The Emerging Ethical Economy and Implications for the Consumer Goods Industry
The New Consumerism alludes to the emerging ethical economy as consumers reassess their priorities, opting for conscious instead of conspicuous consumption. This means they are considering the green credentials and ethical footprints of the products and services they purchase with strong implications for the consumer goods industry including all those involved in the supply chain ranging from the ingredients to packaging companies and retailers in addition to the consumer brands. It is important that all these business organisations have a clear understanding of what the ethical economy constitutes in order to take any meaningful action that will translate to greater commercial success. This article aims to provide a definitive shape to the different concepts relating to sustainability and ethics by drawing on the extensive research Euromonitor has conducted on the relevant topics so far.
The ethical economy comprises of five key pillars listed below:
The Green Economy -comprises of two key tenets including renewable energy and recycled/reusable material in order to ease pressure on natural resources as well as curb CO2 emissions thus contributing to sustainability and avoiding any potential risks in the supply chain. Increasingly, a larger number of companies are endorsing the principles of the Green Economy by incorporating policies that are more environmentally friendly and reduce their reliance on natural resources.
The Circular Economy – is the anti-thesis to the linear buy, use and bury model. As the name implies, it is a system where everything is reused and nothing is wasted, thereby preventing depletion of the finite natural resources. IKEA is one of the pioneers of the Circular Economy and its environmental goals include using recycled, recyclable and renewable materials for its products, allowing customers to sell used IKEA products back to IKEA, which the company will sell at no profit and investing in renewable energy and becoming more energy efficient. IKEA has received kudos for its green initiatives.
The Sharing Economy – the two key aspects driving the sharing economy are the frequency of product usage and the space required to store them. Products that are occasionally used (such as sports equipment), used once (such as DVDs) and for a specific period of time (such as baby equipment) are rented out, reducing the need to buy new products and, in the process, contributing to sustainability. This, however, can impact the consumer goods industry negatively by curtailing demand for brand new products.
The Subscription Economy – is a business model in which pay-per-product (or service) is moving towards a subscription model with consumers subscribing to a regular product or service for a specific subscription fee. There are various forms of subscription models including surprise boxes, regular supplies, short-term access and long-term leasing. The cosmetics industry was a trailblazer with ventures such as Birchbox, but now it is also available in other industries including packaged food. Subscription boxes are effective ways of promoting new products in a targeted fashion while helping to cut down on waste or unnecessary purchases.
The Fair Economy – is based on treating suppliers and employees with fairness and transparency. Fair trade is an integral part of the Fair Economy and ensures sustainability by guaranteeing a fair price to farmers, allowing them to afford a decent standard of living. This, in turn, helps to secure an unhindered supply chain. Marks & Spencer is one of the leading organisations to champion fair trade.