Just a shot of ethicality

Nestle has caused confusion among right-on activists with its new fair-trade coffee.

by Richard Reeves
Last Updated: 31 Aug 2010

Words are just like people: as one dies, another is born. Newborn words are also as ugly as newborn babies (to all except their creators, of course). Soon enough, though, they grow until we can't imagine life without them. Where would we be without hot-desking, downsizing and offshoring?

And so, I suppose, we should be kind to the latest linguistic arrival, 'ethicality'.

The new addition to our word-hoard is certain to get a good run, because ethicality is a growing business issue. Ethics officers are popping up in many corporations. Ethical investment is an established niche in the capital markets. Corporate social responsibility is (supposedly) about sharpening a firm's ethical edge. And now Nestle has caused mass confusion among right-on activists by launching a fair-trade coffee.

For some, this move is downright dangerous, a simple case of a wolf sticking on a layer of sheep's clothing. Although the new line of fair coffee has the Fairtrade kitemark from the Fairtrade Foundation, the World Development Movement said that the launch 'is more likely to be an attempt to cash in on a growing market or a cynical marketing exercise than represent the beginning of a fundamental shift in Nestle's business model'.

The trouble is that Nestle's brand is so tarnished by the high-profile campaign against its baby-milk formula that even a positive step is viewed with great scepticism by many.

To others, the move by Nestle is highly positive and significant, a Damascene conversion with the potential to transform the coffee market. 'This is a turning point for us and for the coffee growers,' enthuses Harriet Lamb, director of the Fairtrade Foundation. 'Here is a multinational listening to people and giving them what they want.'

The truth, of course, is much duller. Nestle is moving cautiously into the fair-trade market as a result of modest shifts in consumer behaviour and a desire to behave more ethically. Only an ultra-utopian would seriously expect Nestle to shift its entire operation to fair-trade principles on the basis that everyone who buys its current £1.78 jar of standard instant coffee will simply switch to the manufacturer's new £2.69 Partners Blend rather than to a competing product. Right now, just 3% of the instant coffee market is fairly traded - although the segment is growing at double-digit rates.

Nestle's decision is neither a smokescreen for its true, sinister purposes nor a symptom of sudden, blinding enlightenment: it is simply a sound business investment.

The only danger to Nestle's reputation is the fact that launching a fair-trade line highlights the fact that the other products are, by definition, unfair. The same risk attaches to low-salt versions of mainstream products such as crisps.

Of course, Nestle is not the first multinational to diversify into ethicality. (See how it already trips off the tongue?) Scottish Power acquired the biggest wind-farm developer in the US. Unilever snapped up Ben & Jerry's ice cream. In each case the 'ethical' division is but a fragment of the whole.

And fears that the parent company thereby transforms itself, in the public eye, from hate figure to saint figure are overdone. This is because consumers divide into three groups. The first group, the ethicists, know too much to be fooled; they know that Nestle's decision to sell right-on coffee changes nothing about its other operations. The second group know the score but don't worry whether companies are being nice or not: their view is that firms should stick to their knitting of generating wealth. The third, overwhelmingly biggest, group neither knows nor cares who makes what and on what ethical basis.

Much is made, especially by well-meaning lobby groups and the corporate social responsibility movement, of the rise of the ethical consumer, investor and employee. Surveys are produced that show how caring and sharing we all are. But actions speak much louder than words. We may tell pollsters that we would much rather our coffee was made by properly paid farmers in an environmentally sustainable manner. But we are not, by and large, willing to cough up the extra quid to do so; otherwise the fair-trade market would have killed off the unfairtrade products long ago.

To put the question at its sharpest: whose fault is it that only 3% of the market in instant coffee is fair-trade? The nasty capitalists running the food multinationals? Or the hypocritical consumers who are unwilling to put their money where their mouth is? Maybe it is simply too early to tell. At the very least, Nestle's decision increases consumer choice.

If consumers genuinely want to make the world a better place, all they have to do is reach for a different coffee.

The problem with ethical business, or corporate social responsibility, is that it all too often expects businesses to live in the world as we would wish it to be - full of ethical consumers and clients - rather than as it really is: full of demanding shareholders and profit targets. One of the great things about markets is that they do respond to consumer demand. If we want ethicality, there is no sense in waiting for companies to undergo a conversion to a hippy cause. Ethicality comes with a price tag, too.

Richard Reeves is director of Intelligence Agency, an ideas consultancy; e-mail: richard@intelligenceagency.co.uk.

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