Consumers are calling for ethical production, but will they spend more?
Modern consumers with an increase in informed options expect more from the companies that produce goods and services. They expect ethical production.
A key arising consumer demand is that all companies maintain an ethical policy while still balancing quality, convenience and affordability. To survive in this new demanding market, companies are fighting hard to enter into or maintain strong positions along with an increasing pressure from competitors and other consumer expectations.
With this added stress in the market, the question is:
Do consumers actually value ethical production enough to change purchasing habits?. Or is it just a feel good opinion?
To understand consumer behaviours, let’s first look into the definition and impact of 'ethical production'.
Ethical production defined
Humankind is in a real battle to lower and reverse the negative impacts of 'Global Warming' from human behaviours, with the responsibility to find a solution in the control of the governments, companies, manufacturers and consumers to act fast.
Ethical production is manufacturing with a conscience. A holistic approach to the manufacturing process of products that encompasses 3 core pillars, as defined by https://ethicallyproduced.org which promotes change in the responsibilities of companies and manufacturers. Ethical production understands that the 'true cost' of a product starts at production and finishes when the product ends its lifespan, not at the end of the sale.
Image: "People, planet, product" the three pillars of ethical production - ethicallyproduced.org
1. People - The inhumane treatment of employees and human rights violations.
2. Planet - The environmental impact of products with a short lifespan.
3. Product - The devastating impact of unsustainable and unsafe products.
Ethical production is a critical component of Corporate Social Responsibility (CSR) and is crucial for environmental wellbeing, staff, customers and for a positive more sustainable future.
Never before has humankind been so informed or able to act on change, but do they value ethical production enough to spend more or choose one company over another? Let's explore further.
What has led to the consumer mindset shift around ethical production?
In recent decades a rising population has made the manufacturing industry destructively fast-paced. This led to an increase in unsafe workplaces globally where unethical production processes were the norm.
In April of 2013, the Rana Plaza building in Dhaka, Bangladesh (which housed five garment factories) tragically collapsed, killing at least 1,132 people and injuring more than 2,500 people.
So far this is one of the worst industrial accidents known globally, and was one major catalyst that plunged the world into awareness of poor labour conditions in the clothing manufacturing sector.
Image: (April of 2013) of collapsed "the Rana Plaza building" Dhaka, Bangladesh
The world needed and still needs radical transformation as production at any cost is not the answer.
More recently, the global COVID-19 pandemic has sharpened the consumer focus on sustainability. With significant shifts to lifestyle, finance, production chains and mental health, consumer mindsets have shifted around values relating to self and societal improvements.
High on this list has been looking at the impact the consumer household has on the world when it comes to products and services. Consumers now more than ever need to favour brands that benefit society and the environment.
Then we need to look at the the vulnerabilities that have been exposed in the supply chain in this post-pandemic world. Supply and production strategies are strained thanks to trade restrictions and delivery lags, however product demand has remained the same and even increased, highlighting the dependency on manufacturers. As a result prices have increased, but service has declined leading to a dissatisfied consumer market.
Why upgrade to ethical production?
Ethical production can have significant benefits for brands.
To manufacture products ethically means a business can future proof itself. Consumers support ethical brands more every year and there will come a day where brands that don’t make an effort regarding sustainability and ethical practices will be irrelevant.
The financial benefits are abundantly clear, with share price and profitability proving to become higher for companies with significant sustainability programs.
A positive work environment is proven to increase productivity and a strong ethical manufacturing framework can lead to improved quality. Both which lead to increased revenue.
Who is ultimately responsible for ethical production?
In order to see the change we strive for there needs to be accountability from the entire supply chain from politicians, manufacturers, brands, retailers, influencers to consumers.
Consumers need to change their behaviours to align with their values by shopping ethically. If they care about the ethical pedigree of a product, they need to exert their buying power by showing loyalty to brands with strong CSR policies. Consumer demand leads to supply change.
Another strategy companies utilise is to align with charities through direct (automatically part of the sale '10% from each sale goes to charity') or customer nominated donations at checkout. These companies are seeing customers with aligned values become repeat customers.
From the top down, governments also have a crucial role to play not only with implementing policy and legislation but with educating the public about the importance of ethical production.
Do consumers value ethical production enough to change their purchasing behaviours?
There is a key divide between intention and action for the conscious consumer. In reality, values might drive some changes but people are still compelled by price point. Many popular stores such as Amazon, Nestle, Boohoo, and Shein take advantage of this consumer behaviour. What’s worse is they get away with it because consumers keep buying their products, despite their long and public history of exploitation.
The latest edition of the EY Future Consumer Index suggests that consumers are starting to change their behaviour when it comes to supporting ethical practices.
84% say sustainability is important when making purchase decisions but 47% say it costs too much to purchase sustainable products.
43% of global consumers want to buy more from organisations that benefit society, even if their products or services cost more.
64% are prepared to behave differently if it benefits society.
A Trivium Communications Buying Green Report conducted in 2022 addressed the real question. Are consumers really willing to pay more?
86% of consumers among younger generations (<45) showed a willingness to pay more for sustainable packaging.
A previous report in 2020 by Trivium showed that of the consumer group willing to pay more, they'd happily pay an increased price of 10% or more.
There is also a significant challenge that companies don’t communicate their values or production methods well enough with their audience. Ethical production doesn’t have to mean poor quality or a significantly higher price point.
Ethical marketing is just as important as the ethical production process. If a consumer doesn’t recognise shared values, they’ll continue looking for a compatible solution. Brand authenticity is crucial and consumers will hold brands accountable if they don’t deliver.
How can brands respond to this shift in consumer behaviour and maintain a competitive advantage?
The challenge for any manufacturer is now to achieve an ethical status while staying ahead of consumer trends and expectations (of values, price and quality).
What does the future hold? The conscious consumer will have peace of mind only with the culmination of efforts from those responsible at every level of the supply chain. The world is at a juncture and action needs to be taken now.
Liam, Founder and CEO of Yourstuffmade predicts;
“By year 2025, over 50% of direct to consumer businesses will have a publicly available ethical or social impact policy, with consumers requiring stronger validation of a brands’ claims. To validate these claims consumers will heavily rely on third party regulators, reliable standards, trusted logos and certifications to decide on behaviours.”
In order to shift a business to a smarter, consumer centric and more ethical brand, there are simple steps to success that need to be taken now.
The first place to start on an ethical production journey is to explore how to source ethical manufacturers.
To explore ethical production and maintain a competitive advantage with quality products, have a discussion with Ethicallyproduced today.