What Ethical Consumerism Means for Businesses - The Hershey Company - Case Study Example

Analytical business report on what ethical consumerism means for businesses The Hershey Company Executive summary Ethical consumerism and ethical business practice are increasingly integrated into modern life. International companies such as the Hershey Company claim to be ethically responsible organisations, pursuing sustainability standards. However, more thorough analysis shows that the company is more likely to work with suppliers of cocoa beans, who use child labour and may be child slavery in order to produce cocoa. The study also indicates that consumers and their readiness to pay higher price for ethically produced products is another important element. The primary research has shown that while most respondents supported ethical brands and were willing to work in ethical companies, they still were not ready to pay higher price for ‘ethical chocolate’ of the same taste and quality. Introduction During the past three decades the combination of words “ethical consumerism” has become increasingly popular. This paper aims to provide an overview of the concept of ethical consumerism, supported with both primary and secondary research. For a more specific analysis of ethical business, there was chosen an international chocolate manufacturer, the Hershey Company. The remainder of the paper is structured as follows: Section 1 provides an overview of the concept of ethical consumerism, major issues and the benefits organisations gain from it; Section 2 provides a brief overview of the Hershey Company followed with the analysis of the company’s ethical business activity and its Corporate Social Responsibility; Section 3 reports the results of a primary research and discuses major findings; Section 4 is a concluding part of the report followed by recommendations presented in Section 5. 1. Ethical consumerism Even though the concept of ethical consumerism is known in society for centuries, it is only within the last thirty years that is has been transformed from a minority concern to a mainstream phenomenon (Yeow, Dean, and Tucker, 2013). In the past decades, the level of awareness of consumers about the ethical, environmental and social problems in the world has increased dramatically. People became more responsible in selecting suppliers of the products and providers of the services. This behaviour led to an increased popularity of the concept of ethical consumerism. In academic world, the term of ethical consumerism is defined as “decision-making, purchases and other consumption experiences that are affected by the consumer’s ethical concerns” (Yeow, Dean, and Tucker, 2013: 88). In other words, while purchasing a product and service, consumers tend to consider not only such basic aspects as quality and price but also the aspects of ethical and responsible behaviour of the company offering these products or/and services. More specifically, there is list of products, which falls into the ethical category. Some of these products are organic produce, energy-efficient light bulbs, recycled paper, electricity from renewable energy, wood products with approval of Forest Stewardship Council, and fair trade goods (The Guardian, 2001). Nowadays, consumers are not only aware and caring about environment and society (both in general and local communities) but also are demanding fairly traded products, and challenging retailers and manufacturers to ensure ethical supplies and business practices (Strong, 1996). This shift in consumers’ behaviour has resulted in increased concerns about corporate social responsibility of business and made many companies to consider ethical behaviour as one of the key aspects of business strategy (Yeow, Dean, and Tucker, 2013). Today, ethical behaviour of business organisations also called as good corporate citizenship is recognised to generate positive business outcomes and help firms to build competitive advantage. There is positive impact on employee relations and other human resource issues. Positive ethical reputation of a company contributes to more effective recruitment, better morale, higher loyalty, motivation, higher retention and productivity (Verschoor, 2001). The empirical evidence also indicates that ethical corporate behaviour of an organisation helps to improve customer relationships. Customers tend to be more loyal to such organisations and prefer to purchase ethically produced goods (Verschoor, 2001). However, often it is a two-edge sword as often consumers’ support of ethical brands is different from actual purchases as ethically-produced goods are often more expensive. This issue will be tested in the opinion survey, presented further in report. Otherwise, the above mentioned arguments should be enough for organisations to integrate ethical behavior into business strategies. 2. Company review: The Hershey Company According to the World’s Most Ethical Companies® designation 2015 an American-based company the Hershey Company was recognised to be one of the companies (in food and beverage sector) doing business in ethical and sustainable way (Ethisphere.com, 2015). The Hershey Company is an international manufacturer of chocolate and non-chocolate confectionery and chocolate-related grocery products (Thehersheycompany.com, 2015). A leading global confectionery company has more than 80 brands and employs more than 13,000 employees around the world (Thehersheycompany.com, 2014). The company claims that it is committed to run business “fairly, ethically, and sustainably to make a positive impact on society” (Thehersheycompany.com, 2014: n.p.). The company’s vision is to “bring goodness to the world through great-tasting snacks” (Thehersheycompany.com, 2014). In order to achieve its mission, the company undertakes various initiatives in order to improve life for consumers, employees, and communities. The Hershey Company has developed a Corporate Social Responsibility (CSR) model, comprised of four pillars: marketplace, environment, workplace and community. Some of the major activities and commitments of the company relates to focus on food quality and safety, workforce engagement, accountable management and governance, stakeholders’ engagement, strategic community investment and engagement, training and empowerment of farmers, creation of opportunity by nurturing new generations (CSR Report, 2013). Also, the company cares about children and their future. Thus, for example, in 1909 the founder of Hershey Company established a Milton Hershey School whereas children receive housing, education and medical care (Thehersheycompany.com, 2014). In addition to various social activities, the company has developed its business strategy in accordance with fair trade principles. As a global manufacturer of chocolate and chocolate-related grocery products, the Hershey Company needs to supply of cacao beans in significant amounts. Cacao beans grow primarily in the tropical climates of Latin America, Asia, and Western Africa (Food Empowerment Project, 2015). Western African countries supply more than 70% of the total cocoa supply in the world. However, this industry is known to exploit heavily child labour and in some cases child slavery labour in Western Africa (Food Empowerment Project, 2015). According to the Food Empowerment Project (2015), the farms of Western Africa supply cocoa to global operators, including the Hershey Company. The company claims that it addresses the challenges of ethical sourcing and sustainable agriculture as it is based on the ethical values the company was founded (CSR Report, 2013). Thus, for example, the company has introduced the Supplier Code of Conduct, which imposes requirements on ethical behaviour of suppliers (CSR Report, 2013). The company reports that it is committed to source cocoa through such cocoa-certifying organisations as Fair Trade USA, UTZ Certified, and Rainforest Alliance (CSR Report, 2013). In 2012, the company has introduced its plan to achieve 100 percent of cocoa supplies from sustainable sources by 2020 (CSR Report, 2013). By 2013, the company announced that it has achieved 18 percent certification. It means that the other 82 percent of cocoa supplies may use child labour, child slavery and trafficking in order to produce cocoa beans for the Hershey’s Company. Moreover, even the reported 18 percent of ethically produced cocoa beans may not be as ethically produced as declared. The experts are doubtful about sustainable practice of cocoa supplies in Hershey Company as its management “has not thoroughly addressed accusations of child labor in its supply chain and refuses to release any information about where it sources its cocoa” (Food Empowerment Project, 2015: n.p.). This aspect is undermining the Hershey’s reputation of being one of the most ethical companies in the food and beverage industry. 3. Opinion survey In order to clarify some issues discovered in the research there was carried out a primary research. There was generated an opinion survey for seven questions. Fifteen students at GSM London have filled in online questionnaires related to ethical consumerism with a focus made on chocolate industry. Out of 15 respondents, 14 claimed responded that they knew the meaning of ethical consumer. This data indicates that respondents are aware (or think they are aware) of modern social concerns and ethical consumerism. On the question whether respondents buy ethical products, only 7 out of 15 responded that they buy ethical products. To the question, whether respondents paid attention on the fairtrade label while shopping 10 responded they did. It means that 2/3 of respondents did notice the fairtrade label and probably bought the products with these labels, supporting thus ethical brands. The next question was quite provocative and was presented as a mini case study, whereas consumers were place in a situation when they had a choice to buy ethically produced chocolate or ordinary chocolate (not ethically produced with high risk of exploitation of child labor). Out of 15 respondents said that they would buy ethically produced chocolate. However, in the next question whereas there was made a suggestion that ethically produced chocolate will cost 15-20% more than ordinary chocolate, only 3 respondents said that they would definitely pay more and buy ethically produced chocolates. These data illustrate important issue, identified previously in research. While consumers support the idea of ethical consumerism and want the companies to do business in sustainable and ethical manner, limited number of those supporters are actually ready to buy ethically produced items if the price is higher, while the quality and other parameters/characteristics are similar. The next question of whether respondents were ready to refuse from purchasing chocolate if they knew that for its production was used child slavery, 11 respondents said they would, while four others said they would not refuse. These responses illustrate that the consumers are important players on the market, and their bargaining power is quite high in order to pressurize brands to act in more ethical and sustainable way. Finally, survey participants were asked in what company they would prefer to work. Thirteen respondents claimed that they would prefer to be employed in ethical company, while 2 respondents were indifferent about this parameter. These data illustrate that a company with ethical image is more attractive employer than non-ethical company. 4. Conclusion Literature review has shown that ethical consumerism is quite a popular phenomenon in the modern society. Companies tend to adopt ethical and sustainable practices in order to make a positive contribution to environment, society and local communities. This behaviour gives ethical companies a number of benefits. The survey has provided empirical support to these views. The results of the study have shown that consumers are aware of ethical brands and pay attention on various indicators of ethical behaviour on packages while shopping. However, the findings also have revealed that while consumers supported the idea of ethical consumerism, not many would support it on practice if the price for ethical product will be considerably higher. This data indicates that until consumers are ready to consume unethically produced goods and services, such as chocolate, many companies will continue to partner with unethical suppliers, especially if the costs of these supplies are lower. The Hershey Company is one of the organisations, which has adopted ethical principles to its strategy. However, this company still acts unethically, purchasing cocoa beans from suppliers who may use child labour/child slavery in production process. 5. Recommendations The Hershey Company is recognised by international organisation to be one of the most ethical brands. However, there were found some obvious gaps in the company’s commitment towards sustainable and ethical sourcing. The company’s plan to source 100% from sustainable suppliers by 2020 is extended for quite a long period of time. The company could shorten this period and switch to sustainable producers. Moreover, the company needs not only to introduce the code of behaviour to its cocoa beans suppliers, but also to carry out random audits, checking if the supplier uses child labour or child slavery on its cocoa farms, mainly in Western Africa. The company needs to publish results of these audits and provide more sufficient reporting on its supplies. References: CSR Report (2013). 2013 Corporate Social Responsibility Report, The Hershey Company. [online] Available at: https://www.thehersheycompany.com/social-responsibility/shared-goodness/pdfs/2013_THC_CSR_140505_V6_TR.pdf Ethisphere.com, (2015). “World’s Most Ethical Companies – Honorees”. Ethisphere Institute. [online] Available at: http://ethisphere.com/worlds-most-ethical/wme-honorees/ Food Empowerment Project, (2015). Child Labor and Slavery in the Chocolate Industry, Foodispower.org [online] Available at: http://www.foodispower.org/slavery-chocolate/ Strong, C. (1996), “Features contributing to the growth of ethical consumerism – a preliminary investigation”, Marketing Intelligence & Planning, Vol.14 (5), pp.5-13. The Guardian, (2001). Ethical Consumerism. Available at: http://www.theguardian.com/money/2001/feb/22/ethicalmoney1 Thehersheycompany.com, (2015). The Hershey Company. About the Hershey Company. [online] Available at: https://www.thehersheycompany.com/about-hershey.aspx Thehersheycompany.com, (2014). Company Profile. [online] Available at: https://www.thehersheycompany.com/investors/company-profile.aspx Yeow, P., Dean, A. & Tucker, D. (2014), "Bags for life: the embedding of ethical consumerism", Journal of Business Ethics, vol. 125, no. 1, pp. 87-99. Verschoor, C.C. (2001), “Ethical behavior brings tangible benefits at organizations”, Institute of Management Accountants, Montvale. Appendix 1: Online Questionnaire: Are you ethical consumer? 1) Do you know what ethical consumer means? A) Yes B) No 2) Do you buy ethical products? A) Yes B) No 3) While purchasing a product do you pay attention on the label of fairtrade on the package? A) Yes B) No 4) If you had a choice to buy ethically produced chocolate or ordinary chocolate (more likely with the use of child labour/child slavery labour), which one would you choose? A) Ethical B)Ordinary 5) If two chocolate brands offer chocolate of the same quality and taste but the price for ethically produced chocolate is higher by 15-20%, chocolate of what brand will you choose to buy? A) Ethical B) Not ethical 6) Are you ready to refuse from purchasing chocolate if you know that it was produced by exploiting children labour in developing countries? A) Yes B) No 7) In what company you would prefer to work if all conditions were equal? A) Ethical company B) Does not matter Read More