Pretty much anything that has a hint of being socially or environmentally better (however slight) seems to be termed ‘ethical’ these days. We seem to have lost sense of what the description really means. Is a company that has slightly reduced the greenhouse gas emissions (GHGs) in the manufacture of one of its products ‘ethical’ in the same way that a company that refuses to operate in countries like Burma, with its appalling catalogue of human rights abuses, or South Africa during the apartheid regime, for instance?
Dow Chemical is building a reputation for its sustainability positioning and initiatives. At the same time its reputation is dogged by the ongoing dispute over compensation for the 1984 Bhopal disaster, since its acquisition of Union Carbide, and its supply of napalm and Agent Orange during the Vietnam War. BSkyB is similarly successfully building its sustainability credentials and yet its largest (almost becoming its controlling) investor is News International, engulfed in the phone-hacking scandal.
Many companies have introduced ethical codes of practice to reduce instances of unethical behaviour. As retail buyers at Boots many years ago it was drummed into us that we should not use small suppliers as a source of cheap credit and that they should always get payment priority (I wonder which retailers have a specific policy like this at the moment?) But does this take us far enough?
Ethisphere have just released their table of the 2011 ‘World’s most ethical companies’. The criteria used to make the judgment on which companies make the grade include: compliance with ethical best practice; track record and reputation; corporate governance; sustainability, corporate citizenship and social responsibility; and an ethical culture that ensures buy-in by the workforce.
It is likely that a company that has an ethical culture will find it easier to become more sustainable, as an expression of its corporate mission, than one that sees sustainability as a desirable initiative, but approached in isolation. The impact on marketing and brand management is necessarily huge, as an ethical basis for all operations introduces a filter through which every action needs to be considered. This may well result in the forfeiting of some short-term profit opportunities, but is highly likely to benefit the brand equity in the longer term as customers build their set of beliefs about the company.
Cadbury, in contradiction with its impressive ethically-based history, launched a heavily-criticised ‘chocolate for footballs’ promotion some years ago. On the other hand the assimilation of a ‘corporate conscience’ into the DNA of the John Lewis Partnership has played a critical role in building the levels of brand trust and loyalty that have enabled it to so successfully buck the trend during the economic downturn. Stripping away the company facade to reveal its core beliefs adds a powerful layer of competitive advantage: most of the time it will not be the primary reason for purchase, but it can be a critical tie-breaker.
The Chartered Institute of Marketing (CIM) produced a thoughtful paper a few years ago entitled ‘New Years Revolution: Morality in Marketing’, drawing a distinction between ethics and morality, which it defines as the truth underlying ethics. The concept of moral principles at work in a company, as the paper delineates, for instance, in Hennes & Mauritz (H&M), is perhaps a useful contribution to a better understanding of ethics. The idea of marketing concerning itself with moral behaviour would bring sneers of derision from many. Yet being perceived as honest and having integrity allows customers to outsource their concerns to particular brands and, added to products and services that meet customer requirements, almost guarantees future income streams.
Because ‘ethical’ has become such a widely used (and abused) descriptor of a huge range of corporate activities it has perhaps ceased to be useful, which is a shame. Perhaps, as with people, the truly ethical companies are those that don’t choose to shout about it, but can be judged by their actions. Informing customers of sustainability and corporate social responsibility initiatives (particularly if of direct relevance to them) is entirely appropriate; talking about being more ‘ethical’ is much more problematic. Achieving an ethical aura is also something that takes a long time, built upon many individual but cumulative actions (e.g. Co-operative Bank).
Becoming truly ethical inevitably involves the whole supply chain; the huge success of the Fairtrade Mark, and its adoption by a growing number of mainstream brands, demonstrates the intrinsic appeal of such an ethos. The ‘way we do business’ must encompass everything.
At the end of the day, ethics is about doing ‘the right thing’: ask the person on the Clapham omnibus if a particular behaviour is ethical and he or she will tell you. Would one’s professional peers see it as ethical? How would it stand up to scrutiny if being interviewed by Larry King or Jeremy Paxman? Ethics is both very simple and ultimately more powerful than sustainability or corporate social responsibility, which it should of course encompass. The latter activities will certainly help in building a more ethical perception of a company, but it is the underlying ethos and morality that will determine ultimately how ethical it is. We should perhaps think more carefully about how the word is used.