The Price of ethics
Ethical goods are more expensive • There is a need to test the assumption that ethical goods are more expensive. • Price will always play a role in people’s purchasing decisions. • Competitive pricing is important for ethical products, especially as they account for a tiny amount of total sales. Only 5% of total food sales are products with some ethical or environmental claim
According to DEFRA • 30% of UK consumers say they are concerned about environmental issues, but evidence demonstrates that most fail to translate this into green purchases. “attitude-behaviour gap” or “values-action gap”
2008 Research from the USA • 44% of consumers willing to pay premium for green products. This suggests a gap exists but fails to identify whether ethical products are really more expensive.
Why? • Several academic studies conclude that ethical consumers are generally more affluent and have a relatively high income, education and social status. • Survey of 31,000 people in 21 European countries showed that those purchasing ethically came from higher social class while boycotting was done by all classes. “this could reflect higher costs of ethical branded products and inequalities in access to good quality product labelling.”
Other barriers • • • • • • • •
Brand strength Culture Demographic characteristics Habit Lack of information Lifestyles Personalities Trading off different ethical factors
Are greener goods more expensive? Research by Michael Pooler and Rob Harrison for www.ethicalconsumer.org • Electronic goods were mixed with cameras 32% more expensive and mobile phones 4.2% more expensive, while ethical TVs were 21% cheaper. • Household cleaning products were found to be three times more expensive. • Cosmetic brands were considerably more expensive apart from sunscreen which was 25% cheaper.
Other sectors • White goods were generally cheaper as well as better energy efficiency reducing the products life time costs further. • Green Electricity tariffs certainly carry a premium, on average £169.67 more per year. • Clothing, as in plain white T-shirts , ethical brands were around 149% more expensive than the lowest ranked brands.
Food Staples • A range of stores in Manchester including ASDA, a market stall, an ethical store and an organic box scheme were compared. • The ethical store was cheapest for organic fruit and veg (£4), while ASDA was just cheaper than the market stall on non organic (69p) • Basic staples were cheaper at ASDA On the whole ASDA were cheaper with the local store coming in a close second.
Overall • The more niche ethical goods are more expensive. • Where products are not branded as ethical, the goods are no more expensive. “When it comes to whether there’s a price premium for ethics in the mainstream brands the results are inconclusive.”
Recession • During 2008 in the midst of the recession, Fairtrade sales actually increased by some 43% in the UK. Sales of organic food rose by 1.7% to a little over £2bn over the same period. However, food prices rose 7% overall so volumes fell. • In 2009 Fairtrade sales continued to increase, by 15% to £3.4bn albeit a slowdown from the previous year’s astronomical growth. Over this period organic sales fell by 12.9% to £1.84bn.
Fairtrade 2010 • Hit £1.17bn of Fairtrade products in 2010. • 9.3m cups of tea and 3.1m bananas. Harriet Lamb, the foundations executive director said “sales could break £2bn next year if the momentum continues.” • Sainsbury’s, the worlds largest Fairtrade retailer hopes to increase sales to £500m by 2015. • The Co-op are increasing the number of Fairtrade product lines. Peter Marks, chief executive, said “We have seen a substantial increase in Fairtrade sales and that’s surprising I guess because in a recession you think people are more concerned about price, but we have found our customers in the Co-operative are more concerned with ethics.”