Last week was a public relations nightmare for Nike in the UK. First it was named, along with Gap, in a BBC Panorama programme exposing the use of child labour in a Cambodian sweatshop. Then, Channel 4 News screened a two-part report on the power of brands, outlining founder Phil Knight's decision to withdraw his substantial financial support of his old university because of student protests against his company's use of sweatshops.
The company must be wondering what's gone wrong. After all, it tries to project the right image - it has a strict code of conduct and claims to carry out regular internal and external audits of its 700 factories in order to weed out child workers. It vows it had already decided to pull out of the factory named in the Panorama investigation. It has even signed up to the United Nations' Global Compact, an initiative launched last year by secretary-general Kofi Annan to encourage businesses to implement certain human rights, labour and environmental principles.
As Nike's head of corporate communications, Yvonne Iwaniuk, told Marketing last week: 'We are not being arrogant. We are learning from this.'
What Nike is learning, presumably, is that a growing percentage of shoppers take account of a company's conduct and reputation when deciding whether to buy its products. While this is good news for a few businesses, many others are finding themselves targets for and often embarrassing public criticism.
The end of the last decade was a bellwether for ethical consumerism. After large-scale protests in the US and Europe against issues as broad as globalisation, GM crops, and brands' use of cheap Third World labour, the 'brand backlash' could no longer be dismissed as ineffective pockets of extremism.
In fact, a recent MORI poll commissioned by the Co-operative Bank suggests that a third of consumers are 'seriously concerned' with ethical issues.
Within the past year, over half of us have bought a product or recommended a company on the basis of its reputation.
This research, together with other market studies, is the basis of a new report by journalist Roger Cowe and The Co-operative Bank's head of corporate affairs, Simon Williams. The report, Who Are The Ethical Consumers?
says that 'caring' consumers cross most socio-political boundaries, and are not defined by party politics, social class, age or gender.
Product attributes such as quality and value for money still dominate purchasing decisions, but most of the population says other factors are important too - particularly how companies treat employees and impact on the environment.
In light of this research, the Co-operative Bank now plans to develop a permanent index to track the growth of caring consumption.
Article 13 is a marketing agency set up two years ago to help brands work within this new framework of consumption, and to assist businesses adopt a more ethical approach in their normal business processes. Founder Neela Bettridge says: 'We are aimed at businesses interested in taking forward environmental and ethical initiatives. Once a company has decided it wants to change, we help them imbue that change into their culture and communicate it both internally and externally.'
Earlier this year, Article 13 helped Barnardo's move away from its old image as an orphanage operator and reposition itself as a comprehensive care agency. The agency worked with Bartle Bogle Hegarty to develop the charity's controversial press campaign, which included images implying kids' use of drugs.
If companies need an incentive to choose an ethical path, it's this ability to attract attention by being controversial. The Co-operative Bank recognised this some time ago. Spokesman Dave Smith says the bank's ethical positioning came about because it wanted its customers to know what happens to their money while it's in the bank. But a convenient by-product is the edge it gives it in marketing terms.
Smith explains: 'Advertising from the financial services sector is taken with some cynicism by the public. Lots of smiling happy people giving great service does not often equate with reality. Our ethical stance gives us the opportunity to say some controversial things and differentiate ourselves in a very crowded marketplace.'
Bettridge says Article 13's clients are generally 'forward-thinking marketing directors who recognise that consumers are becoming savvier. Many perceive the whole ethical issue as a risky area, but organisations that use it find it gives them a competitive advantage.'
While ethical consumption is undeniably at the thin end of the shopping wedge (many ethical products are doing well if they have captured 1% of their market), a few brands enjoy much higher levels of success. Freedom Food eggs won an estimated 16% of the UK egg market in just five years, and Cafedirect, a Fairtrade product, has around 5% of the coffee market.
Though in the past ethics has been seen as a niche issue, a few brands have sought to take it mainstream by applying it to existing product lines instead of just niche alternatives. Iceland set out its stall as GM-free; The Body Shop doesn't test on animals; and B&Q only sells wood grown in sustainably managed forests.
The Co-operative Bank's report suggests that the potential for ethical products and services in the UK could be as high as 30% of consumer markets.
It also refers to 'signs of a new move towards simplicity, a kind of 21st century anti-consumerism which could act especially against the big multinational brands'.
Can global brands like McDonald's and Nike recover from this anti-sentiment?
Mark Simmons, managing director of Anti-Corp, the viral marketing agency which pledges to donate some of its profits to charity, says: 'The anti-capitalist protests started because people decided they didn't like being treated as a mass of faceless consumers. I think people decide, for whatever reason, that they don't feel part of a brand any more and once they've decided that, they look for other reasons they don't like it.
'Nike's mistake was it outsourced absolutely everything, and ended up as nothing more than a marketing company.'
Simmons says Nike's only way back is to change its attitude. 'Companies can't just pretend to be ethical, because people will see straight through that. If your company is genuinely ethical, people will find something to believe in.'
Perhaps ethics won't become big business until big business becomes ethical.
But as the Co-operative Bank's report warns, 'it would be foolish of businesses to dismiss the potential impact of ethical consumption'.
CONSUMER BEHAVIOUR INDEX
% done at % done at
least once least four times
Recycled materials/waste 73 59
Bought to support local shops/suppliers 61 37
Talked to friends/family about company''s
behaviour 58 23
Recommended company because of responsible
reputation 52 14
Chosen product service on company''s
responsible reputation 51 17
Avoided product service because of company''s
behaviour 44 14
Bought primarily for ethical reasons 29 9
Actively sought info on company''s
behaviour/policies 24 6
Felt guilty about unethical purchase 17 3
Actively campaigned about environmental/
social issue 15 2
Source: MORI Base: 1970 UK residents aged 15-plus. Behaviour over past