Last updated: February 2009
Dan Welch looks at some new evidence from market research which re-inforces our belief that the doom-sayers have got it wrong.
Banks appear to be collapsing faster than you can say ‘collateralised debt obligation’ and world wide economic depression is apparently only one ‘rescue package’ away. As we discussed in the last issue of Ethical Consumer, there have been a flurry of stories predicting the demise of the ethical market. The argument usually goes something like this – ‘ethical’ is a fad and a luxury and now that hard times are here we’ll forget this green nonsense and get back to good old-fashioned value for money. A turn around from double digit growth in the organic food market seemed to prove the point. In August the Guardian announced: “Shoppers lose their taste for organic food,” reporting that spending on organic food and drinks fell from a peak of nearly £100m a month, earlier this year, to £81m.(1)
One suspects a certain satisfaction in some quarters that the do-gooders have had their day. But is this decline in the organic food market the exception rather than the rule? One major survey of ethical shopping habits in 2006 found only 1 in 5 consumers said it was worth paying more for organics; however four out of five households were actually buying some organic produce.(2) This suggests that with the mainstreaming of staple organic produce, consumers no longer see organics as premium goods. And with food price inflation across the board perhaps this particular market stalling is no surprise.
In reality the market research paints a very different picture. Shoppers’ interest in ethical products has gone up despite the credit crunch. A study conducted in August 2008 found:
- 17% of shoppers said they bought more Fairtrade products than six months ago
- 22% of shoppers bought more products promising high animal welfare standards
- bought more local food in the last six months.
Whilst the majority of UK food shoppers are economising and bargain hunting, according to the report by international food and grocery expert IGD, they have also been more willing to buy ethically-focused foods where they see genuine value.
“With the surge in interest in the provenance and ethics of food which has occurred since the last major downturn, it seems that shoppers are scrutinising value, but they are not compromising their values,” according to the authors. “[Shoppers] are still investing in brands or ranges which reinforce their values at the right price and finding a way to get what they want without compromising standards.” (3)
And while ethical spending is becoming more mainstream, with the market growing by 15% a year on average since 2002, the majority of the spend is still made by the committed ethical consumers. This is the roughly 1 in 20 of the UK adult population that makes ethical purchases every week, and who are likely to have a deeper commitment to ethics than is easily affected by price.(4) Backing this up, a recent Canadian study found purchasers of Fairtrade products are much less price-responsive than those of non-Fairtrade products.(5) So contrary to the doom-mongers, ethical brands might be expected to ride out the recession better than others.
Pundits often make the uninformed assumption that the growth in the ethical market is purely driven by the fashions and disposable income of the middle class. It’s hardly an insight to say that the wealthy spend more money. In reality ethical spending has increased in all demographic groups. And at a global level, it is not consumers in the wealthiest countries that put the highest value on ethics. Research shows consumers in China, Brazil, Mexico and India are more prepared to pay a green premium than those in the US, UK or Germany.(6)
Effects of a crisis
There is no inevitability that an economic downturn will see companies ditching environmental and ethical concerns. In the last economic slowdown (1999-2001) the sustainability reporting by major companies accelerated, strongly suggesting the drivers of this corporate cultural shift are not narrowly economic.(5) And once companies have committed to ethical standards, back-tracking would do enormous damage to their brands.
Let’s leave the last word, improbably, to the Economist Magazine, traditionally champions of the free market and red-in-tooth-and-claw capitalism. When recession strikes, advertising budgets are usually the first to go – with predictable knock-on effects for publishers reliant on corporate advertising. Where does The Economist hope its advertising revenue will come from in the current downturn?
“The environment represents one of the few potential growth industries in the U.S. right now... The companies involved in the explosive green movement – dedicated to making the world more environmentally friendly and safe – are the logical saviors”.(7)
1 The Guardian, Friday August 29 2008
2 ‘Britain’s ethical shopper: Which way now?” The Nielsen Company 2007
3 “The ‘smart shopper’ emerges in response to credit crunch” IGD 14/10/08 full report at www.igd.com/adaptingtochange
4 Ethical Consumerism Report, Co-operative Group 2007
6 “Consumer perceptions on climate change and its potential impact on business” Havas Media, 2006
7 ‘How the Economist views Wall Street’s meltdown’ www.marketwatch.com 13/10/08