A label does not an ethical angel make

The Co-operative movement has an enviable record of pioneering business standards and trends. Unfortunately, its imitators are usually the ones who have successfully cashed in. A good case in point is the modern supermarket. As a national force, the Co-op with its "divvie" was the one to beat in the early 1960s; and beat it Sainsbury’s then Tesco eventually did. Today, the Co-op has a miserly 5% of the grocery retail market.

It faces a similar contemporary dilemma with its ethical positioning. Co-operative Financial Services (CFS), which embraces the Co-operative Bank and Co-operative Insurance Services, has recently announced a far-reaching shake-up of just that positioning, which has been integral to the brand’s definition since the start. CFS clearly recognises that there is an opportunity, as well as a threat, in the fact that the rest of the commercial world has converted to its once-lonely brand of evangelism.

The ethical consumer movement is now big business. According to the recently published Ethical Consumption Report, UK consumers spent £25bn on ethical goods and services in 2004, an increase of 15% on the previous year. This growing consumer enthusiasm has spawned a number of "wannabe" brands – mainstream, respectable, successful, but not previously noted for their outstanding commitment to ethical marketing. Most conspicuously, perhaps, is Nestlé espousing fair trade coffee; Topshop testing trade brands such as People Tree and Hug; and Oasis experimenting with "ethically produced" clothing lines.

Even more controversially, we come to the heartland of CFC’s concerns: money and its investment. This is now a market topping £10bn, if we take ethical money at its broadest definition. Which is to say investments eschewing notoriously "unethical" companies and sectors: those involved with tobacco, for example, or arms manufacture. Probably the fastest growing category is the more rigorously defined ethical fund sector (£5.5bn in 2004), where individual companies’ corporate social responsibility and environmental record are also taken into account. No great surprise, then, to find the four high street banks and retail arms of various City institutions drawn to ethical funds like bears to a honeypot.

Although outgunned by others’ marketing firepower, CFC has two very important assets when it comes to a fight-back: brand integrity and experience. It’s reasonable to conjecture that many financial services companies jumping on the bandwagon have done no more than clad themselves in a fashionable ethical wrapper. Their engagement goes little further than a communications programme and limited product development. Real commitment, the sort likely to bring sceptical consumers round, costs a lot of money. It requires, for a start, expensive ethical audits to constantly monitor how the money is being spent, not to mention highly able fund managers capable of overcoming the ethical sector’s self-imposed constraints and still outperform the mainstream market. Such funds do exist; but they are rare.

The danger is, of course, that the companies which fail to deliver on their ethical policies will bring down the whole sector. Looks like CFS has its work cut out for quite some time to come.

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