Article
Article

The Role of Ethics in FMCG

08/06/2022

When it comes to running a business, the importance of ethics is hardly new. And yet, in a world where consumers are demanding more and more from brands,  the practice of ethics across the board - from leadership to supply chain to marketing - is becoming increasingly significant. As outsource partners, the EFMP partners are cognisant that their values and ethics as a business need to align with those of the brands they represent, but it is equally  important to ensure that the brands that they represent meet the ethical criteria that consumers have come to expect.

 

In the fast-moving consumer goods, or FMCG, sector, ethics have an important role to play. As FMCGs are  products that both dominate consumers’ day-to-day lives and tend to be low- or single-use, it’s unsurprising that consumers want to ensure  that these products are bringing about minimal harm to both people and the planet. 

 

In this piece, we will look at how consumer behaviour is driving the ethical trend and how brands can prioritise ethical practices by leveraging consumer trust. 

How can we define ethics in FMCG?

Ethics, in any context, is inherently vague and subjective. Defined loosely as doing the ‘good’ rather than ‘bad’ thing, it opens the door for much miscommunication and misunderstanding. In the article “Ethical Branding And Corporate Reputation” by Ying Fan, the writer states that: “an ethical brand should not harm public good; instead it should contribute to or help promote public good”. A brand can be seen to be ethically “good”, therefore, if it champions morality and fairness and actively combats that which is unethical. An ethical brand does not lie or mislead its consumers or suppliers; it ensures that everyone along its supply chain is treated with fairness; and it creates added value for the brand, its customers and its stakeholders. 

 

Although driven by similar consumer needs, the importance of ethics is not the same as that of sustainability, although they are closely linked; indeed ethics relates to environmental responsibility in the same way it does to social and economic responsibility. 

Why are ethics important to consumers?

An Aflac study showed that 92% of millennials prefer buying products from ethical companies, and 82% of those consumers think that ethical brands are more successful than their competitors who lack a clear sense of ethics. 

 

Consumers are increasingly informed about and intolerant of bad business practices and are prepared to use their purchasing power to show it. Shrewd and perceptive, consumers will no longer stand for vagueness when it comes to a brand’s sense of ethics. Nor will they fall for empty “tokenism”: a 2021 survey by DoSomething found that two thirds of Gen Z respondents want to see that the brands they use are committed to employee and consumer safety. It also reported that “if [brands] are not authentic, Gen Z will be the first to raise a red flag.” If brands are unethical or are displaying a hollow or insincere sense of ethics, consumers can tell and are prepared to call it out. 

 

Ethics are not just important from a moral standpoint; leveraging ethical consumerism is an effective commercial strategy. A 2020 report by IBM highlighted the emergence of “Purpose-driven” consumers who make purchases based on how well a brand aligns with their own values and how well it demonstrates its commitment to bringing about positive impact. The report showed that these consumers are willing to pay more to brands who prioritise things like traceability, social equality and sustainability

How can brands build and demonstrate their ethics?

It is possible to create loyalty and trust around ethics - but clarity is key. Consumers want brands to be clear about their economic, social and environmental responsibilities and to walk the walk, not just talk the talk. To create a successful sense of ethics in a brand, it is not enough to simply have a diversity statement or a code of conduct; ethics must permeate the business both internally and externally. 

 

First things first, brands must recognise that what they do has a direct influence on people’s lives. A company’s ethics, therefore, should be as a result of a genuine commitment to social, environmental and economic good. Authentic ethics will consequently make for a competitive advantage by inspiring trust and loyalty in both new and existing customers.      

 

A powerful example of a brand’s ethical responsibility is its commitment to equality and inclusivity, particularly when it comes to marginalised groups, like with LGBTQ+ marketing. Around Pride month, many companies adapt their branding strategy to link up with the event, with  varying degrees of ethical success. On the lower end of the scale there is ‘rainbow washing’,  when a brand simply adds a rainbow logo to its existing activities. This mere nod to the issue is a common mistake that brands make; while ranking higher on the scale of somewhat questionable ethical practice, as a Popular Information article following Pride 2021 pointed out, several companies, including Walmart and Bank of America,  exploited the marketing opportunities of Pride month, despite having previously donated large sums to anti-gay politicians.

 

Proctor & Gamble, however, won favour with consumers when they opted for a year-round approach to Pride by partnering with GLAAD on the Visibility Project, which is dedicated to improving LGBTQ representation in advertising. Through its own research, P&G has also been able to adapt its marketing to reflect LGBTQ experiences.  For example, the insight that over half  the people  who come out about their sexuality, change their hair when they do so,was instrumental in shaping  an ad campaign for one of the company’s hair-care brands, Pantene. 

 

These examples prove the power of instilling ethics at every level of a brand: not only does  ethical practice satisfy savvy consumers who can, and will, uncover foul play, it also promotes diversity, both within and  outside the company, and it supports a marginalised community by both increasing their exposure and catering to their unique consumer needs. 

 

In 2019, Unilever found that, within its portfolio of brands, those who had a clear purpose to support social and environmental good grew 69% faster than their other brands. Among these, Dove is a prime example of a brand with a strong perceived sense of ethics. Since its initiation over 60 years ago, the company has been dedicated to promoting “real beauty”, going against most other companies’ tendencies to airbrush their models and uphold unattainable beauty standards. In 2017, it launched the #RealBeauty campaign, which featured 32 women from a range of age brackets and backgrounds, and also made a formal pledge to use its advertising to: feature real women and not to digitally distort its models, and to help women to build body confidence and self-esteem. Along with this, Dove launched the Self-Esteem Project, which provides body confidence education for millions of young girls across the world. 

 

One of the most iconic ethical marketing campaigns of the 21st century was led by US footwear brand Tom’s: for every purchase of its espadrilles, the company donated a pair of shoes to a child in poverty. In 2013/14, Tom’s shoes were ubiquitous - largely thanks to the sustainability and ethics firmly embedded in the company’s brand since its launch. Despite a significant drop in revenue following its initial success, the company never waivered in its commitment to ethical consumerism and in 2021 set its sights on Gen Z, betting on the generation’s dedication to social responsibility to garner a new set of fans. These new customers will be more inclined to trust the brand since it has a demonstrated, consistent track record of ethics - a rare and significant distinguishing factor.  

Ethics in 2022

The ‘Tom’s’ approach demonstrates the importance of a brand’s ethics being firmly established in its purpose and vision no matter the external circumstances; ethical marketing is a long-term strategy that should evolve and grow along with the company and not be used as a scapegoat for poor performance nor dropped at the first obstacle. This is particularly relevant in a time in which the world is still feeling the effects of the pandemic and suffering from increased living costs and high inflation as a result of COVID-19 as well as the war in Ukraine. 

 

While the generation-defining moment for Millennial consumerism, the Great Recession, shaped millennials’ spending habits by gradually getting them used to living with less and buying more cheaply, the pandemic, which is the Gen Z equivalent, came, for all intents and purposes, out of nowhere. From one week to the next, the world ground to a halt: skies were clear, the o-zone started to heal itself and factories closed operations. The world spent a decent chunk of time consuming a fraction of what it was used to and learned some important lessons as a result. 

 

The influence of the pandemic on Gen Z shopping habits is expected to manifest itself in slower, more intentional consumption that generates little waste and contributes to the health and safety of everyone on the planet. As a result, despite the crippling economic challenges of the period, the importance of ethics will not waver, meaning brands must prepare to find the right balance between customer value and business value. 

 

The 2021 Havas Media Cost of Living survey found a 77% increase in the number of UK consumers stating the increased importance of brands helping them to save money. Simultaneously, 74% of people surveyed highlighted the value of brands delivering on their promises. It is unsurprising, then, that in a survey by Forrester, almost two thirds of B2C heads of marketing felt that promoting ethics and sustainability in their brand would be “difficult or very difficult” over the next 12 months. Nevertheless, success in 2022 and beyond is becoming more and more tied to ethical consumerism. And if brands want to leverage their ethics, they need to focus on building trust. 

Building trust in a time of uncertainty

According to Kissmetrics, 89% of millennials are prone to mistrust companies and, when it comes to making new purchases, increasingly prefer to place their trust in recommendations from friends and family. Additionally, 69% do not trust advertisements and 71% do not trust sponsored ads on social networks. 

 

Yet customers remain loyal to the brands they do trust, and research continuously points to the correlation between consumer trust and a brand’s success. During the pandemic, brands won and retained customers by demonstrating reliability, ethics and fairness. Nowadays, consumers want value and safety over excitement. Now more than ever, a brand’s role within society, its purpose and perceived culture have an impact on its image and consequent success. Evidently, instilling a brand with a strong sense of ethics is a guaranteed way to build consumer trust and to be successful as a result. 

 

A 2021 report by Edelman, “Trust, The New Brand Equity”, which gathered information about how consumers expect brands to show they are contributing to bettering society, found that 40% of consumers leave the brands they love because of issues with, or a loss of trust and this occurs most commonly in high-income consumers. 

 

So, what does trust look like in consumerism? The Edelman report found that 86% of consumers expect a brand to get involved in: providing financial support to good causes; saying no to misinformation; addressing social issues and supporting local communities; supporting art and culture, and making the culture more accepting. What’s more, they expect brands to be up-to-date and engaged with the latest news - around half of the people surveyed expressed the importance of brands issuing a public statement, and/or for the CEO to  speak publicly about topical issues. Engagement in society at large makes a brand trustworthy and relevant in consumers’ eyes and this trust equals growth. Customers who feel that a brand’s ethics and values resonate with their own, get attached to brands, become advocates, and remain faithful to them. A strategy that ensures customers are clear on the brand’s purpose, how it is contributing to making the world a better place, and the fact that it is constantly evolving, is one that will keep customers engaged, and bring about long-lasting success. 

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