Consumers pay heed to CSR when buying products

Consumers actually punish companies for unethical behavior for example, a company that exploits foreign workers by expecting to pay proportionately less for those goods.

The anti-sweatshop brigade has often put companies like Nike, Gap and Levi Strauss under the scanner for exploiting workers around the world. The companies themselves eventually realized that this was not correct. Gap, for instance, came out clean by publishing a social responsibility report which revealed the working conditions in its factories in Mexico, China, Russia and India. Cracking down on child labor and bad working conditions, Gap cancelled its contracts with several factories across the world.

But at the end of the day does the consumer care about what happens in the sweat shops when s/he is picking up a product from a supermarket shelf? Apparently yes. Latest research from Canada’s Richard Ivey School of business has revealed that consumers are willing to pay more for ethically produced goods.

The study titled ‘Reward or Punish?’ conducted found a strong relationship between a company’s ethical behavior and a consumer’s willingness-to-pay. Consumers, it seems, have started using corporate social responsibility (CSR) as an important factor in evaluating their willingness to pay for a product.

Companies should be increasingly interested in behaving ethically as there are economic benefits for companies that behave in a socially responsible manner. The ethicality of a company’s behavior is an important consideration for consumers and influences how much they are willing to pay for a company’s products.

CSR is sustainable only if virtue pays off. The supply of corporate, virtue is both made possible and constrained by the market while there is a place in the business system for responsible firms, the market for virtue is not sufficiently important to make it in the interest of all firms to behave more responsibly.

CSR is sustainable only if virtue pays off. The supply of corporate, virtue is both made possible and constrained by the market while there is a place in the business system for responsible firms, the market for virtue is not sufficiently important to make it in the interest of all firms to behave more responsibly.

But what does this really imply?

For one, there are rewards for companies that act in a socially responsible manner. Consumers are willing to pay substantially more for ethically produced goods. When consumers are given information about the social behaviors of a company, they are willing to reward companies for ethical behavior. A good example is that of coffee companies that are able to charge more for fair trade coffee compared to other roasts.

Secondly and perhaps more importantly, the research warns companies of more serious consequences of unethical behavior. Consumers actually punish companies for unethical behavior, for example, a company that exploits foreign workers by expecting to pay proportionately less for those unethically produced goods.

Consistent with positive negative asymmetries, the notion that individuals react more strongly to negative information, the research found that there is a stronger punishment for unethically-produced goods and a smaller reward pattern for ethically produced goods. The expectation produced goods is far greater than consumers’ willingness to pay more for ethically produced goods.

The era of self-interested companies trying to maximize wealth at any cost appears to have been supplanted by an era of corporate social responsibility. This research represents an important step towards understanding consumer psychology by demonstrating that consumers can influence the price a company can charge for a product.

Over the years, progressive organizations have demonstration several laudable example of responsible corporate action for social development. Unfortunately many of these efforts have not been able to reach a level of scale and dimension that can make an impact difference on a nation as large and diverse as India. Despite possessing rich and diverse managerial capability a tradition of entrepreneurship, economic resources and the right consciousness, corporate firms are still unable to participate in a more meaningful way in building natural and social capital.

The reasons are many and complex. This relate to the lack of a congenial external environment as also to organizations vision values, leadership and competitive capability. However, if there is one common thread, it is the unassailable fact that markets have failed to reward to reward CSR (Corporate Social Responsibility).They do not adequately provide in the drivers required to sustain a level of intensity of long term engagement necessary to produce results in the vast social fabric.

CSR is sustainable only if virtue pays off. The supply of corporate, virtue is both made possible and constrained by the market while there is a place in the business system for responsible firms, the market for virtue is not sufficiently important to make it in the interest of all firms to behave more responsibly.

Over the years, progressive organizations have demonstration several laudable example of responsible corporate action for social development. Unfortunately many of these efforts have not been able to reach a level of scale and dimension that can make an impact difference on a nation as large and diverse as India. Despite possessing rich and diverse managerial capability a tradition of entrepreneurship, economic resources and the right consciousness, corporate firms are still unable to participate in a more meaningful way in building natural and social capital.

The reasons are many and complex. This relate to the lack of a congenial external environment as also to organizations vision values, leadership and competitive capability. However, if there is one common thread, it is the unassailable fact that markets have failed to reward to reward CSR (Corporate Social Responsibility).They do not adequately provide in the drivers required to sustain a level of intensity of long term engagement necessary to produce results in the vast social fabric.

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