Ethical brands: Moral minority

and pleasure', says founder Sam Roddick, 'but no one should have to
suffer because of it.' Not unless they want to, of course.

Coco de Mer, which sells products made from naturally felled wood, and
non-toxic sex toys endorsed by the World Wildlife Fund, is an indication
of how far the concept of moral marketing has travelled since Roddick's
parents founded The Body Shop 30 years ago.

Today, brands built on strong ethical and environmental principles are
blazing a trail in sectors as diverse as chocolate and banking.
Innocent, Green & Black's, Banyan Tree and The Co-operative Bank all
successfully combine a strong product offer with an appeal to consumers'
sensitised conscience (see boxes below).

Is this a passing fad, or evidence of a seismic shift in the way brands
engage with the world? Mike Gidney, director of policy at fair-trade
organisation Traidcraft, is in no doubt that the fundamentals have
changed. 'The old model - that business is business, making its
contribution through tax and employment - isn't enough any more,' he
says.

Profitable approach

Innocent's marketing director, Richard Reed, who describes himself as
'part hippy, part capitalist', believes 'the current capitalist system
isn't going anywhere', and says his aim is to 'embarrass the big food
companies' by taking market share. 'Consumers want something that is
produced in a responsible manner and I want to show that there is cash
in it,' he adds.

It would seem that there is. Innocent launched in 1999 and reached sales
of £18m in 2004, accounting for half of the UK smoothies market.
The company, founded by three friends 'intent on doing a bit of good',
backs its quirkily-expressed, eco-humanist values with an annual
donation of 10% of profits to reforestation projects in the world's
fruit-growing regions.

A similar concern for indigenous cultivation has been a factor in Green
& Black's spectacular marketing progress. 'There is no doubt that our
ethical attributes helped us get distribution in the big chains,' says
marketing director Mark Palmer, recently voted The Marketing Society's
marketer of the year. The brand achieved 70% growth in 2004, compared
with 2% for the chocolate category as a whole. Meanwhile, The
Co-operative Bank, which summarises its approach as 'profit with
principles', saw retail customer deposits soar from £1bn to £6bn in the decade following its relaunch as an ethical bank.

While all these brands are outstripping the growth of their sectors,
none is huge in absolute terms, which sparks the question of whether
moral marketing is still just a niche ploy.

Estimates of the size of the ethical market vary widely. The
Co-operative Bank puts it at £25bn, but that includes £9bn
of indirect investment business.

Direct spending by consumers on ethical products and services sits at
£8.75bn - about 4% of the total consumer pot.

Simon Williams, director of corporate affairs at The Co-operative Bank,
is dismissive of the niche argument. 'Four in ten eggs bought in the UK
are now free-range, despite the higher price', he says. 'That is not a
niche.'

Perhaps it is the simplicity of that choice - free-range or not - which
is part of the reason for that mass-market success, however. The
difficulty comes with the array of questions facing consumers as they
shop. Is this a fair-trade product? Have any animals been harmed in its
production?

Is it organic? Is the packaging carbon-neutral? Does the company that
makes it use green energy? What about the companies that supply to
them?

'It is confusing for customers', admits Mike Gidney. 'You need a degree
in social science to go shopping.'

Snap decisions

Michael Willmott, co-founder and director of the Future Foundation,
believes that rather than being confusing, an ethical image can work in
a brand's favour as a tie-break decider between increasingly similar
offers. 'We're working on a theory that as choice expands, consumers
can't take it in and act more intuitively around fundamentals such as
"are these good guys?"'

The need to be seen as 'good' is exercising minds at the big
multinationals, which are becoming alarmed at the sudden intrusion on
share by specialist ethical brands. From a practical point of view they
are faced with two strategic choices: buy the halo or earn it. Neither
is an easy fix.

The first route has seen Unilever acquire Ben and Jerry's, Cadbury buy
Green & Black's and McDonald's snap up a 30% share of Pret A Manger.
However, in each case the bigger company has been at pains to underline
the standalone status of the acquired brand. There is no evidence that
the main brands have enjoyed any extra respect for their own ethical
credentials as a result of the acquisition, although Green & Black's'
Palmer believes it can have a feel-good effect internally.

Behavioural change

The second approach - earning the 'good guy' tag through better practice
- can imply an overhaul of company policy so far-reaching as to make
shareholders shudder. Consumers may rely on shallow hunches in their
judgment of good and bad, but are perceptive when it comes to detecting
duplicity, and are aided in their choices by pressure groups and
bloggers intent on exposing any deviation between what a company says
and does.

Moral marketing can never be covered by a tacked-on corporate social
responsibility (CSR) programme; the brand must be seen to uphold its
ethical principles across the organisation. At The Co-operative Bank,
for example, even the choice of toilet paper in staff washrooms is
governed by ethical considerations, with the staff doing the choosing,
based on investigations into the eco-credentials of the options.

The bigger the company is and the more established its ways, the harder
it is to get right. As Palmer points out: 'It's much easier for
companies such as Green & Black's and Innocent to take this holistic
approach because it has never been an added cost; it has always been a
part of their way of doing business.'

A challenge to that view comes from an unexpected quarter. 'Shareholders
are important', says David Hudson, communication and corporate affairs
director at Nestle. 'But we work to a triple bottom line where we have
to deliver on social, environmental and economic dimensions.
Increasingly our ethical standards will become more apparent at a brand,
rather than just corporate, level.'

Adrian Hosford, director of CSR at BT, points out that shareholder
return is not always at odds with environmental good. 'We now have 15%
of our people working from home, saving the business £400m last
year,' he says. 'But that also reduces travel and the energy costs that
go with it, as well as giving people a better quality of life'. He adds
that it is not just customers who care about ethics. 'One-third of our
graduate applicants cite BT's achievements in sustainable development as
a reason for their interest in the company.'

Continued progress

However hard big business works on its ethical reputation, the reality
is that the smaller moral marketers can make things tough by continually
moving the game on. Reed wants Innocent to become the first FMSG brand ,
with the 'S' standing for sustainable. 'At the moment, 25% of our
packaging is recycled; I want to be a 100% recycled business. I want our
business system to have either a zero or positive environmental impact.
Big companies can do this, but it doesn't work well for quarterly
shareholder reporting.'

Palmer sees the eventual evolution of a kind of two-tier moral
market.

'Ethical trading will be a requisite', he says. 'But there will be some
blurring and confusion. In 10 years' time, there will be the
super-ethical niche brands, and bigger brands that carry that spirit
into the mainstream.'

However it pans out, it is clear that, from eggs to sex toys, morality
has finally become fashionable.

BANYAN TREE HOTELS & RESORTS

Founded: First resort opened in Phuket in 1994.

Moral stance: Champions eco-tourism. Values ecology and natural
environment and strives for social and economic progress in
less-developed areas. Transformed an abandoned tin mine into Phuket
resort. While building Vabbinfaru resort in the Maldives, used small
boats to transport materials to avoid harming coral reef.

Commercial performance: Grown from one resort to 16 in 11 years, with 46
spas and 49 retail outlets in 19 countries worldwide. Revenues in 2004
grew 40% from £53m to £75m.

Next big challenge: Launching Banyan Tree Ringha, China, in 2006.

INNOCENT

Founded: 1999.

Moral stance: Combines a belief in product purity with eco-humanist
values. Resolutely refuses to use concentrates and accepts lower margins
as a consequence. Supports reforestation projects and non-governmental
organisations in the poorer fruit-growing regions of the world, all with
a characteristic lightness of touch.

Commercial performance: Built from scratch into an £18m brand in
six years. A brand leader in the UK smoothies market, it has a 50%
share. In 2004 sales grew by 110%.

Next big challenge: Making the transition from the £70m UK
smoothies market to the £11bn UK soft-drinks market.

GREEN & BLACK'S

Founded: 1991.

Moral stance: Maya Gold chocolate was the first Fairtrade Foundation
product to be sold in Britain. The company pays farmers a premium price.
It uses a variety of trees within cocoa farms, which increases
biodiversity and helps fight diseases. It does not spray cocoa with
pesticides, so farmers avoid related health problems.

Commercial performance: The UK's fastest-growing confectionery brand,
with 67% growth in 2003 and 70% in 2004. Acquired by Cadbury Schweppes
in a £20m deal in May 2005, it has a 5.4% share of the UK block
chocolate market and sales of £22.4m.

Next big challenge: To perform on an international stage as a part of
Cadbury.

THE CO-OPERATIVE BANK

Founded: 1872 (relaunched as an ethical bank in 1992).

Moral stance: Will not invest money in areas it deems unethical. These
include tobacco, the fur trade and countries with oppressive regimes. It
is a vociferous champion of the ethical business movement and publishes
an annual Ethical Consumerism Report.

Commercial performance: Retail customer deposits grew from £1bn to
£6bn in the 10 years following its relaunch.

Next big challenge: Co-op food stores have not emulated the bank's
success through mainstream ethical marketing. However, ethics cannot
compensate for poor products, and the stores have long-trailed the
leaders in the basics.

ESSENTIALS - THE QUAKERS

Ethical marketing is not the late-20th-century phenomenon it first
appears. Its antecedents reach back at least two centuries to the unique
commercial morality of the Quakers, who believed that business
prosperity was achieved and justified by being good at something that is
good for people.

In an era when it was common for retailers to add water to butter, chalk
to flour and to tamper with scales, the resolute honesty of the Quakers
attracted a large and loyal following.

Some of the brands they founded still prosper today, including Cadbury,
Clarks, Price Waterhouse, Barclays and Lloyds.

The Quakers combined fair dealings for customers with a visionary
concern for those further back in the supply chain. For example, 100
years ago, in a move that presaged today's fair-trade idealism, the
Cadbury family shifted cocoa sources from Angola and other Portuguese
territories to the Gold Coast (now Ghana) because of concerns about
slave labour.

The acquisition of Green & Black's by Cadbury Schweppes therefore has a
certain aptness, and Mark Palmer claims Cadbury's Quaker heritage was a
factor in the deal. 'The ethical roots of Cadbury's business are
strong.

We needed investment and during a three-year getting-to-know period,
Cadbury was respectful of what had been achieved.' Green & Black's will
now get access to Cadbury's international and CTN distribution.

From Cadbury's point of view, the one sector enjoying run-away growth is
premium dark chocolate, in which the company is under-represented.

The Green & Black's deal buys Cadbury credibility in that sector as well
as in organic and ethical chocolate.

- Helen Edwards is a consultant and author, who also lectures on brand
management at London Business School.