Does Being Ethical Pay?

As the first and only Fair Trade certified company in Malaysia (we are a member of the Netherlands based World Fair Trade Organization) this is a question that we ask ourselves constantly. This question arises particularly during our meeting with potential wholesale companies interested in retailing our Indochine Natural products or having us manufacture under their own label.

For many companies, social responsibility has become a big business, and large amounts are spent on doing good things and then trumpeting these efforts to the public. But, does it reap commercial benefits and boost profits?

The rationale applied here is that consumers will pay a premium for products made with higher ethical standards. The big question of course is how far does a company really need to go to win people over?

What we have found over the years we have been meeting with potential wholesale buyers is that even though we may assume ethical production can lead to higher sales, some buyers prefer a lower price even if they know a product is produced unethically. What we have learnt out of this is that we should be very careful where we place Indochine Natural products, because if we are associated with unethical products, while consumers are willing to purchase, they will only do so at a significant discount.

What we have also found is that increasing levels of ethical production do not necessarily correlate with increasing price premiums. Once we have reached a certain ethical threshold, anything beyond that point might reinforce our company image, but doesn’t encourage people to pay more.

The bottom line at the end of the day is that the expectations of the buyer….those with high ethical expectations are willing to pay premiums for ethically produced products, while those with low expectations are not willing to pay.

What have we learnt from these experiences, and how do we implement these lessons in day-to-day business practice?  We have learnt to screen potential wholesale customers from first contact, usually incoming phone calls or emails. By putting our own ethical standards up front, and asking a few simple questions, this initial screening aims to reach out to buyers with high ethical standards. It these wholesalers who ultimately will deliver the biggest potential profits on our ethically produced Fair Trade products. From this initial screening we then move forward with a face-to-face meeting and tour of our production facility, and if all goes well orders will follow. This way we have been able to associate with similarly minded ethical wholesalers, and obtain premium wholesale prices for our products.