Should all companies seek to produce ‘responsible’ products?

Credit: AdBusters

What about tobacco? The World Health Organisation is urging a complete ban on tobacco marketing, whilst a letter published in the British Medical Journal notes that most people start smoking before they are 18. ASH have produced a factsheet on tobacco marketing to Children. What do you think about tobacco marketing?

What about the food and drink industry? How much freedom should companies have when producing and supplying products that may have negative consequences for consumers’ health? Should they be allowed to target children as part of their market?

Credit: The Coca-Cola Company

Since 2009 Coca Cola has rolled out its ‘Open Happiness’ ad campaign and related social projects globally. What do you think are the motivations behind this campaign?

See the list compiled by Ethical Consumer of key examples when customers have been successful in changing business and other organisations’ behaviour by boycotting products and protesting.

Examples from history

Boycotts have a long and noble history of contributing to progressive social change, as well as succeeding in their more immediate goals.

One of the earliest examples was the boycott in England of sugar produced by slaves. In 1791, after Parliament refused to abolish slavery, thousands of pamphlets were printed encouraging the boycott. Sales of sugar dropped by between a third and a half. By contrast sales of Indian sugar, untainted by slavery, rose tenfold in two years. In an early example of fair trade, shops began selling sugar guaranteed to be have been produced by ‘free men’.

Estimates suggest some 300,000 people abandoned sugar, with sales dropping by a third to a half. Some shops advertised goods which had been produced by ‘freemen’ and sales of sugar from India, where slavery was not used, increased tenfold over two years.

The sugar boycott is one of the earliest examples of consumers using their purchasing power to reject the trade in goods which have not been ethically produced. This is the equivalent of the modern day Fairtrade campaign.

Case study

How seriously should we take the Co-operative Bank’s ethical position?

Although there were guilds of craftsmen and merchants from the medieval era, the first formally established consumer co-operative was the Fenwick Weavers’ Society which was set up in Scotland in 1761. The Society bought food (such as oatmeal) in bulk and sold it to members at prices below the normal retail price – thus passing on the benefit of bulk- buying. Account books (currently in an exhibition at the National Library of Scotland) show that the Society made financial loans to members at a rate of 5%. In 1844 the principles which today guide modern co-operatives were established by the Rochdale Society of Equitable Pioneers. (Rochdale Pioneers is the title of 2012 feature film: clips may be available on You Tube.) The International Co-operative Alliance has adapted the original Rochdale Principles which are now set on its website.

The Co-op movement grew during a time of major social and economic change brought about by the Industrial Revolution. In the towns of the English north; socialism and the trades union movements (well documented by the Webbs) took root alongside the activity of Christian missionaries: some of which continues today and is known as The Salvation Army. Another of the religious missionary organisations was founded by Charles Wesley – his followers came to be known as Wesleyans or Methodists. Towards the end of the 19th century socialist thinkers (including the Webbs) came together and formed the Fabian Society which in turn laid the foundations for the British Labour Party. Today, the Labour Party is very closely affiliated with the Co-Operative Party which has around 28 sitting MPs including the Shadow Chancellor, Ed Balls.

The Co-operative Group is the UK’s largest mutual business and employs around 90,000 people. The Group provides a range of goods and services including food, healthcare, funeral arrangements, childcare, travel and banking. In total there are around 300 separate businesses operating 4,500 retail outlets. According to press reports on 18 January 2014, the Co-Operative Group has for some years made an annual donation of £1m to the political party.

The Co-Operative Bank plc is a Public Company with shares trading on the London Stock Exchange.  According to its website: “The Co­operative Bank is the only UK high street bank with a clear Ethical Policy that is based on the views of its customers. It refuses to invest in areas that it feels do not match its ethical position:

‘Our unique Ethical Policy covers five key areas: Human Rights; International Development; Ecological Impact; Animal Welfare; and Social Enterprise. In line with our customers’ ethical concerns, we restrict finance to certain business sectors or activities, while at the same time committing to provide finance to those organisations making a positive community, social and environmental impact’ (Co-operative Bank Ethical Policy)

The Co-operative Bank is 30% owned by The Co-operative Group (with the remaining 70% held by other investors of which no group hold more than a 9.9% stake.) The Bank says that “The Directors support high standards of corporate governance.”

On January 20th, 2014 the Financial Reporting Council announced it had launched an investigation into the preparation, approval and audit of the financial statements of The Co-operative Bank plc, up to and including the year ended 31 December 2012.

Further, in June 2013, Reverend Paul Flowers, the Chairman of the Co-operative Bank and vice-chairmen of the Co-operative Group stepped down from his roles amidst allegations that he was not knowledgeable enough about banking to run the organisation adequately, and for ‘inappropriate behaviour’, including being caught on camera buying illegal drugs in Leeds.

Questions you might want to consider:

  • As long as the Co-operative is providing goods and services that its customers are happy with (both ethically and financially), should we be concerned about its ‘internal’ problems?
  • What does the phrase ‘the highest standards of corporate governance’ mean to you?
  • Should the Co-operative Bank be held to higher standards than other banks because of its historical and ongoing claims to be an ‘ethical’ organisation?
  • Is the behaviour of senior employees (outside of working hours) something that organisations can and should manage?

Case study prepared by Charles Lovatt, School of Management, University of St Andrews.

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