Consumerism vs Sustainability Debate on Consumer Ethics and Innovative Practices Promoting Sustainable Business

Consumerism v/s Sustainability

Debate on Consumer Ethics and Innovative Practices Promoting Sustainable Business

BSM302 CSR+SD

Carlos Fierro K1042263

MA Design for Development

31:04:2011

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Content

Executive Summary 4

Introduction 5

I. Consumerism vs Sustainability, Framing the Issue 6

1. Consumerism: A Brief Historical Perspective 6

1.1 Consumer: An Active Participant in the Market 8

1.2 Social Issues in Marketing Communications 9

1.3 Business Impact on the Eco-sphere 10

1.4 Summary 10

II. Theoretical Framework 11

2.1 Ethical Perspectives of Consumerism 11

2.1.1 Ethics of Duty 11

2.1.2 Stakeholder theory 112.2 Unethical Perspectives of Consumption

2.2.1 Egoism

III. Current Initiatives 123.1 Global Initiatives

3.1.1 Consumer Rights 123.1.2 United Nations, Guideline on Consumer Protection

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3.2 Corporate Initiatives 14

3.2.1 Ethical Consumption 14

3.2.2 Collaborative Consumption 14

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IV. Case Study 15

4.1 ZIPcar, Innovation Business in Collaborative consumption 15

V. Conclusion 16

VI. Recommendations 16

VII. References 17

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Executive Summary

This report aims to explore ethical issues related to consumerism in a global context, to

identify the agents of consumerism and their participation in production and consumption, to

explore the role of marketing communications in businesses and its ethical social responsibilities,

to explore global and corporate initiatives relevant to the issue and to examine socially

responsible and sustainable business approaches to consumption.

Research shows that consumerism includes not only individuals, but also organizations

and governments and all agents that participate in production and consumption. The ethical

debate surrounding consumerism is framed by applying the perspectives of the theory of ethics

and duties, stakeholder theory and from the egoist perspective. A theoretical analysis illustrates

that all the agents that participate in production and consumption have the duty to make ethical

decisions supporting the preservation of the environment and social responsibility. To empower

the decision makers to make ethical decisions, it is fundamental that organizations and

governments provide and reinforce the decision-making process with the necessary information.

The Stakeholder analysis shows that consumers should be considered the most important

stakeholders in any business, and maintains that marketing plays an important role in that matter.

Marketing communications is one area that has the power to build relationships of exchange, to

understand needs, and generate fair communicational strategies. From the utilitarian perspective,

consumer behavior based on an egotistic ethical approach to production and consumption might

be unethical since the decisions made based on short-term outcomes can harm the environment

and be socially irresponsible.

It is important that companies are aware of the conventions and laws that have evolved

over time to protect consumers and the environment and that they adjust their business practices

accordingly. Moreover, the development of green marketing and other alternatives of ethical

consumption might assist consumers in making better informed decisions to choose more

sustainable products and services. To embrace this challenge it is essential to educate the public

about the social and environmental impact of consumption while considering cultural differences

in the delivery and acquisition of knowledge.

This report recommends that businesses consider new innovative modalities of

collaborative trading and that they should endeavour to learn more about consumer needs and

desires, and consider how the consumer organically participates in patterns of exchange. The

rapid development of new technologies and consumer dynamics makes this recommendation

possible and cost effective for businesses. Moreover, companies should consider new value

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systems in trading and consumption for the development of more sustainable businesses and

products; considering for example the durability, exchange, cooperation, recycling and the

evolving life of products.

Introduction

Consumerism is one of the most influential social phenomena that have impacted the

social, economic and environmental characteristics of western cultures in the last 70 years.

Moreover, in the last 30 years the world has experienced an incremental globalization of

businesses and market places; countries, societies and cultures from diverse regions of the

planet have become more engaged in massive production, commercialization and consumption

of goods on the premise of economic growth, social development and wealth accumulation.

The relationship between companies and customers is defined by marketing, which

provides companies with product policies, marketing communications, pricing approaches and

distribution practices. Marketing generally has been criticized for encouraging consumerism and

materialism. Consequentially, marketing influences not only individuals but also the economic,

social and cultural dimensions of societies and their environments. In addition, the role of

marketing communications is to develop communication strategies to inform and persuade

customers about the selection and consumption of products and services.

The aim of this report is to explore the ethical debates on the subjects of consumerism

versus sustainability and innovative global and local approaches towards sustainable business

practices from a responsive corporate angle. The debate involves exploring the theoretical the

framework that provides ethical perspectives on the issues of marketing communications,

consumer behavior and their social and cultural impact on society and the environment.. The

report will then examine relevant global and corporate initiatives developed to address the issues

of consumerism and sustainability. Finally, a case study will be used to illustrate innovative

practices for sustainable businesses.

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I. Consumerism vs Sustainability, Framing the Issue

1. Consumerism: A Brief Historical Perspective

In 1899 the Norwegian economist and sociologist Thorstein Veblen (1899) invented the

concept of ‘conspicuous consumption’. He instates the concept to describe the nouveau riche -- a

new social class that emerged in the early Nineteenth Century. The nouveau riche was people

eager to exhibit their wealth, social supremacy, and prosperity. They spent an incredible amount

of resources on all types of material goods like jewellery and clothing that visually differentiated

them from the masses.

After the Second World War, the western world experienced an incremental development

of science, new technologies, organization of mass production, and the invention of new

materials and products. This so-called second industrial revolution was characterized by an

increase in employment opportunities, economic growth and developments in the areas of health

and education. Western societies experienced a change in consumer behaviour that promoted

“throwaway living,” which was made possible by economic growth and the creation of new

markets and products intended to serve the needs of growing populations. (Thake, 2008). In the

context of businesses and the expansion of growing markets, marketing and advertisement

developed strategic tools to produce, promote, price and deliver new products and services. (Id).

The US economist and retail analyst Victor Lebow, (1955) published The Real Meaning

of Consumer Demand, which encompassed his vision of an economic system of unlimited

consumption. He wrote, “Our enormously productive economy demands that we make

consumption our way of life, that we convert the buying and use of goods into rituals, that we

seek spiritual satisfaction, our ego satisfaction, in consumption. The economy needs things

consumed, burned up, worn out, replaced and discarded at an ever increasing rate.” (Lebow,

1955).

In the last half of the 20th century the world’s consumption and expenditure rose at

unparalleled speed. In 1900, consumption spending was just about $1.5 trillion (UNDP, 1998).

By 1998, the public and private sector was expending over $24 trillion a year, doubling the levels

of consumption from 1975 and growing over six times above expenditures in the 1950’s. The

rise of consumerism in our globalized world not only has impacted the cultural advances and

incremental accumulation of wealth in western countries, but it has also engendered the

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construction of an unsustainable landscape of social inequalities, individualism, environmental

degradation, exploitation and economic disparities.

(The state of human development, United Nations Human Development Report 1998)

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(United Nations, Human Development Report, 2010)

1.1 Consumer: An Active Participant in the Market

In the last 70 years consumption has evolved from local to global; the consumer is not

identified only as ‘the individual’ but as a collective of companies, organizations and governments

that actively participate in producing and consuming.

The environmental damage induced by businesses does not rely only on the incompetent

strategic decision by companies. Social practices and cultural idiosyncratic consumer behaviour

are the principal variables that impact the environment. (Griseri and Seppala, 2010). Brinkmann

and Peattie (2008) in an article about consumer ethics, on one hand describe consumers as

amoral, self-interested individuals with an economical agenda seeking to satisfy their own needs.

On the other hand, Brinkmann also presents the consumer as an ethical individual with social

responsibilities who has the moral compass to choose what to consume, to respect the law, to

responsibly sustain themselves, meet society’s expectations and participate in philanthropic

initiatives.

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Consumer behaviour and consumer ethics model. Source: Johannes Brinkmann (2008)

A typology of primary ethical shopping motives (source: Etisk forbrug..., 2003, p. 21; authors’ table construction and transl.

from Danish).

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1.2 Social Issues in Marketing Communications

Marketing communications generally has been criticized for encouraging consumerism

and materialism, individualism, creating artificial needs, being intrusive, perpetuating social

stereotypes, and creating insecurity and perpetual dissatisfaction. (Crane & Matten, 2010). In the

book Global Problems and the Culture of Capitalism, Richard Robins (2005) asserts that the goal

of advertisers has been focused on the promotion of desire and in the imprint of values on

commodities, which the consumer uses to define his identity and desirability. Consequentially,

marketing impacts not only the individual but also the economic, social and cultural dynamics of

societies and their environments.

1.3 Business Impact on the Eco-sphere

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The current debate on sustainability and social responsibility has grown louder as it has

become widely accepted that the planet does not have enough resources to sustain the existing

economic models of consumerism,. The current lifestyle patterns of convenience and a

throwaway mindset have contributed to the degradation of the earth’s ecosystem by 60 percent in

the last 50 years (UNEP, 2010). Currently 90 percent of raw materials extracted from the earth

become waste within 90 days (Chapman, 2005).

Consumerism is seen as the foundation of western economic strength, and has been

rapidly adopted as a role model by developing countries like China. However, analysts such as

Jonathon Porrit (2007) emphasize that consumerism is a behavioral factor that contradicts

sustainability.. Porrit argues that the application of current economic western models to emergent

markets like China, with a population over 1.3 billion (Wikipedia, 2010), will be impossible to

sustain in the next 10 years since the planet does not have enough resources to supply the

production of products for those markets.

1.4 Summary

Consumerism is a cultural outcome produced by a complex set of economic social and

political decisions, actions and interactions. Such decisions involve several actors, which in their

particular contexts are responsible for making decisions on either side of the production and

trading chain. Those decisions can be influenced by communicational strategies used by

marketing management. As a consequence, those decisions provide a parameter for future

actions and policy development in local and global businesses and markets with the subsequent

environmental, social and economic impact.

II. Theoretical Framework

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2.1 Ethical perspectives of Consumerism2.1.1 Ethics of Duty

The theory of ethics of duty derived from the work of the German philosopher Imannuel

Kant (Crane and Matten, 2010) is a relevant parameter to support moral decision-making in the

area of consumption and its environmental impact. The theory states that humans are rational

and moral actors who, under any circumstances, desires or needs should be able to make ethical

decisions. The theory has a three part rational principle called the ‘categorical imperative.’ The

method frames decision-making by reflections on consistency, human dignity and the universal

recognition of the principles.

According to the tenets of Kant’s theory, in order to alleviate the impact consumerism has

on the environment and to support a sustainable balance between business practices and social

responsibility, it is the duty of all participants to be responsible for the moral decisions they make

when producing and consuming. The categorical imperative provides the necessary knowledge

and background to the public to enable them to engage with environmental and social problems

and for them to make better-informed decisions when producing or consuming. Furthermore, the

imperative is not only the responsibility of companies; it is also the responsibility of institutions

and governments to support the delivery of the knowledge by using all available media and

communication channels.

Universal recognition of such knowledge and background is crucial for the generation of

ethical decisions that will, in turn, have an overall positive impact. A communication strategy

must consider the agent and the agent’s cultural context to make sense in human terms. (Grisery

and Seppala, 2010).

2.1.2 Stakeholder theory

Stakeholder theory maintains that consumers should be considered the most important

stakeholders in any business because they actively support and help to sustain businesses over

time when buying or demanding a product or service.

In 1984, Evan and Freeman developed a compelling argument as to why companies

should consider the stakeholder and act in their best interest. The Stakeholder theory states “A

stakeholder of a corporation is an individual or a group which either: is harmed by, or benefits

from, the corporation; or whose rights can be violated, or have to be respected, by the

corporation.” (Crane and Matten, 2010).

Moreover, the Stakeholder theory maintains that marketing communication practices

should not violate the rights of others by using manipulative communication strategies. Marketing

communications should provide fair and truthful information about products and services,

avoiding the encouragement of consumerism and materialism, the creation of artificial needs,

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being intrusive, perpetuating social stereotypes, and creating insecurity and perpetual

dissatisfaction.

In addition, the corporate effect principle implicit in the stakeholder theory means that

companies are responsible for the effects of their performance on others. In the case of mass

marketing of products and brands, in the context of a globalized economy, an unethical practice

on a global scale can endanger the survival of local cultures and ultimately lead to an increase in

cultural homogenization. (Baughn and Buchanan, 2001).

2.2 Unethical perspectives on Consumerism

2.2.1 EgoismEgoism defines an action as morally right when the decision maker freely chooses to

pursue its own desires or interests. Adam Smith asserted that an economic system constructed

on the principles of free competition and individual self-interest was instrumental in the formation

of a fair and productive society. (Smith, 1776). In the case of consumerism it can be argued that

companies can introduce products or services on the market acting in their own economic interest

and without any interest in the common good, for example, the tobacco businesses. Furthermore,

the consumer can act in its own self interest and make unethical choices based upon its short-

term desires and long-term interest, for example, a consumer that buys African blood diamonds

without considering that a percentage of the money he paid will go to finance insurgency, or

warlord activities. According to egoism, the consumer’s unethical decision is justified even if

based only on self-indulgence or the satisfaction of short-term desires.

III. Current Initiatives

3. Global Initiatives3.0.1 Consumer Rights

On the opposite side of the consumer is the seller, who profits from trading products and

services. Several standards have been created to protect consumers based on the concept of

consumer rights. Crane and Matten (2011) state, “Consumer rights are inalienable entitlements to

fair treatment when entering into exchange with sellers. They rest upon the assumption that

consumer dignity should be respected, and that sellers have a duty to treat consumers as ends in

themselves, and not only as means to the end of the sellers.”

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3.0.1 United Nations Guidelines on Consumer Protection

Another global initiative to protect the consumer is the United Nations Guidelines on

Consumer Protection, which sets the needs of consumers and operates as a guide for

governments to legislate in a manner that protects the consumer. Laws evolve over time to

respond to cultural changes and governments are now interested in the development of new

business models that can assist them in developing new policies to respond to economic, societal

and environmental demands.

The United Nations guideline on consumer protection, (Source: Business and Ethics, Crate and Matten, 2010)

3.1 Corporate Initiatives

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Currently, global and local policies, self-regulations and business ethics support the

development of an ethical approach to marketing. Green marketing, the development of ethical

brands, third party sources and investment in promoting community relations are some of the

marketing initiatives developed to respond to CSR criteria and business ethics. Nevertheless, a

“recent research by Du, Bhattacharya and Sen (2007) indicates that not all CSR initiatives are

developed equal, consumers react positively to a brand that relate itself on CSR, than to brands

that only engage in CSR for convenience. If CSR strategy is integrated with core business

strategy, consumers are more likely to hold positive beliefs towards the brand, have greater

purchase likelihood, be more loyal and engage in advocacy behaviour” (Dall’Olmo Riley, 2011).

3.1.1 Ethical Consumption

Third party sources, ethical organizations working in social responsibility or

environmental issues, are important marketing factors that can influence ethical consumption. The choice of purchasing becomes a voting behavior; the consumer evaluates the product

beyond its physical condition by considering the product’s social impact before its acquisition.

Information and awareness are key elements for ethical decision-making. For example, when a

consumer chooses to buy Fair Trade products like coffee or chocolate bars because the

consumer understands, and buys into, the long-term social impacts promised by the Fair Trade

label.

3.1.2 Collaborative consumption

Collaborative consumption is a social-economic phenomenon that is spreading full-speed

around the world. The defining characteristic of this business model is the use of the Internet as a

vehicle for locating and trading goods, services and collaborations. The business has grown

organically with the development of Internet and digital technologies that support international

transactions and online banking. The collaboration arises in all imaginable areas of human

development, from Wikipedia, to eBay to ‘Couch Sharing’ around the world.

Botsman and Rogers (2011) identify four underlying common principles across

collaborative consumption practices: critical mass, idling capacity, belief in the commons, and

trust between strangers. Critical mass is a sociological term used to describe the existence of

enough momentum to make a system self-sustained. Idling capacity refers to the resting time our

possessions have between uses. Belief in the commons comes from Roman times when certain

property and space was defined as res- publica, meaning that they were set aside for public use.

Trust between strangers is perhaps one of the most interesting phenomena to arise from the

Internet which has allowed unacquainted users to enter into exchanges that require trust..

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IV. Case Study

4. ZIPcar, Innovation Business in Collaborative Consumption

Car sharing has become one of the signature actions of sustainable consumption with

considerable benefits to personal, local and environmental interests. Zipcar is a company based

in Cambridge, Massachusetts, USA with 900% growth since 2009 and covering European and

US markets with more than 400.000 members. (Frost & Sullivan's Automotive Practice, 2010).

The Company took its idea from the European car-sharing system more than 10 years ago and

formulated a new business model. The Zipcar business model relies on membership and

members can drive whenever and wherever they want without having to own a car, and with the

opportunity to choose what car to drive. The business uses state of the art technology to engage

customers in new levels of service and sustainable consumption. Members share car ownership

without the headaches of owning a car. The service provided is a cost-effective platform that

enables thousand of users to change their own behaviour through consumption of a service that

ultimately results in more sustainable practices. The advantages are not only a cost-benefit

service; the business operation also generates a positive environmental impact when scalable to

a global situation.

The business has also influenced the development of public policy and the Company has

a very inclusive and open relationship with his stakeholders, using social media channels for

communication and regional programs for participation. The Company’s website posts tips on

various environmental issues and tools that can be accessed by the user. (Zipcar, 2010).

David Zhao, a research analyst from Frost and Sullivan (2010), said that a car-sharing

program like Zipcar could reduce up to 70% of the members’ transportation costs. Zhao’s studies

demonstrate that car-sharing companies, like Zipcar, can also benefit the environment. Each

shared car replaces 15 individually owned vehicles. According to a Frost and Sullivan survey, the

members’ driving behaviour changed, and the miles travelled using a shared car were reduced by

almost 50%. In 2009 the reductions in CO2 emissions by Zipters amounted to 482,000 tons.

V. Conclusions

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Markets and technology are developing at a speed never before seen, and generating

rapid transactions and the overwhelming production of new goods and new global markets. From

a corporate social responsibility perspective, it is key for individuals, organizations and

governments to recognize the impact of consumerism on the environment and society and to

explore the issues with the public through an open discussion. The development of green

marketing and other ethical consumption alternatives could encourage consumers to make better

informed decisions and choose more sustainable business products and services.

Furthermore, innovative businesses premised on collaborative consumption break with

the traditional forms of marketing and bring a fresh dynamic to business practices. Collaborative

consumption demonstrates that markets have changed and the customer has become more

savvy than the marketer.. Collaborative consumption has revived the interactions familiar to small

village economies , demonstrating that technology can help us to be more human and reconsider

values like trust and sharing as part of common business practices.

VI. RecommendationsIn our global market, behavioural consumption is changing, technology is becoming more

ubiquitous and business practices are recognizing that the active participation of stakeholders in

the marketing process results in a more successful business.

New business should consider new innovative modalities of collaborative trading, and

should learn more about consumer wants and how the consumer organically participates in the

flux of exchange. Moreover, companies should place higher value on trading in the development

of more sustainable businesses and products; considering for example the durability, exchange,

cooperation, recycling and the evolving life of products.

On behalf of promoting CSR, companies, organizations and governments might use all

available media to learn and advocate for more innovative practices towards sustainable

businesses. To embrace this challenge it is essential to educate the public about the social and

environmental impact of consumption while considering cultural differences on the delivery and

acquisition of knowledge.

VII. References

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Crane, A. and Matten, D. (2010), Business Ethics. 3rd. edn. Oxford University Press Inc., New York, US.

Botsman,R. and Rogers, R. (2011), What’s Mine is Yours. Revised Updated. edn. HarperCollinsPublishers, London, UK.

Chapman, J. (2005), Emotional durable Design: Object, Experiences & Empathy. Trowbridge: Cromwell Press

Dall’Olmo Riley, F. (2011), Lecture 9 CSR in a Marketing Context. [Online]. Available at: http://lms.kingston.ac.uk/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2fwebapps%2fblackboard%2fexecute%2flauncher%3ftype%3dCourse%26id%3d_5792818_1%26url%3d (Accessed: 24 March, 2011).

Grisery, P. and Seppala, N. (2010), Business Ethics and Corporate Social Responsibility. 1st. edn. London: South-Western.

García-Rosell and Moisander, J. (2008), Ethical Dimensions of Sustainable Marketing: A Consumer Policy Perspective. European Advances in Consumer Research, Vol. 8.

Lebow, V. (1955), The real meaning of consumer demand. [Online]. Available at: http://classroom.sdmesa.edu/pjacoby/journal-of-retailing.pdf (Accessed: 24 February 2011).

Brinkmann, V and Peattie, K. (2008), Consumer Ethics Research: Reframing the Debate about Consumption for Good. [Online]. Available at: http://ejbo.jyu.fi/pdf/ejbo_vol13_no1_pages_22-31.pdf (Accessed: 24 February 2011).

Porrit, J. (2007), Consumerism vs. Sustainability. [Online]. Available at: http://www.livevideo.com/video/Drachnid/47799F974537428E8ADEA5B7991221A2/consumerism-vs-sustainability-.aspx/(Accessed: 24 February 2011).

Robins, R. (2005), Consumerism vs. Sustainability. [Online]. Available at: www.pearsonhighered.com/assets/hip/us/hip_us.../0205407412.pdf (Accessed: 24 February 2011).

Smith, A. (1776), The Wealth of Nations. [Online]. Available at: http://www.econlib.org/library/Smith/smWN.html (Accessed: 24 February 2011).

Thake, S. (2008), Individualism and consumerism: reframing the debate. [Online]. Available at: http://www.jrf.org.uk/publications/individualism-and-consumerism-reframing-debate (Accessed: 24 February 2011).

Veblen, T. (1899), The Theory of the Leisure Class. [Online]. Available at: www2.hn.psu.edu/faculty/jmanis/veblen/theory-leisure-class.pdf (Accessed: 24 February 2011).

United Nations Development Program, UNDP. (2008), Annual Report. [Online]. Available at: www.undp.org/publications/annualreport2008/ (Accessed: 24 February 2011).

United Nations Development Program, UNDP. (2010), Human Development Report. [Online]. Available at: http://hdr.undp.org/en/reports/ (Accessed: 24 February 2011).

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Wikipedia. (2010), Demographics of the People's Republic of China. [Online]. Available at: http://en.wikipedia.org/wiki/Chinese_population(Accessed: 24 February 2011).

Zaho, D. (2010), Zipcar's Acquisition of Streetcar Accelerates Carsharing Growth. Frost & Sullivan's Automotive Practice. [Online]. Available at: http://www.frost.com/prod/servlet/market-insight-top.pag?docid=190795176/ (Accessed: 24 February 2011).

Zipcar. (2010), [Online]. Available at: http://zipcar.csrroom.com/ (Accessed: 24 February 2011).

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