All of us – as individuals, companies, nations, and a planet – stand to benefit from
more ethical companies. Ethical companies can only emerge with the proper
feedback systems: consumers must be able to respond to company behaviour, and
companies must understand that response.
In the age of shareholder value maximisation, acting ethically is often not a requirement but a marketing tool to improve profitability for companies. Acting ethically may satisfy government regulations. It is also often thought as a defensive measure to protect brand image, and as Wayne Visser, a member of WikiRate e.V.’s advisory council, points out in “The Age of responsibility”, it is rarely ingrained in a company’s DNA.
We believe that companies do not have enough incentive to fully embrace ethical behaviour and sustainability since consumers too often do not include such considerations in their buying decisions. At this time, consumer power to improve company ethical practices is largely underexploited. While some products advertise socially responsible practices, such as fair trade coffee, most products offer the consumer little, no or even misleading information regarding a company’s ethical stance.
This information asymmetry between companies and consumers makes it difficult for consumers to incorporate socially responsible considerations into their purchasing decisions. Consumers may be unwilling to integrate ethical considerations into their buying process because of the difficulty to obtain information, or simply because of an indifference to that information. The indifference can be due to the disconnect between the consumer’s buying decision and the impact of that decision due to time or geographical distance.
Consumer education will help to bridge the distance and lessen the indifference. Marketers use consumer involvement as a standard practice to increase product recognition. Similarly, consumer involvement in CSR issues is crucial to driving ethical purchase decisions.