Can a successful business be ethical?

The world is full of people who run businesses to the highest ethical standards - and fail. Many of these people look at successful small and large businesses and perceive an element of ruthlessness in business which they lack. They comfort themselves with the higher moral ground of their ethics, thinking that if their successful rival prosper then someone, somewhere must be suffering.

Were this to be the case then big successful businesses must surely create havoc amongst their suppliers, staff and customers. Do they merely pay lip service to their fancy ethical statements? After all Enron (apparently) had a 64 page "Code of Ethics".

The companies that throw themselves open to the most detailed examination are those that wear their ethics as the badge of their trade. Were I an oil / nuclear comany executive feeling a little heat of publicity then what better to get off the front page than to send out some investigators to dig some dirt on the squeaky clean?

Or why not simply buy into ethics? Who might I choose as a target? A company like Body Shop perhaps...

In April 2006 came the headline in The Independent "Body Shop's Popularity Plunges after L'Oreal Sale" "An index that tracks public perception of more than 1,000 consumer brands found that "satisfaction" with Body Shop had slumped by almost half".

The big ethical 'thing' with Body Shop is animal testing. None of its products or ingredients are tested by Body Shop or its suppliers on animals. Even though L'Oreal itself had stopped animal testing in 1989, it does admit that some of its suppliers test ingredients on animals......

Another trigger in this slump in Body Shop satisfaction was apparently that L'Oreal is owned to the tune of 26% by Nestle - corporate evil incarnate "voted the world's least responsible company in an internet poll". Anti Nestle campaigners (principally on the baby milk to third world issue) used this as another stick to hit Nestle with and Body Shop's reputation was a casualty.

(Incidentally, the internet poll is the UK's YouGov survey BrandIndex -possibly a nice guide to who the saints and sinners of the corporate world are perceived to be. However - its not measuring ethical performance - Chanel and Dior's position at the top of their relevant league is largely down to their product smelling somewhat better than Body Shop's. At least that's the perception).

But Body Shop is a separate entity to L'Oreal or Nestle. The better it does then the more money passes up the chain and the more the owners of the bigger businesses will notice that ethical branding and action actually pays. Hard headed people running these businesses will know better than to meddle with the ethical position of Body Shop and look to strengthen their own ethical positions. In today’s environment, that is a real possibility rather than just wishful thinking.

Body Shop are back near the top of all the tables in the BrandIndex survey. They will continue to be known as the company that is "Against Animal Testing". They were awarded 2006 Best Cruelty-free Cosmetics by PETA (People for the Ethical Treatments of Animals).In terms of fair trade sourcing they have "31 community trade suppliers in 24 countries" (see their Principle and Policies) and perhaps they could do better here because £5m (Body Shop's figure from July 2006) is spent on supplies from this programme against retail sales of £486m, and cost of those sales of £167m (source the 2006 Annual Report). What happens further down the supply chain in this area is more opaque than Adidas (say) because the emotional edge of ethics in the cosmetics industry is Animal Testing while in the clothing industry it's Child Labour. It's to Body Shop's credit here (and clever too) that they set the agenda for the whole cosmetics industry while for Adidas they were the victims. But Adidas are doing many things right and they top BrandIndex's sports industry's league.

Back to the question, can a successful business be ethical? Unquestionably yes - and more so today than ever previously it's becoming a requirement. Big corporations with dubious activities no doubt look for peripheral areas in which they can appear ethical but at least today ethics are there at the table.

Ethical brand profile - Adidas

Sparked by my last post, it seems a good idea to do a little bit of digging into the status of the brands that Pier 32 have access to so that our customers can make a better judgement on whether they fit in with their own ethical statements. Ethical behaviour towards humans and in terms of looking after our planet.

Adidas, who acquired Reebock recently, is the world's second biggest sports brand behind Nike. You'd expect them to be under the microscope and they know it. On their corporate website they have a section labelled sustainability "For the adidas Group, being a global leader in the sporting goods industry means improving working conditions in our suppliers’ factories and reducing our environmental impact as a business." with lots of information on all sorts of initiatives on the supply chain, human rights and the environment.

Leaving aside the case studies (we are always inclined to do this because of the ease of cherry picking when you have a mega budget) was is available is the "Supply Chain Code of Conduct" where they set out their standards and we we need to go to get to grips with their stated intentions on ethical purchasing.

"Outsourcing our production in no way absolves us of moral responsibility for the way our products are manufactured and the conditions they are produced under."

"Recognising this responsibility led us to create a set of guidelines for our suppliers that set minimum social, environmental and health and safety standards"

"Based on International Labour Organization conventions, the 'Workplace Standards' describe clear rules of conduct for issues such as the environment, safety in the workplace, child labour, and hours of work."

On the environment, adidas also look at their suppliers (95% of the environmental impact of adidas's operations is in the hands of suppliers) and have setting up supplier energy efficiency workshops. On VOC emissions "Our footwear suppliers have reduced VOC emissions from 140 grams/pair in 2000 to 19.3 grams/pair in 2006".

Globalisation impacts the environment through transport of goods not manufactured locally - adidas give the following statistics:

		Sea freight contributes 17.5 grams carbon dioxide CO2/km t
		Road freight by truck contributes 147 grams CO2/km t
		Airfreight contributes 903 grams CO2/km t.

adidas explain that the 2006 World Cup meant "time sensitive products had to be transported via air freight to meet customer requests" which implies at least that most products are transported by sea. Here's the backup data - http://www.adidas-group.com/en/sustainability/performance_data/environment.asp#freight

adidas are using carbon offsetting to lessen the impact of air travel by some of its people - but since this is the SEA team, involved in monitoring their sustainability targets etc it's just a drop in the ocean....

All in all, from my brief review adidas seem serious about what they are trying to do. And you'd expect nothing less. They will not be perfect by a long way but for a major multinational I expect what they are doing will be close to those setting the pace on ethical and environmental issues in clothing production.

Briefly digging for dirt, globalmarch.org disclose "Children in Pakistan were found stitching Adidas footballs, a major sponsor for the 2002 FIFA World Cup." Then it all get's all a bit murky and this article discloses "Adidas says Global March Against Child Labour photographed a counterfeit operation." The end result of all this was a major investment by FIFA in tracking abuses; and counterfeit operation or not, some good seems to have come out of this whole episode. My brief Google search on "adidas child labour" did not disclose any more recent episodes.

(As with all these brand profiles I'd be delighted for further information or help from readers).