Do Ethics Pay?

Today’s Wall Street Journal reported on the large sums of money companies invest in social responsibility. (Policy Innovations ran a story last month about how CSR programs might fare during a recession.) The WSJ focuses on the extent to which consumers reward ethical behavior.

WSJ conducted a series of experiments in which three groups of consumers were shown the same products, but one group was told the products were made using high ethical standards while the other was told that low standards had been used. The control group got no information regarding the products.

In short:

Regardless of their expectations, consumers were willing to pay more for ethical goods than unethical ones, or ones about which they had no information. Likewise, negative information had a much bigger bearing on consumer response than positive information. People punished unethical goods with a bigger discount …than they rewarded ethical ones with premiums…

People with high expectations doled out bigger rewards and punishments than those with low expectations.

The Policy Innovations article notes that ethical products tend to experience smaller losses during an economic downturn than most goods because of ethical consumers’ commitment to concerns other than price.

WSJ suggests that ethical consumers should be targeted regardless of the state of the economy:

Companies should segment their market and make a particular effort to reach out to buyers with high ethical standards, because those are the customers who can deliver the biggest potential profits on ethically produced goods.