Ethical Consumerism

Project Report on Course Completion for

Consumer Behaviour
under
Dr. Ashish Gupta
Assistant Professor, Marketing Department

Submitted by:

Aayush Gupta, 1B
Anugya Rastogi, 8B
Arnav Agarwal, 10B
Kangan Loomba, 25B
Tanmay Kumar, 54B
INTRODUCTION
‘Ethical consumption’ encompasses a wide range of actions from nonconsumption, as in the case of
boycotts and the voluntary simplicity movement (general downshifting of consumption) to
consumption following particular ethical principles, such as the purchase of fair trade, green, and
free- range goods and ‘buycotts’. More broadly, it involves not only particular purchasing (or non-
purchasing) decisions, but also particular ways of using goods – such as handling them with care so
that they last longer, for green motives – and ways of disposing of them, such as recycling and
selective waste collection

Three types of ethical consumerism:

Ethical consumerism may be seen as an evolution from earlier consumerism movements. There are
three waves of consumerism as follow:

1. The first wave of the consumer movement focuses on value for money, basic product
information and labelling (what the product does and how) and consumer choice.
2. The second wave was heralded by investigations into product safety and has been
associated with broader questions of corporate accountability.
3. Third wave of consumerism – ethical consumerism – has three main components: (a) animal
welfare; (b) the environment; and (c) human rights/working conditions and fair-trade. Each
of the three headings has positive and negative aspects: those products and practices which
are upheld and promoted and those which are deplored and avoided/boycotted.

Conceptual framework of Ethical Consumerism

Consumers are increasingly concerned with ethical factors when forming their opinions about
products and making purchase decisions. consumers are actively considering factors related to
supporting fair trade, labor rights, environment protection, welfare of animals, organically produced
food products, boycotting products from unethical producers and others before making their
purchasing and consumption decisions. Their behavior in turn is guided by attitude and subjective
norms. Three core determinants of consumer behavior are perception of social norms, attitude and
perceived behavior control upon which the consumer behavior models are built. The theory of
planned action explains the inter-linkages between beliefs, attitude, intention and behavior of
consumers. It has been stated that attitude of consumers is guided by their beliefs which determines
their behavior and purchase intentions.

Ethical consumption behavior is influenced by price, lack of information, credibility of existing

information, ethical self-identity and moral norms. in order to encourage ethical consumption,
consumers need to be provided proper information on the need for ethical consumption, resulting
benefits and clear any misconceptions regarding price and quality of ethical products. There should
be constant improvement in information flow with the consumers to remove the attitude-behavior
gap. Price, lack of information and quality perception are the factors responsible for obstructing
ethical consumption of products.

The distinction between green consumerism and ethical consumerism is important because ethical
concern encompasses a broader range of issues and therefore a more complex decision-making
process for consumers. Cowed and Williams (2000) therefore extended the green definition to
encompass wider ethical issues associated with purchase behaviour, including “matters of
conscience such as animal welfare and fair trade, social aspects such as labour standards, as well as
more self-interested health concerns behind the growth of organic food sales”.

According to Harper and Macaroni (2002), being an ethical consumer means “buying products which
are not harmful to the environment and society. This can be as simple as buying free-range eggs or
as complex as boycotting goods produced by child labour”.

The three interrelated factors making the path for responsible consumerism, product consumption
and ethical brands are awareness, availability, and affordability. These factors, although
wholesome, only make ethical consumerism values “nice to have” and not “need to have”.
Consumers have ranked higher primary features of the products such as efficacy and value for
money as the main driving force behind their purchase.
 Awareness

Informed Conscientious

Availability

Efficacy Accessible

Affordability
Value for money Brand experience

STARTING AND IMPACT:

This movement was first popularized by the British Magazine ‘Ethical Consumer’ in 1989. Ethical
Consumer's ratings tables made by the magazine awarded companies negative marks for their
practices across a range of ethical and environmental categories viz. 'animal rights', 'human rights'
and 'pollution and toxics', thus allowing consumers to make ethically informed consumption
decisions and providing campaigners with trustworthy information on corporate behaviour.

UK has experienced a welcome change with the country reaching to rank 4th globally in terms of
value for the ethical consumer market as per a report by the Triodos bank. This has not only made
the companies practice ethical practices but also increase their part in the social activism and
environment friendly practices.

Behind the rapid expansion of the support base for ethical consumption in recent years has been the
spread of smartphones and social media since the start of the 2010s, which has greatly enhanced
the information gathering and transmission capabilities of NGOs and NPOs, and even individual
consumers. The expanded use of third-party certification schemes for ascertaining that materials
procurement methods and production processes comply with specific standards has also had an
impact.

A survey conducted in 2018 by the US marketing agency Acosta that targeted millennials in the US
found that with regard to reasons for choosing a meat-free diet, 50% of respondents gave health as
a reason, while about 30% said environmental concerns, and another 30% or so cited animal
treatment.
 The following data sets pertaining to UK will explain the points:
Source – Bord Dia, Statista
60.0%
50% 49% 48%
Share of respondents

50.0% 43% 44%

40.0% 35%
30.0%
20.0%
10.0%
0.0%
2007 2009 2011 2013 2015 2017

Share of adults agreeing with the statement "I prefer to buy from companies that are
aware of the impact of environmental issues" in Great Britain from 2007 to 2017

12 11.01
9.84 9.47
10
Sales in billion GBP

8.57 8.58
7.49 7.96
8 6.75
6 5.04 5.22
4.2
3.58
4
2.09 2.61 3.11
1.88
2 1.21 1.49 1.55

Sales revenue from ethical food and drink products in the UK from 1999 to 2017 (in
billion GBP

Share of sustainable shopping behaviors among UK shoppers in

2019
Not sure
Other
Buying organic
Buying less meat
Buying local
Buying seasonal produce
Buying wonky fruit & veg
Buying products made in an enviromentally friendly way
Avoiding buying single use plastic
Buying product that is recyclable
Buying product that is sourced
Source - ShopperCentric
0 10 20 30 40 50 60 70 80
 2000
1,780
Sales value in million GBP

1,530.2
1500 1,294.1
1,173.8

1000 843.4
712.6
493
500 286.3
140.8 195
63 92.3
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013**

Estimated retail sales value of fair-trade commodities in the UK from 2002 to 2013 (in
Mn GBP)

1800 1,616
1600 1,442 1,467
1400 1,280 1,323
Sales in million GBP

1,199
1,128
1200 1,051
1000
800
600
400
200
0
2011* 2012 2013 2014 2015 2016 2017 2018

Ethical personal products: spending in the United Kingdom (UK) 2011-2018 (in Mn
GBP)
RESEARCH AND TRENDS
Today, we are witnessing the “ethicalisation” of society. This is principally due to environmental
shifts and pressures, population change and shifting consumer values, enhanced by opportunities
emerging due to technological advances and shifting economic power.

As a result, Ethical Consumerism is emerging, replacing the conspicuous consumption of the past.
However, the pace of this shift is slow.

Euromonitor has identified Ethical Consumerism as one of the 8 key megatrends that will guide
consumer behaviour in the future and is of the opinion that slowly but steadily, it will become
integrated into the mainstream.

Recent studies suggest that there is a conundrum of high interest in mindful consumption in
emerging markets but strong value sales of mainstream ethical labels in developed economies. This
is because consumers in developing nations are now becoming increasingly aware of the fact that:

1. The rapid economic development in emerging markets has also triggered negative
environmental changes, such as pollution, water scarcity or unmanaged industrial waste,
which has a direct and more severe impact on consumers’ lives and health.
2. In developing countries, the informal sector forms a massive proportion of the economy.
The informal economy is often characterized by unsafe and unsanitary working conditions,
poor wages and long working hours because workers in the informal economy are not
recognized, regulated, or protected by labour laws or social protection schemes.
3. Animals are often treated poorly in developing countries because there is a lack of laws to
safeguard their rights.

And so, they are seeking out ways to make positive decisions about what they buy and looking for a
solution to the negative impact consumerism is having on the world.

We conducted primary research to understand the attitude of Indian consumers towards ethical
consumerism. The primary data was collected via an online questionnaire. The key insights obtained
post analysing the responses of the 112 respondents are outlined below.

IMPEDIMENTS TO ETHICAL CONSUMERISM

The biggest impediment to the

adoption of ethical consumption
behaviour in India is insufficient
information. Consumers are often
unaware about the practices
adopted by companies in the
manufacturing of a product and
therefore are unable to make
informed decisions.

A close second is the failure to meet consumer expectations. Customers are concerned that ethically
produced products do not meet the criterion that they are looking for.

IMPORTANCE OF VARIOUS FACTORS IN A CUSTOMER’S DECISION PROCESS

 Factor Score (5-Highest) This table indicates that consumers
Quality 4.02
place higher importance on observable
attributes a product alternative than
Customer Service 3.75
they do on invisible attributes like the
Price 3.59 production practices associated with the
Brand Image 3.57 product alternative.
Variety Offered 3.46
These attributes are made observable by
Environmental Impact 3.16
several companies through labelling and
Effectiveness of large-scale publicity of their ethical
3.11
Advertisements
production practices but often
Treatment of Employees 3.09
consumers overlook these attributes in
Locally produced 2.84 favour of the ones that they consider to
Company's CSR Activities 2.73 be more important.

The view of the decision-maker or consumer, as an individual who strives for satisfactory rather than
optimal alternatives, where all aspects are considered, is associated with Herbert Simon and the
research into bounded rationality (Simon, 1957: Gigerenzer & Selten 2002; Kahneman, 2003). Simon
showed that we often lack possibilities of maximising our own choices. We do not manage to absorb
and process all information in a rational manner. Instead we choose the first alternative which is
sufficiently good. For instance, if a product’s environmental impact is not especially important for a
particular consumer he/she may, in order to simplify the decision process, wholly disregard the
environmental aspects and instead choose an alternative that is satisfactory in other respects.

BOYCOTT VS BUYCOTT

If one disapproves of the practices adopted by a certain company or organisation and does not wish
to support it, he/she may choose to boycott the product alternative, the company or the organisation.
On the other hand, if one wishes to favour alternatives associated with certain production methods,
or companies and organisations associated with a certain policy he/she may actively seek out such
product alternatives. Such a reverse boycott is sometimes termed “buycott”.

The tendency to boycott is stronger than the tendency to buycott.

This is in accordance with several studies which have found that negative impressions, in general,
tend to outweigh positive impressions. We often react more strongly to negative information
compared with the corresponding positive information.
A consequence of this is that companies and organisations may have more to gain by avoiding being
associated with unethical practices compared with what they have to gain from being associated
with ethical practices.

WILLINGNESS TO PAY A PREMIUM

We find that a major proportion of the

repondents are willing to pay upto 5%
premium for products by companies
that follow ethical practices.

But several studies argue that a higher

stated willingness to pay should only
be interpreted as a sign of a more
positive attitude towards the product
or service in question and not as
reliable appraisal of how much an
individual is actually prepared to pay.

ACTUAL PURCHASE OF ETHICALLY PRODUCED PRODUCTS

Half the respondents were found to be unsure about whether they have purchased any ethically
produced products in the past year. This is also indicative of the previously discussed problem of
insufficient information and preference for other attributes.

Of the people that had purchased ethically produced products in the past year, the most purchased
products belonged to the following categories:

1. Cosmetics
2. Apparel
3. Household items
4. Food items
EXAMPLES
Facebook is Killing the Competition
The biggest social networking company Facebook has been the biggest bully in the market too. In the
last 10 year they have been following unfair trade practices in order to kill the competition. Their
business strategy has been very simple, they acquire the potential competition before it becomes a
headache.

The acquisitions and adaptations made by the company in the last 10 years clearly exhibit this strategy.
In 2012, Facebook acquired Instagram for 1 billion USD. At the time, Instagram was a social media
platform with only 50 million users, nevertheless, it was very popular with young people and its
features made it a potential rival for Facebook in the future.

In 2014, Facebook acquired Whatsapp, at a time when it was booming with almost 600 million active
users. Faced with such growth, Facebook felt threatened even if it remained largely the leader with
its 1.3 billion monthly users.

In 2013, Facebook tried to acquire snapchat, they made two take-over offers one of 1 billion USD and
the other of 3 billion USD. While the founder rejected both the offers, Facebook has successfully
replicated various features of Snapchat (stories, filters, stickers, etc.) on Fb, Instagram and Whatsapp.

The public is well aware of the unethical practices undertaken by Facebook. But with the huge list of
benefits along with the obvious absence of any proper competition, it is very convenient for the users
to turn a blind eye towards this unethical behavior of Facebook.

Foxconn Suicides
Foxconn, is a Taiwanese multinational electronics contract manufacturer with its headquarters in
Tucheng, New Taipei City, Taiwan. They manufacture electronics for companies including Apple, HP,
Microsoft, Amazon, Sony, etc.

The company came into new when in 2010, a spate of suicides linked to low pay at the "Foxconn City"
industrial park in Shenz came to light. While, a few suicides were also reported before 2010 as well.

The series of suicides drew a lot of media attention, which in turn resulted in investigations into its
employment practices by its customers including Apple and HP.

As a result of these investigations companies like Apple and HP addressed these issues publicly and
committed to implementation of various structural changes in the working of their vendors (In order
to save their reputations).

Fabindia, the Indian story

Fabindia, is an iconic garments and home furnishings company, which started its domestic operations
in India in 1976 & over the next 44 years has become synonymous with quality handmade products
procured from artisans all over India. The company is perceived as a company with a social conscience.
The business combines the twin objectives of making a profit and providing a sustainable livelihood
for rural artisans.
By the early eighties, they were already known for garments made from hand woven and hand printed
fabrics. The non-textile range was added in 2000, while organic foods, which formed a natural
extension of Fabindia’s commitment to traditional techniques and skills was added in 2004, with
personal care products following in 2006. Handcrafted jewellery was introduced in 2008.

Currently, they are one of the largest private platforms for products that derive from traditional crafts
and knowledge. A large proportion of these are sourced from villages across India where the company
works closely with the artisans, providing various inputs including design, quality control, access to
finance and raw materials.

Their endeavour is to bring customers a choice of products – and lifestyle – that offers an alternative
to the mass-produced, while creating sustainable livelihoods in the rural sector.

The company’s objective to support the rural artisans all across the nation, has created a positive
sentiment for the company. This has been one of the greatest factors for the success of the company,
and exhibits how ethical practices can help companies grow in India.

Organic fruits and Vegetables

Organic food is food grown, prepared & processed without pesticides, fertilizers, or chemical
preservatives. Organic food is thought to have a better nutritional value as compared to conventional
foods. Foods grown without pesticides and fertilizers produce more phytochemicals that strengthen
their resistance to bugs & weeds.

India organic food market is predicted to grow at a CAGR of >23% by 2023, on account of favourable
government policies supporting organic farming along with rising land area under organic cultivation.
Online availability of organic food products and shifting consumer preference towards organic food
are among the major factors expected to boost demand for organic food products in India during the
forecast period. Expanding marketing and distribution channels coupled with increasing number of
health-conscious people is also anticipated to fuel organic food consumption in India until 2022.

This is a perfect example of a product which has been widely adopted by the consumers because of
their dual benefits which helps them personally and also promotes sustainable practices in the
development of the product.
CHALLENGES
Ethical consumerism, in the true sense of the word, is the intentional purchase by a consumer of
products and services that have been manufactured, processed or provided through ethical means,
i.e. with minimal harm to or exploitation of humans, animals and/or the natural environment.

The fundamental principles of ethical consumerism in India are directly linked to the need for
companies to be socially responsible in all aspects of their business activities and for governments to
apply and monitor the application of international conventions relating to human rights and
appropriate labour, social and environmental standards.

AWARENESS
Over the last decade or so, more and more consumers in India have become better informed about
the origin of the products they purchase on a day-to-day basis. Yet, with regards to ethically
sourced/produced items, there is an inadequacy in the information that customers have access to.

Information is sometimes provided by the media on the global supply chains of businesses, which
sometimes include stories on children and labour that is exploited, and paid a miniscule amount as
compared to the prices at which the products they make, are sold. The following are trying their best
to enable customers to make informed choices:

• Governments: Inform ethical consumers by certifying, creating legislation and publishing

related information, and data of the relevant research to the public.

• Private Sector: Influences consumers by providing an identity to ethical consumers while

the mainstream companies create a trend that catches on, to attract more consumers to
the ethical market.

• Consumer Associations/Groups: Provide useful tools for ethical consumers, such as labels like
the Ecomark to assist in identifying ethical products, while updating information and data
necessary.

Despite this customers remain unaware of the unethical practices being followed by companies as a
part of their production process, due to which they end up purchasing the not-so-ethical products. At
times, consumers may also be wilfully ignorant of these aspects and this is a major reason why the
market share of ethically produced goods has remained low.

AVAILABILITY
Ethical consumers are shoppers who base their purchasing decisions on whether a product’s social
and ethical positioning aligns with their values or not. As the average Indian consumer today, is
expressing their desire for ethical products, brands are responding with the launch of products such
as eco-friendly furniture, cosmetics that are not tested on animals, fair-trade chocolates and so on.

Consumers today, have become conscious and this conscious consumption is not limited to what they
wear, but is all encompassing – i.e. where they live, the food and drink they consume, how their
ingredients are sourced and processed, and also how leftovers are managed.
But the fact of the matter is, there are not many industries that can offer ethical products, which
means customers are left with no choice. Availability of ethically sourced/produced items is limited to
some industries, like cosmetics, apparel, a few parts of food. Largely, unavailability is why Indian
consumers are unable to stick to a singular attitude of ethical purchasing.

AFFORDABILITY
Customers today desire much more when paying a premium price for ethically produced & sourced
goods. In order to accommodate this growing change in the market, companies have to consider
reducing prices for non-sustainable products or alternatively, invest in methods that trigger some
behaviour modification of consumers to favour and pay more for sustainable products in a manner
that better reflects the costs of producing and sustaining ethically sourced products.

Price may be a critical part of the overall ‘attitude-behaviour gap’ i.e. the extra prices charged for
ethical products dissuades the Indian customer to quite an extent, thus leading to a non-translation
of consumer intentions into buying behaviour.

Consumers may say they support ethical brands, but may not buy those products. A widely cited study
on ethical consumers described this as the ‘30-3 syndrome’. Over 30% of consumers claim that they
pay attention to the social and environmental records of companies whose products they buy. The
market share for ethical products, however, hovers around 3%.

TRANSLATION INTO BUYING BEHAVIOR

The consumers of today want to make purchases of products sold by companies following ethical
practices, yet when companies offer such products, they are invariably met with a difference by all
but some groups of customers.

Although many individuals bring their beliefs into their purchasing decisions, the percentage of
shopping choices made on a truly ethical basis proved far smaller than what is believed.

The reasons why the ideas of ethical consumption have not entirely translated into buying behaviour
are availability of alternatives and lack of effective labelling. Consumers are sometimes neither able
to find the products, nor the accurate information to guide their behaviour. Therefore, sometimes
even ethical consumers are forced to make choices based on imperfect information and unavailability
of an ideal alternative.

Also, India is a price-sensitive market, therefore ethical consumers want much more (apart from basic
features that make a product ethical) when they are paying a higher price for such products, such as
natural ingredients, transparency, ethical marketing and advertising, recyclable packaging.
SOLUTIONS
As consumers express their desire for greener products, brands are responding with the launch of
human-friendly and health-friendly products for homes. More eco-friendly paints, pest control
products, lighting, furniture and consumer electronics, among several other things, are vying for
consumer preferences.

In a market that is notoriously price-sensitive, ‘ethical consumers’ want and expect much more than
when they are paying a higher price for ethically sourced goods. Some of the things they also look for
in a company, brand or product are:

• Natural/Pure Ingredients
• Ethical Sourcing, Production and Distribution
• Clear Information About Nutrition
• Fair Labour/Honouring Human Rights/ Protecting Human Health
• Respecting the Environment
• Ethical Marketing and Advertising
• Renewable/Recyclable Packaging
• Giving Back to the Community and Society

AFFORDABILITY
In order to accommodate the growing change in the market, companies have to consider reducing
prices for non-sustainable products or investing in methods that trigger some behaviour modification
of consumers to favour and pay more for sustainable products in a manner that better reflects the
costs of producing and sustaining ethically sourced products. Purpose-driven marketing is a perfect
tool to modify consumers’ behaviours worldwide.

AVAILABILITY
We have plenty of examples to conclude that consumers have shown a positive buying behaviour
where they are sure about manufacturer’s ethical reputation, potential benefits attached to the usage
of these goods and above all, whether their environmental concerns are met. At this juncture, if the
items we discussed are widely available in the Indian market at competitive prices, the customer will
more often than not take a decision in favour of these products.

Let us take an example. The Indian market is experiencing a high growth rate in energy efficient
products and this has happened mainly because of increased awareness by energy conservation
campaigns run by the government, NGOs and business houses. Favourable government initiatives like
the Smart Cities Mission (SCM), increasing demand for intelligent solutions for street and office
lighting and evolving lifestyle of Indian consumers establish a positive environment for the growth of
the smart lighting market in India. The government has initiated the smart street lighting installation
program in all major cities of the country. Bajaj, Wipro, Syska, Philips, Xiaomi and Samsung are some
of the major players.

In terms of revenue, the India smart lighting market was valued at INR 7.63 billion in 2018, which is
expected to reach INR 80.56 billion by 2024, expanding at a CAGR of ~48.87% during the forecast
period.
BRIDGING THE ATTITUDE BEHAVIOUR GAP
Professor Nitika Garg of the University of New South Wales explains in her 2017 paper: ‘Not walking
the walk: How dual attitudes influence behavioural outcomes in ethical consumption’, that the
process of aligning consumer behaviour and attitude is a slow process.

Consider the example of free-range eggs that have created a niche in the markets the world over,
including India. As Garg explains, “People do spend extra for free range eggs, because they are
constantly fed information on the poor conditions of chickens. Over time, consumers reconciled their
feelings for the poultry-farmed chicken and the eggs they produce.”

Moreover, as demand for free-range eggs soared, their supply responded. Gradually, that led to a
shrinking in the gap between prices of ordinary and free-range eggs, further pushing up demand for
free-range eggs.

CONCLUSION
So, the above examples reinforce our findings that awareness and availability of environmental
products can change the attitudes of consumers towards ethical consumption whereas lack of
awareness and non-availability of the same can act as a potential barrier in the usage of ethical goods.
This lack of information means that companies must explain not only their own products but also the
larger issues of pollution, climate change, overfishing and other environmental problems. The
development of governmental regulations of corporate disclosure, environmental claims and general
information availability are of crucial importance. NGOs and government agencies should also take up
the cause of ethical education.

Further, the role of consumer authorities and importers is important when it comes to providing
reliable ethical information. It also suggests the need for government to continue reinforcing actions
in causing the behaviour shift towards ethical buying.

The purchase and consumption of ethical products require that a large amount of effort be invested
in information acquisition and decision making. In addition, consumers have to be willing to pay higher
prices for these products. To realize the ethical market’s true potential, businesses and Governmental
action must help consumers change their behaviour by removing the hurdles/ barriers between
intentions and actions.
REFERENCES
1. The Gap between Attitudes and Behavior in Ethical Consumption: A Critical Discourse- Pragya
Budhathoki, Kabita Adhikari and Ranjana Koirala
2. https://www.triodos.co.uk/articles/2018/the-rise-and-rise-of-the-ethical-consumer
3. https://www.sheffield.ac.uk/festivalah/exhibition/history/the-ethics-of-consumption
4. Ethical Living: Mindful Consumerism: Euromonitor Passport 2017
5. WindowOn Trends Report, Issue 23 by ShopperCentric
6. Ethical Retail in the UK: Statista, June 2019
7. Ethical Consumption Spreading — Impact on Corporate Activities and Business Opportunities
— Michiyo Sakai, Industrial Research Dept. III, Industrial Studies Div., Mitsui & Co. Global
Strategic Studies Institute