In July 2020, British fashion retailer Boohoo hit the headlines when a number of its suppliers in Leicester were accused of paying their factory workers far less than the minimum wage. In March 2021, US Customs and Border Protection started investigating these allegations. If it finds against Boohoo, the agency could impose an import ban.
Yet this long-running scandal seems not to have been detrimental to the business. Boohoo’s sales revenue increased by 41% year on year to £1.7bn in the 12 months to 28 February 2021, while its adjusted pre-tax profit rose by 37% to £174m.
More than 60% of younger consumers consider a company’s ethical values and authenticity before buying its products, according to research by Accenture. But it seems that one of the most high-profile ethical crises affecting a retailer in years hasn’t radically changed their purchasing habits.
This apparent disconnect between consumers’ ethical purchasing intentions and their actions is just as evident in relation to other brands. Amazon, for instance, is regularly criticised for its harsh HR practices and aggressive tax-avoidance measures, yet customers spent more than £272bn with the company last year. Volkswagen was found to have cheated diesel emission tests in 2015, but five years later the group achieved its highest market share ever (22.1%) in the UK.
What is going on here? Mike Beverland, professor of marketing at the University of Sussex, believes that several factors are at play. One of them is an “expectation-behaviour gap”, which helps to explain the apparent inconsistency between what people say in surveys and what they do in practice.
“If you ask someone: ‘Do you want that brand to be ethical?’ they will say ‘yes’. But, if they’re asked to rank what they consider important, social purpose tends to come quite low down on the list,” he says.
Choosing the cake
As Claire Heathcote, co-founder of sustainable fashion brand Loop Cashmere, says: “Sometimes people don’t have the financial ability or knowledge to make an ethical choice – if you’ve got only £15 in your purse, price will be your top priority. But sometimes you do know the right thing to do, yet you don’t always do it. If you’re offered an apple or a cake, for instance, you may still choose the cake.”
Dan Cullen-Shute, founder and CEO of advertising agency Creature, agrees. “The world tends to adopt binary views of good and bad, but people are fuzzy and contradictory. They rarely make entirely rational choices,” he says. “In the emotional ledger behind their decisions, if there are more ticks in the ‘it’s good for me’ box than in the ‘it’s bad for me’ box, consumers will find ways to rationalise their choices.”
Even post-millennials, who are generally cited as being more ethically focused than older people, are affected by this tendency.
If you ask someone: ‘Do you want that brand to be ethical?’ they will say ‘yes’. But, if they’re asked to rank what they consider important, social purpose tends to come quite low down on the list
“The media is full of statistics about how much young people care about the planet, but they’re generally less financially secure, which influences their spending habits,” Cullen-Shute says. “It doesn’t make them bad; it makes them human with context.”
Another key point, he stresses, is that a brand’s reputation is not driven solely by an internally defined “purpose”, although that may play a part. More important here is “promise”, which is less about what a business wants to achieve and more about what customers can expect to experience each time they interact with it.
“The reason we ‘do purpose’ is that it fits with our values and motivates our staff,” Cullen-Shute says. “But purpose needs to be tethered by promise to make it meaningful. If it has no bearing on your customers’ experiences, your brand at best loses credibility and at worst looks hypocritical.”
The importance of behaving ethically
If brands that trade on their ethical credentials were found to be acting unethically, that would cause them significantly more reputational damage than it might to firms such as Amazon, Beverland says. That’s because its brand promise centres on a completely different aspect of the business: getting goods to consumers quickly and cheaply.
Nonetheless, an ethical scandal is likely to have lasting ramifications for businesses of all types. The way a firm handles the situation at the time will have a strong bearing on its long-term prospects, according to Heathcote.
“If its leaders hold their hands up and say ‘we’ll learn’ and make changes that feel genuine, rather than being smoke and mirrors, long-standing customers in particular will give the business another chance,” she says.
Moreover, behaving ethically does carry some weight too, not least in terms of appealing to social media influencers and boosting the organisation’s employer brand.
In fact, Cullen-Shute believes that, as long as putting ethics at the core of a business remains a relative rarity, “there’s a strong argument for it to be a brand differentiator. It’s in the last six inches where it becomes powerful.”
He explains: “If you’re looking at two identical jumpers and one comes from an ethical supplier, most people will go for that one, even if it costs a couple of quid more. It becomes a tipping factor.”
In July 2020, British fashion retailer Boohoo hit the headlines when a number of its suppliers in Leicester were accused of paying their factory workers far less than the minimum wage. In March 2021, US Customs and Border Protection started investigating these allegations. If it finds against Boohoo, the agency could impose an import ban.
Yet this long-running scandal seems not to have been detrimental to the business. Boohoo’s sales revenue increased by 41% year on year to £1.7bn in the 12 months to 28 February 2021, while its adjusted pre-tax profit rose by 37% to £174m.
More than 60% of younger consumers consider a company’s ethical values and authenticity before buying its products, according to research by Accenture. But it seems that one of the most high-profile ethical crises affecting a retailer in years hasn’t radically changed their purchasing habits.
