Tuesday, June 19, 2007

Addressing consumer demand for ethical goods and global supply chains

What is the cost to workers as the demand grows for cheap but fashionable products?

Tom Barnett, Director of Ethical Junction (www.ethical-junction.org), looks at what it means to produce ethical goods and if the demand amongst consumers really exists.

“Ethical” is fast becoming a brand name – a cleansing agent that can be strapped to a product or service to alleviate the guilt of consumption. Does it mean that the mythical ethical consumer is emerging, a consumer who tries to act and buy ethically in all aspects of their life? Or does there simply exist a growing demand for “ethical” products? For the two are not the same.

The Co-op’s latest annual “Ethical consumerism” report now shows that the ethical sector in 2005 was worth £29.268 billion, a growth of 11% on 2004 exceeded the sales of ‘over-the-counter’ beer and cigarettes. Whichever way you look at it, something is changing amongst consumers.

The hidden ingredients
Recent legislation in the food industry introduced universal food labelling; specific ingredients, whose quantities must be revealed are clearly listed on all food sold from the shelves of our supermarkets. Now we know exactly what we are putting into our bodies and if we choose to, we can make better educated decisions about our diets. Suddenly it makes sense why my Mum banned me from drinking Ribena all those years ago. The labels show clearly what has physically gone in to the product: salt, sugar, fat and protein. Of course, there is more to it than they can display, but it is a vast improvement on the rather cryptic link between Coca-cola and some of its original ingredients. But what about everything else that went in to producing that product? Where are the raw materials sourced from? In what conditions are they grown, mined, raised, fished and processed? What about the number of miles it travelled to get on the shelf? What about what the producer does with the money? What about the “ethics” that brought that product to market?

What is ethical?
Ethical practice is about more that just fair-trade, it is more than organic, it involves holistic appraisal of every aspect that goes into the trade and industry behind a product or service, in Marxist terms it is the “means of production and distribution”. There is no one definition for “ethical”, as an adjective it’s very nature is open to interpretation, although there is no doubt that to be ethically led means to be trying to “do the right thing” at all points of the supply chain. As of yet, however, the consumer cannot easily get a fair appraisal of the ethics that lie within and behind a product as easily as they can find the ingredients that lie within it. So the question must be: Do consumers really know in what proportions they are demanding “ethical”?

What measures the ethical quality of a product? Minimal environmental impact? I think so. Respect for fellow living creatures? Probably. Fair treatment of all labour involved in the production process? Definitely. So the key to a truly ethical product lies in the production process and the “worker” is core to that as we are, mercifully, not entirely mechanised yet. It would be fair to say then, based on ethical demand requiring suppliers to adhere to these practices, the worker is going to come off quite well. Fair wages, workers rights and limits on the amount of hours worked are just some of the benefits available. However, we haven't addressed price yet.

Addressing the price
Price, whilst the least tangible of all costs that we can relate to a product, is more often than not, the deciding factor in the relative success of any product or service. Price, traditionally, drives both demand and supply. Price as a financial measure is ultimately a measure of the relative cost of a product. It is a generic summary of the resources that have been consumed bringing the product to market; it is not necessarily related to or indicative of the “ethical” cost of a product. Waitrose now boasts that its products are “honestly priced” and, in case you hadn't noticed, their locally produced organic products are not cheap.

Organic food will probably always be more expensive than non-organic, the animals have more space and the intense battery and shed systems are banned; the avoidance of pesticides and chemical fertilisers means that more human labour needs to be utilised for the same kilo of production so organic farmers will always have to charge more, until of course the full environmental cost of agri-chemicals becomes factored into industrial farming by legislation. Fairtade coffee on the other hand is very different, in non-Fairtrade coffee the amount paid to the grower of the beans makes up a mere 7% of the total cost, for Fairtrade coffee including the minimum price and the social premium this rises but to only 11%. Yet this small rise is not reflected in the increased cost of Fairtrade coffee over non-Fairtrade, why? When the Co-op first introduced Fairtrade coffee into its range, it had a 1p difference in price from the rest of its coffee range. One conclusion to draw is that some of the traditional large retailers are cashing in on ethical consumerism to increase their margins.

Take the cost of two different tomatoes; one is 20p, the other 35p – one is from Africa the other is from Somerset. One was bought from Tesco Express, the other from an independently run local produce shop. One is sprayed in pesticides; the other has been exposed to the elements. One was grown on land that is patrolled by thugs and funded by a bank you have never heard of; the other was grown in a field about two miles north of Hove in a farmers field whose family had owned it for generations. The food labels, if tomatoes carried such things, would be identical. It’s the “Tale of Two Tomatoes” and if they had ethical labelling they would read very differently indeed.

Does ethical demand really exist?
So perhaps, as with the latest food labelling laws, the public need to be exposed to a standardised measure of the ethical costs of a product, or should we say the ethical compromises made to ensure that it could be successful according to its derived financial price. We can then see if ethical demand really exists. If effective ethical demand really does exist it will not be price driven, it will driven by the other costs normally associated with supply. Fashion too would be relative to what was achievable within ethical parameters, not simply within the realms of possibility.

What can I do about it?
At Ethical Junction we believe that ethical demand does exist. But, like the fundamental economic problem, it is not a perfect world. Moving in the right direction is all anyone can do to create an ethically driven supply and demand chain – lots and lots of tiny steps in the right direction – millions of consecutive ethically driven decisions that help to shape the economy. And this can only be done if we co-operate.

Ethical Junction represents more than one thousand enterprises that have signed up to do just this – which is move in the same ethically guided direction. Choosing an Ethical Junction member as a supplier helps build the chain and consequently feeds into the development of core ethical principles held by thousands of people.

Ethical Junction (www.ethical-junction.org) is a not-for-profit community interest company that has established itself as the UK’s leading network of ethical businesses. Ethical Junction was established in 1999 and has an active network of over 1,100 companies and organisations that operate ethically and provide a range of goods and services which are environmentally friendly, sustainable, fairly traded and socially responsible.

No comments: