In the past year, everyone has been flashing ethical credentials. Take the Waitrose Foundation, set up to improve conditions for South African farmworkers; Tesco's £100m environment fund; and Asda's commitment to recycle all its waste.
Now, as people become more attuned to issues such as climate change, fair trade and organic food, more and more suppliers are using ethics to boost sales too. New manufacturers are increasingly conscious of the benefits of joining either the healthy or the ethical camp, and established companies such as Nestlé and Procter & Gamble are making moves to improve their reputations.
Nestlé has launched a web site dedicated to answering critics of its infant formula marketing in developing countries while P&G has forged a partnership with the Humane Society of the United States to eliminate the use of animals in product development. If this trend continues, ethical conduct won't just be a way to tap into a small minority of consumers, it will be a prerequisite to trading. But can companies still be profitable while being ethical?
The answer, at first glance, would seem to be an emphatic yes. UK sales of goods branded with the Fairtrade mark hit £195m last year, up 40% on the year before. Sales of organic food leapt by 30% in 2005 to £1.6bn, the fastest growth this century. And in a report published two weeks ago by AccountAbility and the National Consumer Council, entitled 'What Assures Consumers?', the authors say 90% of UK consumers oppose caged egg production and 80% support reducing food miles. The sentiment is clear, and would suggest that those businesses with a similarly clear brief can make money.
Cafédirect, the Fairtrade coffee, tea and cocoa supplier, grew turnover by 14% in 2005 to £19.75m with an operating profit of £665,495. Although that equates to a relatively modest operating margin of 3.4%, it's enough to get CEO Penny Newman thinking big. "Cafédirect could become a global brand. We're looking at developing a brand in Tanzania and want to establish markets in Mexico, Europe and the US too."
She is adamant that profit should not be sacrificed. "We are not a charity. It has to be about making a profit that you can share with your farmers. Fair trade is a 365-day purchase, not just something you do during Fairtrade Fortnight."
Of that £665,495 profit last year, 86% went back to growers through a variety of support and development activities and Newman hopes that she is leading the way towards a whole new way of trading.
However, consumer sentiment does not always translate into ethical shopping behaviour. The AccountAbility/NCC report points out that although 90% of consumers oppose caged egg production, only 50% buy free range eggs. And although 80% of consumers say they want to reduce food miles, only 25% look at country of origin labels. So, are consumers simply paying lip service to ethics - and are price, quality and status still the true determinants of how money is spent? This is something basmati rice supplier Tilda is acutely aware of. Although it invests heavily in its growers in India and pays premium prices, it does so to ensure the quality of its rice rather than to proclaim its ethical stance.
Jonathan Calland, external relations manager at Tilda, says: "We have to provide our customers with the highest quality rice. But it's hard work to produce, so we visit farms to provide free advice and machinery to encourage farmers to continue growing it. It's enlightened self-interest really."
As a result, Tilda boasts sales of £80m in the UK, including a 17% share of the £121m dry rice market and a 14% share of the rapidly growing microwave rice market, up 26% year-on-year and worth £76m. Tilda also has a significant following in ethnic communities that value the high quality of the rice.
Of course, playing the ethical game is not easy, particularly if you're a small supplier bought out by a bigger company. Green & Black's, The Body Shop and Pret A Manger have all been acquired by bigger companies keen to cut themselves a slice of the ethical pie. The trick is to deliberately distance the brand from the parent to ensure that the ethical image remains in tact.
But not every product can realistically tap into this ethical trend. The Fairtrade Foundation says it would not endorse a cigarette brand, because consumers wouldn't be able to reconcile the ethical stance with the unhealthy image. And Tim Sleep, director of retail at Ernst & Young, does not believe an organic ready meal would work because of the processed nature of the product. He adds: "It's as much a question of awareness as anything else. Are people aware of what it means to be organic? Probably not."
That's something Yeo Valley Organic is addressing with some success. Although the total yoghurt sector grew 3.3% year-on-year to £894m [ACNielsen 52 w/e 17 June 2006], Yeo Valley Organic yoghurt sales, which make up 80% of the brand's £80m retail sales, were up 22%. The company is also benefiting from interest in organic milk, a sector that saw sales rise 53% year-on-year to £118m, with Yeo Valley Organic's milk sales up 120%. In the past four weeks it has become the market leader in that sector, according to Ben Cull, marketing director. He says: "We've been trying to demystify the organic concept, telling people about the merits of crop rotation and looking after the land. It's about doing things the right way, and for us that means providing organic food to the masses and guaranteeing farmers a fair price."
Cull's only concern is that the ethical bandwagon may become unstable if too many companies jump aboard without committing fully to the principles. But he adds: "There's a level of transparency you can't go beyond. If you start singing your own praises too much, it looks like a bolt-on."
The truth is that more companies will be blowing their ethical trumpets in the future. Julia Hawkins at the Ethical Trading Initiative says: "Is there a business case for ethical trade? Our members say yes. There are reputational benefits, efficiencies in the supply chain, and credit from the investment community too. In the medium to long term, businesses can really use these issues to their advantage.Ethical consumerism worldwide
Global sales of fair trade lines increased by more than a third to hit £758m in 2005. TNS Worldpanel data shows that 40% of UK households bought a fair trade product last year. Tesco reports that 25,000 new Clubcard customers are buying for the first time every week.
Organic up: Organic food sales have increased from just over £100m in 1993/94 to £1.2bn in 2004, an 11% increase on 2003.
Free range up: Free-range egg sales grew by 38%, from 24% to 30% of all eggs sold in the UK between 1998 and 2003. In terms of retail sales, Sainbury's reports that free range eggs account for more than 50% of total egg sales.
Investment up: Ethical investment and banking is growing at a rate of more than 15% per year. Money invested ethically in the UK broke through the £10bn barrier in 2004.