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Does Being Ethical Pay?
For corporations, social responsibility has become a big business. Companies
spend billions of dollars doing good works—everything from boosting
diversity in their ranks to developing eco-friendly technology—and then
trumpeting those efforts to the public. |
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But
does it pay off?
Many companies hope consumers will pay a premium for products made with
higher ethical standards. But most companies plunge in without testing that
assumption or some other crucial questions. Will buyers actually reward good
corporate behavior by paying more for products—and will they punish
irresponsible behavior by paying less? If so, how much? And just how far
does a company really need to go to win people over?
To find out, we conducted a series of experiments. We showed consumers the
same products—coffee and T-shirts—but told one group the items had been made
using high ethical standards and another group that low standards had been
used. A control group got no information.
In all of our tests, consumers were willing to pay a slight premium for the
ethically made goods. But they went much further in the other direction:
They would buy unethically made products only at a steep discount.
What's more, consumer attitudes played a big part in shaping those results.
People with high standards for corporate behavior rewarded the ethical
companies with bigger premiums and punished the unethical ones with bigger
discounts.
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