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Why your e-commerce business needs to have ethical practices

The rise of social media and “clicktavism” are helping to drive a global movement of consumers who are demanding that companies – both big and small – adhere to ethical practices. So what does it mean to be an ethical company and how can e-commerce businesses become more responsible in their everyday practices?

Nobel Prize-winning economist Milton Friedman had a clear view on corporate social responsibility back in the 1970s. “The business of business is business,” he famously said. In Friedman’s view, a company’s social responsibility was to increase its profits.

How times have changed. Today, a company’s reputation relies on its commitment to ethical practices. People judge a company the same way they judge a person – if they don’t like your behaviour, they won’t be your friends. So, how ethical is your business?

Changing ethical expectations

Leeora Black, Managing Director of the Australian Centre for Corporate Social Responsibility, a consultancy that works with organisations to help them improve their performance through responsible business practices, says the demand for business transparency and accountability has grown significantly over the past 15 years. “Broadly speaking, societal expectations are changing,” notes Black. “There’s a desire of consumers to understand where their products were made and how they were made and to feel confident that the practices are ethical. Once you understand the issues, it’s hard to ignore them. You can’t say ‘I know my handbag was made using child slave labour, but that’s ok’.”

Consumers can now highlight their disapproval via social media campaigns and clicktivism – the use of digital media for facilitating social change. It was these kinds of protests, combined with street demonstrations, that threatened a boycott of Starbucks in the UK in 2012, because of the company’s tax avoidance arrangements. Subsequent to the consumer protests, Starbucks announced it would substantially increase the amount of corporation tax it paid in the UK. Closer to home, Woolworths was forced to shelve its ANZAC Day “Fresh in our memories” website  after a public backlash against the corporation placing its logo on photographs of Australian servicemen.

Ethical expectations are likely to increase. The Australia & New Zealand Consumer Trends 2015 report by market intelligence agency Mintel predicts a growth in consumer demand for clarity in areas such as ingredients in food, treatment of workers and online terms and conditions.

Reputation counts

Ethical practices are good for business. They can attract new customers and increase loyalty. A study by New York based consultancy Reputation Institute found that 73 per cent of consumers in the 15 largest markets in the world are willing to recommend companies they believe have a positive stance on social responsibility.

More organisations are becoming aware of the value of ethical practices. Companies such as Westpac, for example, are working to promote sustainable practices by undertaking internal and external audits to verify their suppliers’ operational practices.

E-commerce businesses need to carefully consider their suppliers. Ignorance is no longer a defence, and if your business is selling goods derived from unethical practices, consumers are likely to hold you accountable. It pays to check the ethical credentials of your suppliers – look at how their products are made, who makes them and under what conditions, and seek to work with suppliers who can prove the environmental and social impact of their operations.

Black says one of the greatest ethical threats to e-commerce businesses is the security of customer information, so it’s important to ensure your processes protect your customers’ privacy and data – particularly with credit card information. “These are key risks for e-commerce businesses, because they’re dealing with everything over the internet,” she says. “Security, privacy, integrity of systems and fair processes for dealing with customer complaints are the basics of corporate social responsibility for an e-commerce business.”

10 questions for e-commerce retailers to ask their suppliers

1. Do you have an ethical procurement policy?

2. Can you provide an ethical supply chain audit report?

3. What steps do you take to protect customer data?

4. What reasons did former customers have for leaving you?

5. Who makes your products?

6. How do you apply fair employment practices to your employees and subcontractors?

7. Do you maintain records of potential environmental hazards and have systems in place to reduce their risk?

8. What steps does your organisation take to reduce its greenhouse gas emissions?

9. Do you have initiatives in place to minimise or reduce the amount of packaging used?

10. Has your organisation had any employment-related convictions in the past two years?

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