the age of ethical business

It is both a bad thing and a good thing that ‘ethical business’ is rare – and in my view, it is rare.

The rarity of ethical business, which I will define shortly, is a bad thing to the extent that we would all like businesses to behave in a manner we consider ‘ethical’. On the other hand, the rarity of ethical business is (at least for some) a good thing, because it creates an opportunity for those businesses to develop a powerful strategic competitive advantage.

The core proposition in this ‘IDEA’ is that business is well and truly in the AGE OF ALIGNMENT – when ethical standards are important and consumers expect an alignment between their values and those of businesses with which they spend money. Ethics by the way are defined here as moral values in action. Morals differentiate right and wrong. Values are core beliefs.

That said, there is increasing evidence to suggest that while ethical business might be a powerful strategic competitive advantage in the short term, it will become the ‘standard’ in the next five to ten years. Research suggests that in time ‘unethical business’ or unethical business practises will become unacceptable and with social media, fewer and fewer business will be able to get away with being unethical. Unethical business limits profitability and will do so increasingly.

WHAT IS AN ETHICAL BUSINESS?

In defining ‘ethical business,’ it is useful to consider three terms – morals, values, and ethics. Morals are – standards of behaviour or principles of right and wrong. Values are – principles or standards of behaviour; one’s judgement of what is important in life. Ethics are – moral principles that govern a person’s behaviour or the conducting of an activity. While not synonyms, at least in so far as this discussion is concerned, there is enough similarity in these terms’ meanings to consider them such, at least in so far as this discussion is concerned.

For this discussion, ‘ethical business’ describes an approach to businesses that reflects the consistent application of principles and standards of behaviour consistent with those of the broader community – and especially the stakeholders of the business.

This definition provides for the notion that ethics, morals and values are rarely absolute and can vary radically from community to community and do vary radically from society to society or country to country. The implication here is that if a business is to be an ethical business, it must allow for variations in ethical standards and expectations in the various communities within which it operates.

  1. Forget about corporate social responsibility. It is both expensive and incredible. 

Rio Tinto spends a fortune sponsoring community causes. They claim to support human rights. Read their website, and you might conclude that Rio Tinto places a high priority on corporate social responsibility – but after the Juukan Gorge destruction – would you consider Rio Tinto – an ‘ethical business’? I wouldn’t and don’t.

Corporate social responsibility (CSR) can be defined as incorporating environmental and social concerns into a company’s planning and operations. CSR is important, with research suggesting that:

  • 87% of consumers have a more positive image of businesses that support social or environmental issues.
  • 88% of consumers are more loyal to businesses that support social or environmental issues.
  • 92% of consumers are more likely to trust a company that supports social or environmental issues.

As this paper will demonstrate is most certainly merit in ‘incorporating environmental and social concerns into a company’s planning and operations.’ That said, I have two problems with CSR as we have seen it practised in business over recent years:

  • It is rarely addressed with sincerity but instead treated as a box that the business must tick to develop and maintain a positive corporate image.
  • It is much more limited in scope that ‘ethical business’ tends to focus on the external environment – to the exclusion of the all-important internal environment.

Moreover, in my experience, CSR is little more than jargon. The actions to achieve it are insufficient to ensure that a business is ethical or considered an ‘ethical business’.

An ethical business looks beyond CSR to create a business that embraces and behaves consistently with the highest ethical standards within their communities. 

  1. Stop publishing your core values on your website and in your annual report. 

According to their website, the core values of the commonwealth bank include – care, courage, and commitment. Do you believe CBA – care about our customers and each other – serve with humility and transparency; have the courage to step in, speak up and lead by example; are unwavering in their commitment – to do what’s right and work together to get things done. Even if you accept all of this – do you consider the CBA an ‘ethical business.’ I sure don’t.

Many businesses invest in a structured process to develop a set of core or corporate values and then publish them on their website and in their annual report. Some even erect posters all around their workplaces, informing their staff and customers of their core values – as if this somehow brings them to life or impacts on interactions with customers and other stakeholders.

It is well and good to have a set of core values, but they are of little if any value if:

  • The management and staff don’t live them consistently and reflect them in every aspect of their behaviour and in every interaction with a stakeholder.
  • The business is still not seen as genuinely ethical in its business practises – something consumers and other stakeholders, value more than a list of values.

Further to this, if core values are lived consistently by all managers and staff, and the business behaves ethically, both internally and externally, there will be no need to publish the core values. They will be self-evident.

Instead of publishing a list of core values, define what ‘ethical business’ means for your business in your communities and consistently reflect the key characteristics.

  1. Defining your WHY and your JUST CAUSE, is never enough.

While I am not a fan of Simon Sinek, I endorse wholeheartedly the importance he places on a business developing a WHY and a JUST CAUSE. In his book ‘Start with Why’, Sinek highlights the importance of a business having a WHY.’ In his book ‘The Infinite Game’, Sinek extols the virtues of a JUST CAUSE – working for something bigger than ourselves and certainly bigger than profits. In branding terms, these might be considered references to a business’s vision and mission.

There is no doubt that in 2021, a business’s long-term health is assisted by having an engaging and inspiring WHY and JUST CAUSE. In his book The Infinite Game’, Sinek highlights the example of CVS Caremark, one of the three major pharmacy chains in the United States, its JUST CAUSE to ‘Helping people on their path to better health’ and their decision in line with this just cause – to be the first of the big three pharmacy groups to stop selling tobacco products. The other two continue to sell tobacco. He points out that despite a short-term fall in its share price – CVS benefited in the medium term with booming sales and a booming share price.

This and other examples highlighted in SINEK’s book point to:

  • The value of a JUST CAUSE in boosting the performance, profitability and share price of a business.
  • The fact that having a JUST CAUSE not enough. It is also important to have the courage to make the JUST CAUSE real.

Making a JUST CAUSE real involves making the hard decisions to do what is necessary to make the JUST CAUSE real, sincere, and clearly evident. While CVS was roundly criticized by investment houses for its decision and thought foolhardy by its competitors – in the medium term, it behaved like an ‘ethical business’ by having a purpose that is bigger than money and the courage to make potentially detrimental decisions to support that purpose.

While it is beneficial to have a WHY and a JUST CAUSE, the business cannot be considered an ‘ethical business’ until it makes the hard decision to deliver on its JUST CAUSE.

  1. Stop talking about sustainability.

Coal miner Centennial, on its website, articulates its mission as follows – ‘To operate and grow a sustainable mining business, delivering value to our customers, our shareholder and at the same time exceeding the expectations of our stakeholders.’

Firstly, do you believe Centennial are committed to ‘sustainability’ and secondly, what do they mean by ‘sustainable mining business’? Is a sustainable mining business that cares about sustainability or wants to sustain its own profitability? Either way, do you consider a Centennial ethical? I am not offering a judgement but, given it is invested in coal in 2020, I suspect many people would not.

I have five concerns about the use of the term ‘sustainable’ in defining the mission or ethical standards of a business:

  • Sustainability is perhaps the most overused term in establishing corporate social responsibility credentials in 2021.
  • No two people I know can agree on a definition of sustainability – recognizing the range of ways in which the work is used.
  • Many businesses that claim to be sustainable simply focus on their financial sustainability – as I suspect Centennial is.
  • Few firms I have looked at display a sincere commitment to the requirements for developing a society and way of life that is sustainable – which is undoubtedly the end goal.
  • Committing to sustainability might involve sustainability at all costs and, as such, may not be an indicator of an ‘ethical business.’

It is surely ethical to work towards developing a society and way of life that is sustainable. Still, I suspect few businesses see this as their role, and even fewer do it.

Sustainability can be a crucial component of ‘ethical business’, but it must involve more than just the business’s sustainability, and it must be only one part of a broader commitment to ethics.

  1. Aligning your internal practises with higher ethical standards.

Despite low margins and a highly competitive travel market in the United States, in 2017, American Airlines gave flight attendants a pay rise of 5% and pilots a pay rise of 8% despite other airline offering no increases at all. Wall Street analysts and the industry considered this madness, and the companies share price was marked down accordingly (9% in 24 hours). But in less than two weeks, the share price of American Airlines had not only recovered, but it was up 20%.

The CEO of American Airlines took the ‘ethical business’ view that well paid and happier staff would deliver a better product, which would attract and retain more customers. He also took the view that happier, well-paid staff would be attracted to, retained by and would work harder for American Airlines.

This case suggests two points to be explored further in this article:

  • Ethical business is good business – in that, it can drive staff performance, customer satisfaction and positive investor sentiment.
  • Ethical business practice starts within the business. Indeed, an ethical business will not exist until ethical practices are lived internally.

Research has demonstrated time and again that ethical businesses treat their staff with the same ethical standards they treat their investors, financiers, and customers. 

So, what is an ‘ethical business’?

An ethical business endeavours to ‘live’ internally and externally – across all aspects of the business and without exception – ethical standards that exceed the communities’ expectations in which they operate. Such businesses look beyond trite CSR documented ‘core values’ and ‘sustainability’ to develop a purpose higher than money, embracing a commitment to making the decisions necessary to live their ethical standards day in and day out.

Even the most ethical business will fail to live up to expectations from time to time – but when this occurs, they will ‘fess up and make the improvements necessary to get back on track asap.

Ethical businesses are committed to long term performance, willing to ride the short-term bumps and, in doing so – leverage the value that comes from such. For proof of this – one of the world’s largest investors – Warren Buffet, despite panning airlines as an investment category, is now one of the largest shareholders in American Airlines.

WHY BOTHER WITH ETHICS

A great deal has been said and written about the importance of ethics in business. Less, however, has been said and written about why, in commercial terms, ethical practice is central to most businesses’ long-term profitability in the 21st century. There are most certainly good moral reasons why ethics in business are important. There are also excellent commercial reasons, and the importance of those commercial reasons will only increase in the years ahead.

  1. Beware the Friedman – Sinek false dichotomy.

In his recent book, The Infinite Game, self-appointed guru Simon Sinek is critical of Milton Friedman’s view, expressed in the 1970s that – the sole purpose is to generate profit for shareholders. Characterising this as a ‘finite’ and therefore limiting view of business, Sinek suggests that businesses that take a longer-term perspective with an ‘infinite mindset’ will generate superior returns to shareholders over time. While I appreciate Sinek’s point, he is creating a false dichotomy here – albeit it one that Friedman would also have created.

Indeed, Friedman did say – “The difficulty of exercising ‘social responsibility’ illustrates, of course, the great virtue of private competitive enterprise — it forces people to be responsible for their own actions and makes it difficult for them to ‘exploit’ other people for either selfish or unselfish purposes. They can do good — but only at their own expense.” Certainly, Friedman did express the view that companies that adopt “responsible” attitudes would face more binding constraints than companies that did not, rendering them less competitive.

Increasingly, however, it is becoming apparent that ethical business practises and a sincere commitment to corporate social responsibility is a pathway to maximising the returns to shareholders – especially over the medium term. Consumers increasingly want to purchase from businesses they consider to be good corporate citizens and are more likely to pay a premium to do so. Research has found that 66% of consumers in general and 73% of millennials are prepared to pay a premium for what they believe to be a ‘sustainable’ product. This product harms the environment as little as possible.

That is why Google used the motto – “don’t do evil’ and why their parent company Alphabet has adopted the motto – ‘do the right think’. It is also why the book by Roy Spence – ‘It’s not what you sell. It is what you stand for,’ was a best seller.

Increasingly, consumers distinguish between businesses they consider ethical and those they consider less than ethical – choosing to buy from the former.

  1. Align your ethics with those of your primary target audience. 

The book by Roy Spence – ‘It’s not what you sell. It is what you stand for‘ – highlights just how important ethics, as reflected in the values of a business, are to consumers. Spence points to the increasing importance of aligning their ethics or values with those of their customers if profits are to be maximised. This view is highlighted in research finding as follows:

  • 86% of consumers want businesses to stand for something.
  • 66% of consumers would spend more on a sustainable brand.
  • 81% of millennialswant a company to make public commitments to charitable causes and global citizenship.

Values and ethics matter and influence the shopping behaviour of most shoppers, and even more so among millennials – the fastest-growing consumer segment on the planet. The fact that millennials are so concerned about ethics and values suggests that the importance of both will only increase in the years ahead. There is an increasing trend towards consumers expecting an alignment of their values and those of the businesses they buy from. Research suggests that:

  • 71% of consumers prefer buying from companies aligned with their values.

Further, the importance of aligning values highlights that it is the consumer that determines what is ethical and what is not. Ethics and values are relative, and it is the consumer’s ethics and values that ultimately matter most.

Aligning a business’s values with those of its primary target audience is much more than feel-good – it is central to maximising profitability. 

  1. Align your ethics with those of your staff and potential staff.

Like so many other guru’s Jim Collins, in his book ‘Good to Great‘ highlights the direct relationship between the people on the bus’ or the people a business employs and that business’s performance. Steve Jobs often highlighted the importance of hiring the best people – people’ smarter than you’ and letting them contribute to the extent of their capabilities. Many studies have demonstrated the importance of employing the best people – while many others have highlighted the importance of ethics to the best people:

  • 64%of Millennials won’t take a job if the employer doesn’t have a strong CSR policy.
  • 83% of millennials are more loyal to a business that contributes to social and environmental issues.
  • 94%of employees say it is “critical” or “important” that the business they work for is ethical.
  • 82% of employees prefer to be paid less but work for a company with ethical business practices than receive higher pay at a company with questionable ethics.

The last of these findings are especially interesting, suggesting that within reason, many employees place a higher priority on ethics that money. Together these findings highlight the link between ethics and – attracting, retaining and getting the best out of the best people.

Aligning the values of a business with those of current and potential employees is central to attracting, retaining, and getting the best out of the best people. 

  1. Align your ethics with those of your target investor.

Many banks are now refusing to do business with coal miners. This is largely related to the view that coal mining is an industry with a limited lifespan and an associated fear by the banks that they may not get their money back. However, it is also evident that a growing number of banks and investment houses are choosing not to do businesses with coal miners because their customers and, indeed, their investors are concerned about climate change. This is part of a growing trend towards ethical standards being considered in investment policies. Consider:

  • Ethical investment funds in Europe now have some 500 billion Eurounder management.
  • Global sustainable investing now exceeds US$30 trillionand is growing at 34%/ annum.
  • 71% of CEOs believe it is their responsibility to ensure the organisation’s environmental, social and governance.
  • 55% of CEOs believe their organisations must look beyond purely financial growth if we are to achieve long-term, sustainable success.
  • In 2019 – Australian Ethical Superwas the fastest-growing super fund in Australia.

Ethical investing is a growing sector as an increasing number of investors listen to their stakeholders’ demands and see increasing returns in businesses considered ethical in their business practices. Research suggests that ethics will become an increasingly important criterion in investing.

Ethics are not just important in attracting customers and staff – they are also increasingly important in attracting investors. 

  1. Align the ethics of your business with your own ethics.

Having suggested that it is critical to align the values and ethics of your business with those of your customers, staff and potential staff, investors, and potential investors – it is perhaps a big call to suggest that they also need to align with your own ethics – but in an ideal world, they should. Indeed, research would indicate that there is a small likelihood that your business will achieve its potential – at least over the medium term, if the ethics it communicates and lives are not aligned with all four groups – including the owners.

As noted previously, with listed businesses, the ethics communicated and lived by the business will determine its attractiveness to ethical investors and, indeed, investors in general. Beyond investors, however, it is also important that the owners’ values and ethics (in the case of private businesses) and management, in the case of public businesses, align with those of the business.

There are few things more ‘naff’ than a business publishing its values in its annual report and on its website. Values, and indeed ethics more broadly do not exist because they can be listed; they exist because they are lived. Living a vale or ethical standards brings it to life – makes it real and ultimately makes it meaningful. If a value or ethical standard is alive and real – it should not be articulated. It should be self-evident from the behaviour of staff – including the management and owners of the business.

For staff to live the values and ethics, the owners and managers must live the brand, and for the managers and owners to live the brand – they must believe in those values and ethics. In this regard aligning the values of the owners with those of the business is essential. It is also essential if the owners are going to draw from the business the job satisfaction required to put in the time, energy and passion needed to maximise the performance of any business.

As Steve Jobs said – ‘The only way to do great work is to love what you do’ – and you cannot love what you do if it does not align with your ethical standards.

Ethical standards and the values that flow from them are important for your customers and potential customers, staff and potential staff, investors, and potential investors and – you!

Ethics are increasingly important to attract and retain customers; maximise margins; attract, retain, and get the best out of the best people; attract investors and maximise investment, and keep you, the business owner, motivated and performing at your best. Ethical standards and the values that flow from them are critical to business performance and will become increasingly so. Even Milton Friedman would struggle in 2021 to deny the importance of ethics and, indeed, corporate social responsibility.

REQUIREMENTS OF AN ETHICAL BRAND

  1. Stop using workshops to identify values.

Have you ever sat down twelve months later and objectively assessed the outcomes of last year’s strategic planning workshop? Unfortunately, too few people have. If they had, they might not schedule this year’s workshop – recognising that it would be a waste of time – or at best an inefficient team-building exercise. In my not inconsiderable experience, while strategic planning sessions can deliver productive outcomes – they rarely do.

One of the most misguided exercises in a strategic planning workshop involves the development of core values. Core values have been defined as – ‘principles or beliefs that a person or organisation views as being of central importance.’ Core values lie at the heart of every great brand. They identify what an organisation stands for – fundamental to its brand. Optimum core values have several critical characteristics – one of which is – alignment. Alignment is all about – ensuring that an organisation’s values are consistent with the expectations of its target audiences.

Consider:

  • 87%of customers buy from organisations that share their cause.
  • 71%of consumers prefer buying from companies aligned with their values.

These research findings highlight just how important it is that an organisation’s values align with those of its target audiences. If alignment is to be achieved, it is essential to:

  • Identify the values that are important to the target audience.
  • Identify the values that are important t the organisation.
  • Identify the common ground and the points of potential alignment.

This suggests that values need to be identified, not in a strategic planning workshop, but through a collaborative process involving representatives of the business and the audience. At the very least, there is a requirement for listening to the expectations of the target audiences.

  1. Stop using advertising to create a brand.

All advertising and, indeed, all commercial communication should reflect the brand of the organisation communicating. Inconsistent messaging will and often does, inhibit the branding process – creating confusion within target audiences. That said – advertising is an inefficient and, very often, ineffective way of creating a brand. For more than 100 years, – banks have been using advertising to build a trusted brand. Question – do you trust banks? I suspect not.

Advertising can communicate a brand, but it cannot create a brand. Behaviour is the only thing that can create a brand. For most organisations – their brand becomes real when there is alignment between that brand and its culture. Such organisations are authentic in that their people’s behaviour reflects the elements of their brand most of the time – if not all of the time. Few brands have been created without a culture that brings the brand to life. Few great brands have been created without authenticity – the organisation being what it says it is.

Consider:

  • 86%of consumers say that authenticity is a key factor in determining brand support.
  • 81% of consumers say they need to be able to trust a brand before buying.

Given that authenticity (and the credibility it engenders) creates trust, these findings highlight the importance of authenticity – ensuring that the reality (as determined by the culture) is in line with the perception (as determined by the brand.

Brands should be defined by marketing experts working with consumers. Brands should be created by human resources experts working with the staff of the organisation. 

  1. Stop using advertising agencies to create brands.

There is a chance that your advertising agency can help you define the optimal brand. To be able to do so, however, advertising agencies need to adopt an approach that involves getting very close to the target audience and leveraging a deep understanding of the target audience and the organisation – to define the common ground in terms of audience expectations (and aspirations) and organisational capabilities (and points of difference. Few agencies adopt such a process – viewing brand definition as a creative rather than an analytical process.

What very few, if any, advertising agencies can do is create a brand. Creating a brand requires first creating a culture within the organisation that can bring the brand to life. A brand will rarely be more than the culture and behaviour of staff (as determined by the culture) will create the brand. Brands are not real until they are lived – and as such – until the elements of the brand are reflected in everything the organisation does. Consider who has a better brand:

  • Myer, which advertises its brand, but rarely if ever, delivers instore….. or
  • Ikea which also advertises its brand and almost always delivers instore.

Ikea living its brand (as reflected in the design, pricing, service, displays, etc) brings the brand to life. Myer saying one thing and delivering another simply damages its reputation.

It is not enough to define a brand. It must be lived, and that takes time. That time is largely consumed in stage two of the process:

  • Define – establishing the aspiration.
  • Create – establishing the culture.
  • Communicate – spreading the message.

It takes time to create the culture that will bring the brand to life. A brand definition begins as an aspiration, and it is the culture that brings it to life – this enabling communication that is authentic and credible.

It takes perhaps a year or more to create the culture that will bring a brand to life. 

  1. Don’t greenwash. It is worse than doing nothing at all.

I would argue that a significant proportion of corporate Australia’s communication regarding its contribution to mitigating climate change and encouraging sustainable practices is little more than greenwashing. Talking about sustainability in marketing is in 2021 ubiquitous, while truly sustainable behaviour is much less common. Investopedia defines greenwashing as – ‘the process of conveying a false impression or providing misleading information about how a company’s products are more environmentally sound’. It cites as examples – businesses involved in greenwashing behaviour might claim that their products are from recycled materials or have energy-saving benefits.

The importance of environmental issues is illustrated by the following:

  • 66%of consumers would spend more on a sustainable brand.
  • 64%of consumers will boycott a brand solely on social or political grounds.

Numbers like these, together with the costs associated with adopting more sustainable practices, have unfortunately led many businesses to fain their environmental credentials. While greenwashing is becoming more common, it is also becoming more dangerous and potentially damaging to brands. One authority recently noted – ‘Vague, unsubstantiated, misleading, confusing, false or deceptive claims disadvantage everyone’. They create distrust and reduce customer confidence in legitimate environmental benefits, disadvantage ethical traders, and promote the use of toxic and harmful substances.’ This is a significant issue given the importance of trust in branding.

A major study of greenwashing and consumer attitudes towards it found that – ‘when greenwashing is identified in the product, it loses the aspects of loyalty, satisfaction and benefits, and becoming a product that causes confusion. Further, consumer attitudes and beliefs show that they are guided by the aspects of perceived loyalty, satisfaction and benefits and that the perceived risk aspect is practically ignored.’

Either be environmentally conscious or don’t be. But whatever you do – avoid greenwashing as it will damage your brand more than claiming green credentials you don’t have. Sincerity is an essential element of branding.  

  1. Increase revenue through consistent messaging.

Research suggests that the consistent presentation of a brand can increase revenue by 33%. There is a body of evidence that indicates that inconsistent branding can also embarrass employees and lower morale. Just as the consistent presentation of a brand (in all communication and all behaviour) can boost revenue and enhance performance, so the inconsistent communication of a brand can damage performance. Research suggests that the consistent communication and demonstration of a brand can:

  • Reduce costs.
  • Increase income.
  • Reduce risk.

Brand consistency involves the consistent:

  • Use of on-brand messaging – with all elements of all communication reinforcing the brand.
  • Display of on-brand behaviour – with all behaviour reflecting the brand.

It most certainly involves repetition and the reinforcement and increased recall that comes from repetition – increasing the return on investment in communication. It also involves eliminating all inconsistencies that inevitably contribute to confusion and a lack of certainty regarding what a brand stands for – this facilitating trust.

Great brands like Apple are absolutely committed to and obsessed with consistency. Alas, most mid-tier and smaller brands place far to low a priority on consistency and pay the price accordingly. This is especially important if you are trying to create an ethical brand. The display of behaviour inconsistent with the values of the business can be especially damaging.

As Warren Buffet noted – ‘It takes 20 years to build a reputation and 5 minutes to ruin it ….’

To save money and increase income, commit to absolute consistency in communicating the core messages and demonstrating the core behaviours you want associated with your brand.

 

CREATING AN ETHICAL BRAND 

  1. Identify the ethical standards your audiences will respond to.

Ethical standards are increasingly important to consumers. Some 71% of consumers prefer buying from companies aligned with their values. Increasingly consumers are becoming aware of their power and capacity to influence the behaviour of brands. Indeed, 71% of young consumers surveyed by Accenture believe that refusing to buy from brands or criticising them on social media can make a difference in how companies act.

In addition to a link between ethical standards and profitability, these findings suggest that the optimal ethical standards of a business will reflect those of the target audiences being addressed. The ethical standards of greatest importance may vary by audience (including by generation), on the basis, of the industry involved and from time to time. Research suggests that ethical standards are more important to millennials than older consumers and that topical issues like climate change and sustainability and top of mind in 2021.

Research suggests that in 2021 consumers are ethically aware. In 2021, ethical issues of greatest concern to consumers include:

  • Privacy and confidentiality.
  • Buy local and food miles.
  • Meat consumption.
  • Carbon/climate change.
  • Waste, recycling, and sustainability.
  • Equity and equality.
  • Trust and certainty.
  • Automation and Machine learning
  • Poverty and homelessness.
  • Transparency and communication.

The starting point in terms of developing an ethical brand is always establishing what is important to the target audiences and the business and identifying the common ground.

  1. Create an ethical culture that can deliver an ethical brand.

Articulating a list of ethical standards is well and good. It can be an important starting point in developing a business viewed by the target audience as ethical. It is not, however, enough. For a business to be considered to have high ethical standards, it needs to consistently display high ethical standards by way of staff behaviour and its conduct and communication. This, in turn, involves establishing an ethical culture – a culture that ensures all staff behave ethically.

An ethical culture has been defined as one with a – ‘set of experiences, assumptions, and expectations of managers and employees about how the organisation prevents them from behaving unethically and encourages them to behave ethically.’

Creating an ethical culture involves:

  • Employing staff who value ethics and have values consistent with consumer expectations.
  • Ensuring staff understand the ethical behaviours and standards required of them.
  • Providing the training necessary to ensure staff have the skills to meet ethical standards.
  • Directors and senior managers consistently articulating and displaying high ethical standards.
  • Visibly recognise and reward ethical behaviour and standards.
  • Provide any protection staff might need to enable them to highlight unethical behaviour.
  • Ongoing monitoring of ethical standards and fine-tuning strategies accordingly.

It is impossible to create an ethical brand without establishing an ethical culture that can ensure staff deliver the ethical brand. This is a human resources issue, not a marketing issue.

  1. Deliver ethically without deflection or deceit. 

I don’t know about you, and in truth – I don’t know – but I find it hard to believe that the Prime Minister was not aware of accusations of rape and sexual assault of staff working for his ministers. I also find it hard to believe that 711 was unaware that the team in many of its stores was being underpaid or that staff within Rio Tinto did not facilitate the destruction of the Juukan Gorge caves, knowing full well it was unethical.

In each of these cases – if people’s behaviour within the organisations was unethical – it is shameful and has the potential to damage the brands. If these behaviours are unethical and occurred in the full knowledge of those responsible – it is even worse – and will be seen as such by the target audiences. The one thing worse than unethical behaviour is the attempted cover-up of unethical behaviour. In this regard, we can all reflect in those members of the catholic clergy who actively covered up child abuse – such as occurred with Cardinal Bernard Law in Boston. The cover-up is viewed by many as being as bad as the crimes covered up – and potentially more dangerous.

Consider:

  • 81%of consumers say they need to be able to trust a brand before buying.
  • 66% of consumers think that transparency is one of the most important qualities of a brand.

It is important to consumers that they trust a brand – and attempting to cover up or deny unethical behaviour does not inspire trust. It is important to consumers that a brand is transparent – and attempting to cover up or deny unethical behaviour is not being transparent. In other words – if a business behaves unethically – it is generally better to be upfront, admit the mistake and highlight the action to be taken to ensure no recurrence.

It is certainly more complicated in cases where it might be less than believable – but none the less the case – that a business did not behave knowingly unethically. This may well be the case in the cases listed in the first paragraph of this blog. In such cases – a strategy is needed to ensure the truth is successfully communicated. I remain sceptical about these claims.

Being honest and transparent is a big part of having an ethical brand. 

  1. Communicate behaviour, sincerely and with humility. 

Nobody likes bragging, and telling the world how ethically your business behaves can be viewed as bragging. There is also the potential for bragging being seen as a sign that the ethical behaviour communicated is skin deep. To create a genuinely ethical brand that target audiences actively embrace – it is important to communicate with sincerity and humility. It is also useful to remember that listing the purpose, mission and values of the business on a website or in the annual report does not make them credible or believed.

The effective communication of an ethical brand involves putting demonstration ahead of communication. It involves replacing – telling the audience how the business is with – demonstrating how ethical the business behaves. The starting point for an ethical brand’s sincere and humble communication is always through the staff’s day-to-day behaviour. From the most senior member of the board down to the most junior staff members – the behaviour should consistently demonstrate the business’s ethical standards – and where it does not – immediate steps need to be taken to admit and rectify the deviation. Ideally, ethical standards will be demonstrated by way of:

  • Delivering the value promised to customers.
  • Products delivering precisely what they claim to deliver.
  • Transparent and truthful approach to marketing.
  • An absolute commitment to customer service.
  • Management consistently delivering as promised.
  • Demonstrating ethical standards in personal behaviour.
  • Products delivering precisely what they claim to deliver.

In terms of corporate social responsibility, communicating the commitment of the business without bragging or boasting might involve:

  • Enabling the organisations supported to promote your involvement.
  • Actively advocating for causes the organisation supports.
  • Engaging experts to provide constructive commentary.
  • Promoting the events of supported causes on social media.
  • Endorsing the initiatives and activities or organisations supported.
  • Congratulating supported organisations or causes on their successes.

A high-profile example of this has been Qantas p where CEO Alan Joyce has been very outspoken on a range of subjects – advocating for the legalisation of gay marriage, the mitigation of climate change and other topical issues. Banks withdrawing from the funding of coal mining is another example.

It is important to ensure target audiences understand that a business is ethical, but ideally, communicating this should be through behaviour and without boasting or bragging.

  1. Act now to establish ethics as a competitive advantage. 

Many, if not most businesses, claim to be ethical. Indeed, few would admit being unethical. That said. Few businesses have successfully positioned themselves as an ‘ethical business,’ with an ‘ethical culture’ and a track record of behaving ethically. Characteristics of an ‘ethical business’ might include:

  • A brand definition with strong values and a code of conduct.
  • A leadership committed to and outspoken about ethics – leading by example.
  • Documented ethical policies (relating to issues like equality and diversity, for example).
  • Ongoing ethics training and ethical governance.
  • A track record of getting involved in social and environmental issues.
  • Documented processes for ensuring ethical behaviour.
  • A long term ‘infinite’ perspective on business.

This orientation to ethics is very often reflected in:

  • A loyal and high performing workforce.
  • A loyal and high spending client base.
  • Strong media and community support.

Given the increasing importance of ethics in business and the paucity of businesses that have successfully pursued the development of an ethical culture and an ethical business – there is the opportunity for businesses to adopt ethics as a point of difference and potentially a strategic competitive advantage.

Consider establishing ethics as a strategic competitive advantage.

ETHICS IN 2021

  1. Consider context before defining core values.

I would argue that the sector least qualified to advise what constitutes a truly ethical business what ethics such a business should advocate is religion. It would seem that many people agree with me. A recent study found that ministers of religion no longer rank in the top 10 professions in terms of trust. One of the erroneous notions perpetrated by many religions is that ethical or values are absolute – when, in fact, values are almost always relative.

In ‘western’ nations, a high value is placed on individualism, while many Asian cultures discourage individuality instead of prioritising the collective. In Islamic cultures, a business might be viewed as more ethical if it actively aligns itself with the Muslim faith. In Western countries, aligning a business with any faith is fraught with danger. There are few values or ethical standards that are viewed in the same way and with the same priority across the world.

This makes it important to take context into account when determining the core values of a business, especially if the intention is to position it as an ethical business. What is considered ethical in one country may not be considered ethical in another. What is considered ethical within one group in the community may not be considered ethical in another. This highlights the importance of listening to the primary target audience and understanding what it considers ethical.

Recognise that values and ethics are relative, and the optimal values will be set with due consideration of the context.

  1. Embrace the evolution of ethical standards. 

While there were complaints from some conservative commentators, when the CEO of Qantas, Alan Joyce, made media statements supporting same-sex marriage, the majority of the community supported his right to do so. Indeed, some 68% of Australians subsequently voted in favour of legalising same-sex marriage – something that would have been unthinkable 20 years prior and remains unthinkable elsewhere in the world – including some states in the United States.

The lack of community decent for the comments made by Joyce, and the view that same-sex marriage was considered ethical (and indeed a cause worth fighting for) in Australia in 2017, highlights two things:

  • Ethical standards are not uniform across the planet.
  • Ethical standards change or evolve over time.

The first of these points is discussed in an earlier section of this blog. On the second point, same-sex marriage, while supported by two-thirds of Australian voters in 2017, would have received very little support indeed in homophobic Australia of the 1970s, for example. Values embraced by the community in one era may not be embraced in another. Australia is a great deal more ‘politically- correct ‘in 2021 – and embracing values like the federal government’s ‘bonk ban’ would not have been as readily accepted 30 years ago. Now – some view the bonk bad as a minimum standard.

Recognise that values and ethical standards change over time. What is important today may not be considered important tomorrow.

 

 

  1. Take a stand on a big issue to establish your credentials.

When Alan Joyce, the CEO of Qantas, voiced his support, and by implication the support of Qantas, for same-sex marriage, most of the community an Australia at least respected his view and his right to express it. More recent comments by Mr Joyce and various other business about climate change have attracted more criticism while enjoying most Australians’ support. While 79% of Australians are concerned about climate change – there is also an increasingly prevalent view that business should take a stand and support significant social or environmental issues.

This is perhaps why research has found that 86% of consumers want businesses to stand for something. There is a growing view that businesses should take a stand on significant economic, social and environmental issues. This is perhaps why:

  • The Business Council of Australia has felt comfortable advocating for an increase in Job Seeker.
  • Major corporations like BHP and Rio Tinto have actively called highlighted the importance of working towards zero emissions by 2050.

There is perhaps a sound economic rationale for increasing Job Seeker and reducing emissions. Still, it is also apparent that businesses see it as good branding to take a stand on these issues. It is hard to see an economic angle for the support of same-sex marriage by Alan Joyce and Qantas – other than the potential of attracting more customers from the same-sex community and its supporters. Put simply – it is increasingly becoming good business for these businesses to take a stand on social and environmental issues.

Consider taking a stand on social and or environmental issues – because it is the right thing to do and good marketing. 

  1. Integrity is a stupid core value for any business.

I have been involved in many projects designed to help businesses establish their core values. Some have involved a sound customer-focused approach, while others had involved a less robust approach at the request of the client. Regardless of the approach, I would estimate that in 95% of cases, ‘ integrity’ was one of the first two or three, if not the first value identified. Read through business plans, annual reports and website ‘about us’ sections and you will notice two naff but common occurrences:

  • The values of the organisation are listed.
  • Integrity is one of the values.

There is no point in listing an organisations values or articulating the elements of its brand in any document – other than staff training documents. Being documented does not make a value real, and if it is not real, it has no point. Further, when a value is real – it will be evident and publishing it will be superfluous.

Integrity is arguably the worst value of them all. I say this for two reasons:

  • It is ubiquitous and lacking credibility.
  • Nobody knows what it means, and there are better terms.

When every second organisation lists integrity as a value – it loses its potency. If everybody says it and few deliver it – there is no credibility. Most banks say they have integrity. Do you believe them?

Few people seem to understand the real meaning of the word integrity. Indeed, there are many definitions. Very often, words like transparent and honest are more precise and more credible. They are certainly easier to demonstrate.

Be honest and transparent – but avoid integrity as a value. 

  1. Be prepared to defend your ethical positioning. 

While the support for same-sex marriage expressed by Alan Joyce, the CEO of Qantas, had broad community support, it was criticised by conservative members of the government and representatives of various religions. While the support of multiple businesses for action on climate changes was supported by much of the community, elements of the government were urging them to stay ‘out of politics.’ Whenever a business takes a moral or ethical stand, there is a chance they will be attacked.

In such cases, such businesses are best served by defending their position. In supporting their position, such businesses also reinforce their ethical stance and their willingness to fight for it within target audiences.

No matter how ethical a business and no matter how ethics focused on a business’s culture, there will inevitably be slip-ups. Some will one day do the wrong thing, say the wrong thing, or generally fail to live up to the ethical positioning adopted expectations. Slip-ups of this kind have the potential to destroy the ethical positioning of the business. However, they also have the potential to enhance the ethical positioning of the business.

The outcome of a slip up depends entirely on how it is handled. If the business tries to paper over the matter, damage will follow. If, on the other hand, the business admits the slip-up, is totally transparent about the circumstances and takes decisive action, the business’s image can be enhanced. Everyone makes mistakes, and those who admit them – can be forgiven – if not rewarded.

It is not enough to establish an ethical positioning. That positioning must be defended when it is criticised by external players or damaged by internal players.

ETHICAL MARKETING

There are those among us who would argue that branding, marketing, and commercial communication are almost by definition – unethical. While I would argue that branding, marketing, and communication can be unethical – and often are unethical – they need not be so. It may well be unethical to promote fast food to children, alcohol to teenagers and tobacco to anyone – but marketing need not do any of these things. While I would agree that it is unethical to dream up a product and then use consumer insights to create a demand that promotes un-necessary consumerism, branding, marketing, and communication need not and should not do any of these things. Branding, marketing, and communication can – and should be entirely ethical.

  1. Avoid unethical branding – create a culture and deliver. 

There are few things I find more unethical in marketing or indeed in commerce more broadly than making promises or claims about a product that will not be delivered. I suspect I am not alone in this. Being promised the world and receiving an atlas is not only bad for consumers – it is bad business. It kills conversion rates, repeat purchasing and referrals. It can kill any perception that a business is ethical.

Nowhere have I found this experience more prevalent than with telecommunication providers. Whether it be Telstra, Optus, II Net or Vodaphone, I have tried them all and find them all over promise and under deliver. I have used them all and have never received service standards close to that promised. Their only saving grace is that they are as bad as each other.

Is there anything more central to ethical or indeed effective marketing than delivering as promised or claimed – not just in terms of the product perse – but also in terms of the service received when making the purchase? That is surely one of the real strengths of brands like Ikea and Apple. There almost always deliver as promised. That is why Apple is the world’s most valuable brand ($US264 billion). Consumers trust Apple, and that translates into consistent sales, and that, in turn, translates into brand value.

Research suggests that 81% of consumers need to trust a brand before purchasing it. Trusting a brand means expecting that when purchased, the product will do what it claims to do – always, or almost always. It also involves providing, as indeed Apple do, the standard of customer service promised. Research suggests that 73% of people consider the customer experience before trusting or developing a loyalty for a brand.

Creating a brand that delivers as promised and offering a customer experience as promised is central to marketing ethically and being seen to do so. Sadly – this is an area where SO MANY Australian businesses – like Myer (a once-great brand) – fall short. 

  1. Avoid unethical marketing – co-create a great product.

There are few things more unethical from a marketing perspective than creating the product you want to create (for whatever reason) and then designing a campaign to convince consumers that they want it – especially when they certainly don’t need it, didn’t want it before you started advertising and may not be able to afford it. This approach to business plays into the perception that business is all about maximising profit at any cost.

There are few sectors where this is more prevalent than fast food, where overweight people of all ages are convinced through clever and often misleading advertising, slick merchandising. The pumping of food smells into the atmosphere outside a store – to buy fake food that is not good for them (in ANY quantity) contains carbohydrates they don’t need and will hasten the decline in their health without giving them any real benefit. Worse than this are promoting these fake foods to children and promoting tobacco to anyone. Worse still – are business owners trying to rationalise such behaviour. None of this is ethical, and trying to rationalise it is self-serving.

This is not to suggest that marketing food is unethical. Some great Japanese restaurants in most cities sell low sugar, low fat, low carbohydrate, and high-quality food. It is most certainly not. It is not even to suggest that marketing fast prepared low-cost food is unethical. There are some very healthy burgers on the market. There is, in my view, nothing unethical about marketing high-quality salads – except, of course, when you have researched to find out how to attract customers in to buy the salads, knowing that your merchandising will ensure they buy the burger. Using consumer behaviour insights in this way reflects poorly on marketing and business.

Perhaps the most ethical marketing approach involves working with customers to co-create products that meet their needs and tastes while protecting their health and well-being. It is surely more ethical to market what the audience wants and needs, rather than convincing them and using consumer insights to cause them to buy what they don’t need; I would love to have the strength to avoid and really should not be purchasing. Many of these businesses are exploiting their customers’ weaknesses – slowly helping them to contract type 2 diabetes.

Which businesses do you consider more ethical – Apple or McDonalds, the local hamburger bar or Hungry Jacks? 

  1. Avoid unethical communication – be honest and transparent. APRIL 09

It would not surprise any reader to learn that 96% of people surveyed in one study do not trust advertising. Indeed, consumers are more inclined to believe social media comments than advertising. Indeed, one study found that 85% of consumers believe online reviews as much as they do the referrals of friends and relatives.

I would argue that this is partly related to the propensity for advertisers to be less than authentic and less than transparent. Research suggests that 86% of consumers consider authenticity in developing an attraction to a brand. Brands promising one thing in advertising and delivering a fraction of it in real life – is ubiquitous. It is almost an expectation – so much so that when a brand delivers on the advertising promises, it is memorable.

This is not to suggest that advertising perse is the problem. Research found that 45% of consumers believe advertising could positively contribute – raising awareness of good causes. Some 31% believe advertising can encourage people to make positive changes, and 30% believe advertising can contribute by promoting products or services that are good for the planet or society.

It is not advertising; that is the problem, but rather the lack of authenticity in advertising, or more accurately – the lack of honesty and transparency in most advertising. From a consumer’s perspective, there is nothing wrong (or unethical) with the promotion of a product – so long as the product is consistent with their values and the message in the advertising is honest and transparent.

Keep advertising – but advertising products your target audience wants, offer a clear competitive advantage and be authentic, honest, and transparent. STOP BULLSHITTING

 

Ethics are becoming increasingly important to consumers. Consumers want the ethical standards of brands to align with their own. Consumers are expecting marketers to behave more ethically. Consumers will reward businesses that genuinely align ethical standards with those of the audience.

There are no silver bullets in marketing. Ethics are not a silver bullet. In 2021 however, ethics might represent an opportunity for businesses wanting to establish a sustainable competitive advantage relevant to consumer expectations.

We are, however, in an AGE OF ALIGNMENT in which consumers expect business to behave ethically and will tend to spend with businesses that share their values and ethical standards.

Ethical standards are most certainly becoming important for all businesses. Research has conclusively demonstrated that consumers, staff and investors are attracted by businesses that stand for something. Ethical standards need to be reflected in all businesses’ values – and branding in 2021 and beyond.

 

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