Are fair trade labels good business?

Are fair trade labels good business

Are fair trade labels good business

For the past thirty years several attempts have been made to describe consumers in terms of their concern about societal problems (Roberts, 1996). As society changed, this concern shifted towards other topics.
There was the socially conscious or socially responsible consumer in the seventies (Anderson and Cunningham, 1972), whose range of action did not reach further than his own community From the late
eighties on, however, environmental disasters gave birth to the green consumer (Smith, 1990; Vowles,
2000). Finally, in the past ten years, the ethical consumer sees a more direct link between what is
consumed and the social problem itself. This kind of consumerism incorporates environmental issues but
extends the concern to animal welfare, human rights, and working conditions in the Third World (Strong,
1996; Tallontire et al., 2001).
In general, the ethical consumer feels responsible towards society and expresses these feelings by means
of his purchase behavior. When companies have bad social records, consumers can decide not to buy their
products. Boycott campaigns against Nike because of their alleged labor abuses and Nestlé because of the
infant formula issue, are the most cited (Creyer, 1997; Shaw and Clarke, 1999; Strong, 1996; Auger et al.,
1999; Carrigan and Attalla, 2001; Crane, 2001). On the other hand, companies expressing corporate
social responsibility (CSR) give incentives to positive purchase behavior by means of codes of conduct
and social or fair-trade labels on products (Tallontire et al., 2001). Creyer (1997) found that the ethicality
of a firm’s behavior is an important consideration during the purchase decision. In spite of the lack of
evidence of the relation between corporate social responsibility and financial performance, it is believed
that it pays off if put in a strategic perspective (Burke an Logsdon, 1996).The idea of broadening the
focus of a company’s activities beyond immediate interest groups, such as customers and shareholders, to
embrace employees, suppliers, the local community and even competitors, is called the stakeholder
model. A new consensus, acknowledging the value of a “stakeholder” approach to business transactions,
has emerged (Whysall, 2000). In times when government capabilities for solving social problems are
called into question, the business sector is expected to take up her responsibilities. The cost of ignoring
corporate social responsibility may well be survival (Anderson and Cunningham, 1972). Moreover, CSR
produces excellence (Robin and Reidenbach, 1987). As Gaski (1999) wrote: “the ethics of one day may
be the law of the next”. Reviewing the literature of the past decades, he finds that marketing and the law
coincide with what is considered as being ethical. Many consumers already think that acting within the
law is the same as acting ethical (Carrigan and Attalla, 2001).
It is of high importance for companies to know whether the group of ethical consumers is large enough to
focus upon. Should or should they not attune their business ethics to the call for more corporate social
responsibility? Evidence of a growing market segment for ethical products is sought in the increased
availability of ethical products and in opinion polls and other studies. They claim that the part of
consumers who buy more ethical products is increasing. According to a MORI poll for the Co-operative
Bank 51% of the respondents have the feeling of being able to make a difference in a company’s behavior
and 68% have bought a product or a service because of the company’s responsible reputation (Hines and
Ames, 2000). On average, 46% of the European consumers also claim to be willing to pay substantially
more for ethical products (MORI, 2000). American consumers agree with a price increase of 6.6% for
green products (The Roper Organization, 1990), while French consumers want to pay 10% to 25% more
for apparel not made by children (CRC, 1998). Bird and Hughes (1997) tone these findings down. They
claim that the willingness to purchase goods based on their ethical credentials is limited to a small
minority of shoppers.

From “Are fair trade labels good business ? Ethics and coffee buying intentions” by Patrick De Pelsmacker, Liesbeth Driesen and Glenn Rayp

Posted in Ethics and tagged .

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