The Importance and Implications of Ethical Branding

The Importance and Implications of Ethical Branding

Building your brands with ethics in mind is not just the right thing to do. Done right, it can play a major role in satisfying evolving buyer demands, for which ethical brand standards have become the norm.

In recent years, with members of Gen Z coming of age and the increasing buying power of Millennials, ethical branding practices have entered the marketing mainstream. Today, a company's strategy needs to be created with ethics in mind because it relates directly to audience interests. From ethically sourced products to a philanthropic approach to sales, ethical branding has become the norm in today's market place–and for good reason.

Ethical branding, of course, is a relatively broad term. It refers to a business and marketing strategy that positions your brand as focused on the common good, doing what's morally right rather than simply focusing on company growth or profits. It also highlights the importance of honest, authentic communications instead of traditional marketing speak and promotional language.

Finding the right suppliers, donating a portion of the profits, and raising awareness of issues relevant to your audience for example, are all things brands can do to increase their company’s positive public karma.

For some companies, this approach has been the norm for decades. Nonprofits tend to focus on ethical practices by default of who they are. But an increasing interest in "ethical companies" in both B2C and B2B spaces, have made ethical branding a trend that spans industries and audiences. As McKinsey outlines, an emphasis on sustainability has become increasingly popular even in the most traditional, slow-moving B2B industries.

So, let's dig into the details. This guide will explore the basics and nuances of ethical branding, from the origins of the trend to its tangible and intangible benefits, examples, and a clear outline of how you can take a similar approach in your own branding efforts.

Why Younger Generations Gravitate Towards Ethical Brands

An illustration of three people surrounding a giant smart phone. The smart phone has a large letter "Z" on the screen. Each of the three people is using a smart device of some type.

As outlined in a recent research paper from McKinsey & Company, consumption for younger generations is increasingly anchored in ethics. Gen Z in particular wants the brands from which it buys to have "something to say." Even more importantly, those ethics should be consistent between the company's suppliers, partners, and any other stakeholders in the larger brand ecosystem.

Millennials are not much different. They too want to shop responsibly, driven especially by an emphasis on sustainability that has long been a cornerstone of ethical marketing.

Expectations for brands, in other words, are high. And those expectations shine through when younger audiences start to make purchasing decisions. According to Leger's seminal Youth Study,

  • 46% of consumers between 15 and 39 reduced their consumption of fast-fashion products in the past year.
  • 40% of consumers in the same demographic avoided products with excessive packaging.
  • 24% of consumers in the same demographics avoided companies because of allegations of sexism or racism.
  • 23% of consumers in the same demographics avoided companies because of concerning environmental footprints.

It's not enough to avoid scandals, either. The rise of the #BlackLivesMatter movement has seen an increase in the belief that complacency makes you complicit. This shift in the social consciousness has made Gen Z and Millennials want to put their money into products and practices that actively support social causes.

In fact, one study found that 63% of Gen Z consumers are more likely to buy from brands that explicitly support a social cause.

The second component of ethical branding, authenticity, matters just as much to this demographic. One recent survey found that authenticity is an important factor for 90% of consumers when deciding which brand to support, and that number rises even higher among younger demographics. Of course, that's not necessarily news; brands perceived as honest have long been more profitable than others.

Don't underestimate the impact these statistics have on B2B brands either. After all, Millennials and Gen Z will make up more than 50% of the workforce within the next three years. Meanwhile, a recent survey among HR managers found that 81% believe their ethical and sustainable initiatives attract better, more motivated talent. As AT&T's Chief Marketing Officer puts it, "Millennials and Gen Z work for purpose."

5 Distinct Benefits of Ethical Branding

As hinted in the introduction to this guide, the increasing gravitational pull of ethical branding has brought with it some benefits that are far from esoteric.

To examine the concept further, researchers surveyed more than 2,000 consumers between the ages of 18 and 65 and published their research in the Journal of Business Ethics. As their study found, brands engaging in ethical behavior can expect 5 distinct, major benefits:

  1. Customers have greater brand commitment – They're more emotionally attached and less likely to care about price differences when the brand they're buying from is considered ethical. Oftentimes, they’ll use ethical practices like sustainable sourcing to justify higher prices. Even brand failures, like poor customer service, are less likely to be a reflection of the brand and more likely to be blamed on external factors.
  2. Perceived brand quality increases – A company that embraces and showcases ethical behavior is more credible, generating a level of trust that translates into higher perceived quality. Brand interactions, and even the product itself, become more valued and highly rated.
  3. Better understanding of customer needs – Brands that embrace a holistic ethical approach tend to have more empathic customer interactions, which leads to being more responsive to customer needs. Customers experience more positive emotions that raise brand commitment, thanks in part to the more personalized service.
  4. Increased customer loyalty – Customers whose values align with the brands they buy from can develop a strong emotional bond with those brands, making them more likely to stay with them in the long term. Searching for alternatives becomes less relevant, and the likelihood of customer retention increases.
  5. Increased positive brand conversations – Thanks to the boosted commitment and more positive feelings about the brand, customers connecting on the basis of ethics also become more likely to talk positively about that brand to others. They'll share their experiences directly and in online forums, creating invaluable word-of-mouth reach.

Combined, these benefits can have a significant impact on any company's bottom line. Ethisphere, which regularly ranks the world's most ethical companies, has found that its honorees outperform companies of comparable size by 7.1%. Meanwhile, 40% of these companies more than doubled the profits of their closest competitors.

Put differently, ethical branding isn't just the right thing to do--it can pay off significantly, in almost every conceivable way.

How to Frame Company Values to Appeal to Ethically-Focused Audiences

An illustration of four picket signs. Two have peace signs on them and two have heart symbols on them.

In short, the reasons behind the need for ethical branding are clear. Of course, the how is just as important in building a foundation that appeals to your audience on a deeper level.

That process starts with a foundation that's likely already in place: your company's values and mission statement. Changing those values might be challenging; instead, consider framing them in tangible ways that are specifically designed to appeal to your audience. Let's examine some examples to put your values into action.

Take a Stand on Social Issues

It's tempting to stay out of the flashpoints of so-called culture wars. But research consistently shows that taking a stance is much more powerful. Of course, that means more than simply changing your logo during pride month. For example, the #BLM movement saw companies increasingly recognizing Juneteenth and paying travel expenses in the wake of the Supreme Court's Roe v. Wade decision has become an increasingly popular brand action.

Put Your Mission Statement in Front of Your Audience

At its best, your mission statement sums up exactly what your company stands for. So why not get it in front of your audience? Make it as concrete as possible, then use it in ads and other messaging directly to your audience. You can even create content around your mission statement, like company leaders explaining what it means to them and how they try to live it every day.

Change Practices that Don't Align With Company Values

Ethical branding goes far beyond marketing. Leading by example is a key mantra, as increasingly observant audiences watch closely whether your actions meet your words and promises. Review business practices, from the employees you hire to the suppliers you work with, to align with your stated values. The recent trend towards carbon-neutral shipping options in eCommerce is just one of many examples where this approach applies.  

Own Your Mistakes

Not everything will go right. Some customers will be unhappy, and a PR crisis might be just around the corner. How you react to these efforts can go a long way towards building your audience's trust in your ethical business practices. Take responsibility for any mistakes, creating messaging that looks inward and builds authenticity as a result.

Look Toward the Future

Simply acknowledging and owning mistakes is a great start but doesn't tend to be enough to be truly perceived as ethical. It can be impossible to implement changes right away, but you can make a pledge to work towards a better experience in the future. Put actionable plans in place to address the issue, creating a roadmap for improvement that your audiences can follow along.

Building a Values-Focused Marketing and Messaging Strategy

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Ethical branding goes far beyond marketing and messaging, but those elements nonetheless play a key role in driving and improving perceptions across audiences. A values and mission-focused messaging strategy is typically built on a few pillars that we'll explore in more details below.

Share Your Story

It might be counter-intuitive in marketing that is often forward-looking, but grounding your brand and business practices in your own history can make it powerful. Telling the story of how a founder was driven by the desire to change the world can make your values come to life, creating a tighter connection with your audience.

Make Honesty and Transparency a Key Differentiator

The right value placed on honesty and transparency can, when truly embraced, make a massive difference in your messaging. Once you establish a reputation as a brand that's more honest and transparent than your competitors, customers will gravitate to you. As an explicit part of your brand personality, it becomes a filter through which all customer interactions can be judged and potentially improved.

Prioritize the Employee Experience

Employees play a key role in communicating the values of an ethical brand. It starts with paying fair wages, and communicating it not just to prospective employees but customers as well. Clearly communicating your mission also attracts more mission and values-focused employers, which become more engaged--the first step in delivering a better customer experience.

Emphasize Ethically Sourced Materials

Is part of your mission-focused drive connected to producing goods or services that are sustainably sourced? If so, talk about it often and early. Include the details in product descriptions or create content specifically describing your supply chain in customer-friendly terms. Given the move towards green marketing in both B2C and B2B environments, it's difficult to overemphasize this type of benefit.

Build Your Brand With Strong Morals

Don't shy away from expressing strong opinions, as long as those opinions are consistent with core company values and audience expectations. Potential customers who align with your values tend to respond positively to strongly and clearly expressed morals, especially when they are connected directly to your industry or value proposition.

Emphasize Company Donations

Company donations have become increasingly common, with entire business models being built in part on donating part of their profits to relevant charities. A timeless analysis of the Harvard Business Review examined the competitive advantage that corporate philanthropy can bring. But of course, that's only the case when you talk about it, like actively communicating how the percentage of a customer's given purchase will result in charitable donations.

From Ben and Jerry's to Earth Angel: Ethical Branding in Action

None of the concepts and best practices mentioned throughout this guide are theoretical. Companies in both consumer and business-facing industries are putting ethical branding strategies into action to appeal to more demanding, socially conscious audiences. These are just some of the many examples in the market today.

Patagonia Takes a Leading Role to Solve the Fashion Industry's Waste Problem

The outdoor clothing brand openly admits that through the products it sells, it contributes to the sustainability issues connected to the fashion industry. The result: an active campaign to use its influence and profits for fighting climate change, from lobbying for environmental regulations to paying an "Earth Tax." Its customers know that when they buy from Patagonia, they support a company dedicated to improving the planet.

Ben and Jerry's Promotes Fair Wages and Sustainable Sourcing in the Ice Cream Industry

The popular ice cream company has become a global case study in brand marketing because of their seemingly unexpected commitment to ethics and social justice. Consumers who purchase their products know as much about its effort to pay fair wages and sustainable materials sourcing as they do about its tastes and flavors. When the company takes a political stance, it does so knowing that its audience appreciates the strong moral stances it tends to take.

Teal Media Brings a Conscious to the Creative Services Industry

Teal Media is a creative agency located in Washington DC that promotes more than just their abilities in brand strategy, web development, and graphic design. Their tagline, Creative With a Conscious makes it clear from the jump: these professionals aspire not just to great designs, but to create positive social change designed to make the world a safer place. Their strategic client choices clearly reflect a portfolio of partners to help drive that change.

Earth Angel Builds a Business Around Sustainability in the Production Industry

Given their one-time use nature, entertainment production might not scream sustainability, but that's exactly where Earth Angel has built its niche. They help studios, sound stages, film offices, production vendors, and other organizations in the industry create more sustainable physical solutions, and their proof points are delightfully specific. Over the past decade, Earth Angel has saved their clients more than $1.2 million in production waste while diverting more than 10 million pounds of production waste from landfills.

Building Your Own Approach to Ethical Branding

An illustration of a person standing in front of the letter "Z", a giant red heart, four picket signs with peace signs and hearts on them, and a smily face symbol.

Ultimately, ethical branding doesn't come with a one-size-fits-all approach. Instead, it's about building around a few central tenets, authenticity and focusing on the greater good, and applying those tenets in ways that are particularly relevant to your business and audience.

Anything else would, ironically, be far from ethical. Simply stating you care about the environment when your company values or mission don't support that statement will not be positively received by an increasingly media-savvy audience. Instead, it's about starting on the inside, recognizing where your values lie and then extending those values into your business practices, branding, and everyday messaging.

From there, it's all about continuous improvement. The change to an ethical brand doesn't happen overnight, but can take years to build. Small improvements, consistently repeated over a long period of time, will be more effective (and more authentic) than a big change that doesn't align with your values and doesn't have a high probability to stick long-term.

Where Steel Croissant Comes In

We can help in building those practices, starting with discovering who you are and how that connects to where you want to go. Over time, we will become your partners to develop ethical business and branding practices to help you stand out and build strong relationships with your audiences. Contact us to learn more today.

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