Who are today’s ethical consumers?

Back in the good old days of 2000 the Co-operative Bank and the New Economic Foundation, Mori and the Future Foundation commissioned a journalist and marketer to investigate “Who are ethical consumers” They came up with the finding that they called the 30:3 syndrome, that 30% of consumers professed to care about a company’s policy and reputation but yet ethical goods made up only 3% of the market.

They quickly realised that ethical consumers, that is consumers predominantly driven by ethical considerations made up a very small part of consumers who to some decree are influenced by ethics in some of their purchasing decisions.

Ethical consumers, which the authors dubbed “Global watchdogs” in fact made up 5% of the population, they were predominantly middle class and middle aged, social and environmental issues far exceeded brand image, indeed they could be dubbed Anti-Logo. They were southern England based, centred on London and felt powerful as consumers.

A second small segment (6%) the authors dubbed, the ‘Brand generation’, for this young, Midland/Northern group ethical was secondary to brand but could augment the power of a brand.

‘Conscientious consumers’, the largest section of ethically motivated consumers (18%), were driven by value and quality with ethics as one of the quality variables. Based in the Midland and South, outside of London, they were relatively upmarket and predominantly conservative in outlook.

49% they classified at ‘do what I can’, an older group of home owners spread throughout the country who had a weak but still existent ethical motivation

Last but not least were the remaining 22% who ’look after my own’, predominantly poorer/unemployed, Northern or Scottish, people who felt completely powerless as consumers.

So what has changed in the six years that have passed since this report?

Firstly it is worth looking at the market. The Ethical Purchasing Index as it was then called valued the ethical market at £13.429 billion, with Food sales at £1.288 billion and cosmetics and toiletries at £341.5 million, and ethical finance at £7.772 billion. In 2005 ethical consumerism report, the renamed EPI, valued the market at £29.268 billion. Food had shot up to £5.406 billion, cosmetics and toiletries, now renamed personal products, were £1.315 billion and ethical finance at £11.552 billion. The ethical sector has surpassed the over the counter cigarette and alcohol sales in the UK.

The Green and Ethical Consumers Report from Mintel published in January 2007 showed that a great deal had changed in the profile demographics. It is difficult to directly compare the two surveys as there methodology is different but there are common threads.

The ethical resistance element, classified by Mintel as ‘too busy to care’ remained constant at about 20%. However the ‘Greener-than-thou’ segment had risen to 16%, with a further 24% identified as ‘keen to be green’ and are conscious of green and ethical issues. 23% they identified as ‘confused but willing’ .

It is undoubtedly easier to make ethical purchases on 2007 than it has ever been, since the pioneering of Fairtrade products by the Co-operative retailer in 1992 the large retailers not only stock Fairtrade and organic foods and products but also have develop own brand versions of them. Most cosmetic companies now actively avoid animal testing. On the ethical finance side the robust performance of the funds combined with good press coverage have attracted both a wider angle of individual investors as well as deepening their relationship with local and national government pension fund managers.

The growing consumer concern about health issues concerned with pesticides and fungicides, as well as the perceived worries about the health implications of GM crops has motivated consumers for different reasons than traditional environmental concerns.

The growth trends in organic and fair-trade products looks set to continue according to research company IGD with 50 and 100% growth respectively by 2010 predicted.

The growing interest in investing in “technologies of the future” will continue to fuel ethical investment, though new funds are emerging such as the Schroders Climate Change Fund which fall outside of the ethical sector.

The fashion industry is a potential huge growth area with many companies now looking to launch more ethically sourced and produced products for an more discerning consumer base.

The cosmetic industry is already well along the natural and organic product route, either through acquisition, L’Oreal of Body Shop, or repositioning in a sector which overall is stagnant.

Recent reports from TNS Worldpanel show that the growth in organic food is likely to slow down, this is caused not by a lack of demand but by bottle necks in supply. The report shows that organic food rose 9.3% in the year up to the 23rd March, a fine figure to be sure but long short of the 17% in the previous 12 months. Quoted in the Observer Patrick Holden head of the Soil Association said, 'I'm not normally apocalyptic, but the organic food industry is facing big problems that need to be sorted out as a matter of urgency.' Increasingly demand is being met by imports as the British farming industry slowly increases its organic output, organic meat production has been especially hard hit in its attempts to expand due to the shortage in organic animal feeds. The present debate on food miles, and the Soil Association consultation on air freight may add future pressure on those companies forced to look abroad for secure supply chains.
Another key issue as recently reported is the supply chain practices of the major retailers. Sainsbury’s has just de-listed both Prince of Wales organic carrots and Patrick Holden’s because they do not meet their rigorous standards after being subjected to the long distance haulage that their distribution systems demands.
Fairtrade on the other hand does not suffer the ethical qualms of the organic sector with regards to transport, for them the development benefits of Fairtrade and the low carbon emissions of the producers far out weigh the issue of long distance travel, even air freight. The majority of Fairtrade suppliers only sell a small part of their crop through the system with the majority being bought through more traditional buying means. There is a huge margin for growth here, both in sourcing more existing lines and widening the product range covered by Fairtrade certification.
Overall the ethical sector has been a huge success story in the last six years supply chain problems, while difficult in the short term, are a result of the sectors growth and will in the medium term lead to a growth in suppliers attracted to the sector. It is crucial that both certifying associations, retailers and government action continue to support high standards to maintain high consumer confidence rather than lower standards to meet short term supply problems.