CONSUMERS FOCUSING MORE ON COMPANY ETHICS DURING CURRENT ECONOMIC DOWNTURN

Businesses hoping to ride out the economic downturn by reducing customer service or ditching their environmental and social commitments may find themselves punished by consumers, according to new research by management consultancy Baringa. 

The company polled 6,028 consumers worldwide including 1,002 in the United Kingdom. It found that just under 4 in 5 (79%) UK respondents said that, in the context of the current economic downturn, they are more likely to purchase from companies they considered “kind”. 

Only 6% of UK respondents reported the downturn made them less likely to buy from a kind business because they would base purchasing decisions on price alone.

80% of UK respondents reported they would avoid buying from a company who had recently laid off large numbers of staff with 40% claiming they would do so even if this decision cost them more. Likewise 54% of UK respondents said they would accept higher costs to avoid firms who were known to have treated their staff poorly, and 53% would pay more to avoid firms who treated their suppliers badly.

Guy Dent (pictured above), a partner at Baringa, said: “The assumption is that when times get tough, ethical choices become a luxury and people make decisions based on price. But the increased awareness of unkind business practices might be changing this. As we head into a possible recession, we are seeing more people prepared to take a financial hit to choose kind firms, often in an act of solidarity.

The lesson for recession-hit companies is reputation and ethics should be weighed alongside traditional concerns such as cost. If you ditch your environmental and social commitments, lower your customer service standards, switch to unscrupulous suppliers, or cut staff in a manner that is plainly arbitrary and unfair, you risk improving your balance sheet today only to damage your sales tomorrow.”

If consumer behaviours towards unkind firms have shifted, it may be due to the emergence of a generation of consumers entering the economy since the credit crunch of 2008. Of the cohort of economically-active “Gen Z” (people aged between 16 and 24) consumers in the UK, over 3 in 5 (62%) have refused to buy a product or service in the last two years because they felt a company was unkind or did not display kind qualities, whereas just over 2 in 5 (42%) of those aged 45-54 said the same.

Of all UK consumers surveyed, 50% reported they were more likely to buy from a company they considered “kind”, because they wanted these firms to succeed during the economic downturn. 45% said they were more likely to buy from kind firms as, in the current downturn, it’s more crucial than ever to consider the results of your actions.

Guy Dent commented: “There is a school of thought, going back to economist Milton Freedman and beyond; that the point of business is to make money and everything else is immaterial. 

But in a connected age where the consequences of business decisions are instantly transmitted worldwide, people are faster to make moral judgements about firms, and to act on those judgements. The smartest companies will respond by increasingly incorporating a review of the ethics of their actions into their planning. They should do this for self-interested reasons; unkind firms will be increasingly punished by consumers.”

He added: “In the UK, Google searches for the term ESG have risen by a factor of almost eight over the past decade. Ethical company structures such as B Corporations have grown, the first UK B Corp appeared in 2015; there are now more than 1,300 in the country. Put together this means a heightened awareness of ethical issues when making purchases. And this awareness will persist even in the face of a recession.”

While British consumers expressed support for kind firms, they were only mid-table internationally. The country where consumers were most likely to have refused to buy from an unkind company was Switzerland, where 70% of respondents reported having done so in the past two years, followed by 68% in Germany, 65% in Australia and 63% in Singapore. The UK figure was 50%.

While 48% of UK consumers said they sometimes considered the behaviour of a company or its leadership while making a purchase, 26% of UK respondents reported always doing so – compared to 48% of Americans, 35% of Australians, and 32% of Germans.

Jon Fletcher, founder of the Big Clean Switch, one of many firms consulted as part of Baringa’s research into kindness amongst businesses, said: “Rigid, inflexible businesses are poorly placed to adapt to a rapidly changing world, to new competitors, or to new consumer behaviours.

Ultimately, it’s the businesses that ask the difficult questions, that support their people in meaningful ways, and that look to the future who will survive and do well. In short, kinder businesses prosper.”