* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.The rise in ethical consumerism is impacting the companies and brands that we have all come to rely on.
Business and ethics have never been more closely linked than they are today. Consumers and the next generation of workers demand better business practices and want to know about a company’s history, goals, and operations before handing over their loyalty.
From a 2016 Label Insight study, 94% of consumers are more likely to be loyal to a brand that offers transparency, and 73% were willing to pay more for products that offer complete transparency.
This rise in ethical consumerism is impacting the companies and brands that we have all come to rely on.
Customers want to know the provenance of what they consume and the effect of their purchases, from the environment to the communities where they were sourced, to how a business will use its profits from the sales. They expect businesses to deliver social and economic value.
Larry Fink, founder and CEO of the world’s largest investor BlackRock, recently threw down the gauntlet for businesses to contribute to society or risk their future growth: “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”
The positive social and environmental impact of a company is not just becoming a license to sell; it is becoming a license to operate.
Yet despite these calls for companies to do the right thing, many find it difficult to implement scalable and profitable strategies for growth that are inclusive and benefit all of society.
This is partly because social impact has been seen as separate to real commercial strategy - at best, well-meaning corporate social responsibility (CSR), and at worst, a public relations cost. Even the most successful CSR initiatives can suffer from short-term thinking that misses real opportunities to impact communities – and their business’ bottom line.
The key to sustainable prosperity is to recognise that a proactive contribution to society is not just the right thing to do; it is an opportunity for businesses to realise their long-term commercial goals.
But what opportunities are there exactly?
There are three key areas ripe for exploration: building sustainable supply chains, bridging the skills gap, and accessing hard to reach markets.
A sustainable supply chain is one where every link of the chain benefits both commercially and socially.
To effectively connect these links, it’s crucial to understand the complex ecosystems and networks of actors that impact all industries. Every company cuts deals with traders, wholesalers, or regional buyers. Every wholesaler relies on regular supply from the producers of raw materials. Every farmer grapples with irregular commodity prices and climate threats.
The key to transparency and traceability lies in fixing all these links. This isn’t something companies can achieve alone. All parties need to work together to find and close the gaps. The end result is worth it as businesses can secure their long-term supply.
Let’s now look at bridging the skills gap. This isn’t just about training your employees. Beyond the potential to improve productivity, contributing to the skills of a community can help solidify a company’s consumer base by improving the employability, and therefore income potential, of poorer segments of society.
At a macro level, it can be one of the keys to maintaining the type of vibrant economy that every business relies on to grow. At the micro level, individual qualities of life improve.
But perhaps the greatest impact can be achieved when hard to reach markets are brought into the modern economy.
For many businesses that face saturation in their markets, this can be essential for long-term growth. Emerging markets offer brand new customers and an unprecedented opportunity to build brand recognition.
By aligning product development and marketing strategies with the challenges an emerging market may face, companies have the opportunity to tie their product to the growth and inclusiveness of society itself.
This isn’t about selling morality to the board of directors. It’s about giving businesses a pragmatic opportunity to make better decisions about how they reduce costs, improve productivity, and target long-term growth.
You can’t have successful businesses without successful societies, and you can’t have successful societies without the economic opportunities that businesses bring.
Eduardo Tugendhat is the Director of Thought Leadership at Palladium.