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Corporate Responsibility: Consumer Preferences & Fair Trade, Part 1 - Willingness To Pay
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Corporate Responsibility: Consumer Preferences & Fair Trade, Part 1 - Willingness To Pay - Executive Leadership Articles

Corporate Responsibility: Consumer Preferences & Fair Trade, Part 1 - Willingness To Pay

Executive Leadership Articles

Corporate Responsibility: Consumer Preferences & Fair Trade, Part 1 - Willingness To Pay

It’s been said that Corporate Social Responsibility is not charity, and that looking out for the best interests of all stakeholders—including the community, the employees, and the environment—can be a viable strategy for success. Of course there are tradeoffs: one bottom line may show less profit when resources are expended on other considerations, and the cost of being socially conscious can raise prices for consumers. So far, it seems consumers are willing to pay the premium, as we’ve discussed before, but how far does that consumer consciousness go, and how might different expressions of corporate consciousness compete against each other in the hearts, minds, and wallets of typical customers?

A hot topic in sustainable consumerism lately has been seafood. The ocean is so enormous it seems impossible that its resources could ever be tapped out, but alarming reports are published seemingly weekly, proclaiming that at the current rate of consumption, the sea will be fished out of many favorite species within thirty years, especially those at the top of the food chain. In response, farming efforts have shown promise, but unregulated practices in some countries of origin have called into question the safety of consuming farmed fish, such that labeling is required in several places. The realities of the market are already proof that consumers are willing to pay a premium for quality product, but are they willing to pay another premium on top of that for a socially conscious quality product?

Researchers surveyed consumers about their familiarity with three types of sustainability: ecological sustainability, local origin, and social sustainability. “More than half of respondents demonstrated good understandings of both ecological sustainability” for seafood, their report says, “and were willing to pay more for all three types.” But respondents were least willing to pay more for social sustainability, although they recognized that benefits of local sourcing overlap with benefits of social and ecological sustainability. The researchers conclude that some kind of seafood certification with a system-wide approach could succeed, but it might need to be paired with an awareness program so consumers would understand (and be willing to pay for) the benefits of social sustainability.

In a similar study, this time of consumers’ willingness to pay for premiums on bananas, respondents said that the higher price on three ethical attributes—fair trade, organic, and lower carbon footprint—was worth it to them in equal amounts with none of the attributes favored over the others. However, they expressed that ethical foods would compete for consumers’ money if the price of organic food were decreased significantly, if the price for fair trade products were to go higher than their willingness to pay, and if bananas with a lower carbon footprint were priced lower. This result seems to indicate that there’s a wide-open acceptance and awareness of the price and value of ethical products, but that when ethical concerns result in different levels of price premiums, there may be a shift in how consumers prioritize their conscientious spending.

The success of higher-end supermarkets who highlight local sourcing and ethical products points to a growing understanding among consumers that consciousness comes with a price. So far, it seems that enough of them are willing to pay this price, but this research indicates both a tenuous understanding of the underlying practices and a limit to their willingness. Time will tell where that limit is, and whether or not certain aspects of sustainable production will suffer if they are forced to compete with other, more desired sustainability.

Reference Links:
Fair Trade Fish: http://onlinelibrary.wiley.com/doi/10.1111/faf.12148/abstract
Ethical Bananas: http://link.springer.com/article/10.1007/s10806-016-9642-7

 

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Corporate Responsibility: Consumer Preferences & Fair Trade, Part 1 - Willingness To Pay - Executive Leadership Articles

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