Ethical, Social Responsibility Gain in Importance

ELLIOT ZWIEBACH

BURLINGAME, Calif. — Concerns for ethical and social responsibility will join fiscal responsibility as part of a new “triple bottom line” for corporations by 2015, according to a TNS Retail Forward executive.

“Consumers recognize that corporations today are extremely powerful, and they will expect those corporations to accept increased responsibilities in the future,” Dan Stanek, executive vice president and head of consulting practices, said during “Retail 2015: New Frontiers,” a daylong seminar here sponsored by the Columbus, Ohio-based company.

“By 2015, corporations will measure success not just in terms of profits, but also in terms of ethical standards and social responsibility to the people and the planet,” he explained.

“The market recognizes the triple bottom line as an asset, and while return on investment will remain a hurdle, companies will realize there's a cost to not being accountable to people and the planet that can have negative bottom-line consequences.

“Many retailers and suppliers take a defensive posture today on these kinds of issues, but rather than trying to avoid calamity, an offensive stance is required, and that stance will be the norm in the future as companies view these challenges as an opportunity to use their power and influence to have a positive impact on communities, customers, employees and the market itself.”

According to Stanek, ethical concerns stem from a sense of compassion for humanity, including concerns over fair trade practices, local sourcing and executive compensation.

“Tesco's reputation was blemished a few years ago by a subcontractor of private-label clothing who was exploiting child labor at a factory in Bangladesh — a situation Tesco said it wasn't aware of,” he said. “But by 2015 companies will have to know about every link in the supply chain.”

Stanek cited a push for local sourcing by Wild Oats Markets and Whole Foods Market as “part of an effort to help the little guy.”

“With a majority of consumers today saying they consider causes when choosing where to shop and what to buy, that kind of cause-related marketing will become a bigger factor in the future,” he noted.

CEO PAY SCRUTINIZED

Consumers also see executive compensation as an equity issue, Stanek said. “Many people view CEO compensation as unfair because it outdistances shareholder returns and the performance of the company being managed,” he explained.

“Accordingly, Whole Foods set a salary cap on top management compensation that's tied to the annual hourly wage paid to workers, and we're seeing more companies appoint ethics and compliance officers as shareholders are demanding to know more about how companies act.”

In terms of concerns for the planet, “Wal-Mart is leading the charge,” Stanek said, with its efforts to create a prototype store by 2009 that's 25% to 35% more environmentally efficient than its current store base through the use of LED lighting, wind turbines, skylights and waste-reduction and water conservation programs, plus efforts to reduce packaging.

“These green initiatives are not just a PR effort,” he pointed out.

Stanek also cited Marks & Spencer, the British retailer, for its 150-point plan to reduce waste, combat climate change and create a process for sustainable sourcing.

“The millennial generation is really carrying the torch of sustainability,” Stanek said, “because that's part of the value system it grew up with.”

He cited studies that indicate 69% of that generation consider social and environmental commitment when deciding where to shop; 83% trust companies with the right social and environmental positions; and 89% are likely to switch brands if another brand is more closely associated with affinity causes.

“So this is not a fad,” Stanek said, “and it's not something that's going to go away.”