said that they would like to know more about the way clothes are made, such as information about working conditions in factories.

Companies aware of these trends have been keeping ahead of the game for many years by working on monitoring and improving conditions in their supply chains. But this has been done mainly behind the scenes with the focus on brand protection rather than promotion. Few have been prepared to talk about their activities, fearing that consumers will not understand the complexities of managing supply chain labour standards and that campaigners and journalists would target them further.

The Marks & Spencer "Look Behind the Label" campaign marks a fundamental change. It informs customers about how products are made, not in the recesses of its CSR report, but in the national media, and in store windows. The way its products are made is now a central part of its brand.

Marks & Spencer is not alone in spotting this consumer interest. Topshop has a buying executive dedicated to sourcing ethical clothing, and has signed a deal to sell Fairtrade cotton lines. Last month, U2 vocalist Bono launched Red, a fashion label that will sell ethically sourced products and give a slug of its revenues to fight Aids in Africa. Gap, Giorgio Armani and Converse are among the first big brands to sign up. The balance has clearly tipped.

These brands have identified that a significant percentage of their customers want to be offered an ethical choice. This makes ethical supply chain issues a key factor in purchasing decisions.

The shift presents purchasers with several challenges. They need to develop the core competences of supply chain professionals to include ethical considerations in purchasing. They also need to develop the capacity of the supply base. Research shows that manufacturers often do not operate to international labour standards, so purchasers need to work with suppliers to ensure improvements are made across the board. This also raises questions. As payments of minimum wage rates are not as common in some parts of the world as they are in the UK, will adherence cause costs to rise? Will consumers pay more for their ethics? With expectations rising across the board, many people are demanding higher standards for static prices.

There are benefits of outsourcing production and the trade this brings to developing countries is beneficial to a point. But expansion of low-cost country sourcing needs a mindful approach to take account of the challenges it poses. Some changes to labour standards can be funded through improving productivity within production processes, requiring suppliers to be upskilled. However, purchasers also need to examine how their actions (or inaction) can exacerbate problems. This is becoming crucial, as consumers become more aware of the issues and are prepared to punish those companies that perform poorly.