Building an Ethical Retail Business

So you think you want to build an ethical retail business. But what does that even mean?

We’ve all seen the symptoms of increasing awareness of ethical consumption – ‘keep cups’ for your coffee, recyclable packaging, cruelty free, slow fashion, Fair Trade and all the rest – but what’s it all about and why should you get on board?

You don’t have to look very far to see the word ethical pop up in relation to business. And very often it’s bundled together with other words like transparency, sustainability, responsible sourcing, eco-friendliness and the like. So, what’s it all about and how does it apply to your business?

‘Ethical’ is not a fad

Let’s get one thing straight. Running an ethical business is not a fad or a fashion. It’s not a marketing gimmick, nor is it an innovation.

It’s not like coconut water, paleo diets, Instagram-eyebrows or beer-serving barber shops. It’s much bigger than any of those things and it’s a movement that has been steadily gaining momentum over the past ten or fifteen years at least.

Building an ethical retail business is about one simple thing. It’s about caring.

I can’t think of a better way to put it.

And by caring I don’t just mean for your customers or yourself and your employees. It’s about caring for all the people and things that go into making your business possible. It’s about being thoughtful, considerate and giving a damn about whether what you’re doing is making the world a better place.

There are lofty ideals attached to running an ethical business, but you can either lead the way now, or play catch up later. The choice is yours. But sooner or later consumer opinion and legislation are probably going to push you in that direction anyway.

What makes a business ethical?

The word ethical is a bit of a catch-all term. It can mean many different things.

At one level it includes honesty and integrity, but it also includes the ideals I mentioned earlier – transparency, sustainability, responsible sourcing, environmental friendliness and so on.

So, let’s talk a little about those things.

‘Transparency’ is probably the scariest word on the list. And becoming more transparent to your customers might require some courage at times.

Importantly it does not mean giving away your trade secrets, revealing your pricing strategy or opening up your accounts to the general public. In terms of being an ethical retail business, it means allowing your customers behind the scenes to witness the things you do to support your claim of being ethical.

It means telling them about your suppliers and why you choose them. It means publishing your ethical standards and abiding by them. It means doing the little things like recycling, thoughtfully

disposing of waste and publicly supporting philanthropic organisations that have a logical connection to your business.

Sometimes that means you can tell a good news story, and sometimes you need to tell the ugly truth. Being transparent means you’re prepared to do both.

By the way, the upside of having to disclose an ugly truth is you then have the opportunity to compensate for it – which, in turn, will set you apart from your competitors.

An example of this might be when one the ingredients in a product you sell has some widely known negative issues associated with it. For instance, cobalt – a critical mineral used in the production of mobile phones and similar products – is known to come from some very troubled regions in the world. In particular, the Democratic Republic of Congo (DRC), where exploitation, child labour, conflict-funding and criminal violence are day-to-day realities.

Of course, it’s very easy to just skate over this issue and ignore it – like most businesses do. But if selling mobile phones is a big part of your retail operation, is it ethical to pretend it doesn’t happen?

There may not be anything you can do to change the situation in the DRC directly, but what you can do is admit the problem exists, educate your customers about the truth of the matter and make donations to organisations that work to make things better.

What is sustainability all about?

Very broadly, the main idea behind sustainability is whether or not we can continue doing something without causing an unacceptable amount of harm or irreversible damage.

In some instances, it’s about the self-renewability of a resource – like sustainable fishing or forestry, where the resource we want to use can, when managed properly, replenish itself naturally. In other cases, it’s about whether the activity we’re engaged in causes an unacceptable level of collateral damage. For instance, some mining activities are often referred to as being sustainable, even though the resources being extracted will inevitably run out.

Sustainability is only part of the ethical question of course. Just because an activity is sustainable doesn’t automatically mean you should support it.

For instance, puppy farming is theoretically sustainable, but that doesn’t necessarily make it a good thing.

Responsible sourcing

Responsible sourcing is about making a considered decision regarding where your products and the raw materials they’re made with come from.

Let me give you an example.

Suppose you sell a cardboard product of some kind and you can get it from one of three sources.

One supplier is a reputable manufacturer in Asia that uses wood chip from sustainably managed local plantation timber and provides employment opportunities to people in a developing country. The second source is a fully recycled product made in, let’s say, Australia. And the third is

unbranded, comes via an international wholesaler and you know nothing about it other than the quality is fine and it’s noticeably cheaper.

The responsible choice is to pick either the Asian sustainably produced product or the Australian recycled product. Both are reasonably justifiable, albeit for different reasons.

Now, the cheaper, unbranded product might make more business sense in terms of generating more profit, but is that being responsible? What if the factory pollutes local waterways with toxic chemicals? What if the wood chip comes out of old-growth forests? What if you’re inadvertently supporting exploitation of workers, or worse still, slavery?

That could blow up in your face – as we’ve seen with several high-profile companies in the fashion industry who chose to look the other way when it came to the conditions under which factory workers in developing countries were employed.

Environmental friendliness

This is the easiest one to understand. It’s also the one least likely to win you accolades from your customers, unless you’re doing something truly extraordinary.

These days, with concerns about climate change, pollution, extinction rates, recycling, polar ice caps and all the rest, running an environmentally friendly business isn’t novel, it’s expected.

Unfortunately, it usually goes unnoticed when businesses aren’t doing the right thing. Yet no one is going to pat you on the back either if you diligently do the basics like responsibly sourcing your packaging, preferring renewable energy, choose cruelty free and having a shop fit-out made out of re-purposed, pre-loved and recycled materials.

Nor are people necessarily going to get all that excited if you curate the products you sell so they’re all clean and green. That’s not to say some people won’t actively seek you out, but offering environmentally friendly products isn’t particularly special anymore.

Which brings me back to the point that for a business to considered ethical, it has to be about a lot more than the products on your shelves.

An ethical retail business is not a ‘one trick pony’

Like I said up front, ethical in the context of business is something of a catch-all term. And to do ‘ethical retail business’ well you need to genuinely care about a lot of different things.

Not only do you need to do all the stuff you’re legally obliged to, but you also need to go way beyond that.

You need to take a position on sustainability and own it. You need to diligently source responsibly – whatever that means for your business. You need to be transparent and you need to take actions that demonstrate you care about people and the environment.

And, most importantly, you need to have integrity – which means sometimes you’ll have to forego a questionable sale or drop a product line because it doesn’t meet your standards.

Draw your line in the sand and be flexible on the rest

This might sound like I’m compromising the whole idea of being ethical by suggesting you can be flexible, but hear me out.

I’m not suggesting you betray your core principles. What I am saying is that ethical means different things to different people and it’s not always up to you to judge who’s right and who’s wrong.

Take our cardboard product example from earlier. You might choose to stock both the recycled and the responsibly produced versions because they appeal to different people for different reasons.

That’s not unethical or compromising. That’s just a function of recognising that different people have different priorities.

In other words, what I’m saying is you should develop a set of core, meaningful, no-compromise principals that are relevant and make sense, but don’t make them so rigid as to put yourself out of business.

Do customers even care about this stuff?

The idealistic answer to that question is; it doesn’t matter one way or the other. If you’re aware of gross social and environmental injustices in your sector or you care about things like reducing waste and slowing climate change, isn’t becoming ‘ethical’ simply the right thing to do?

Of course, you need to stay competitive to remain in business. Which may mean you need to transition to the new, more ethical business slowly over time. But I can guarantee you this, the customers worth having will respect your decision to go down this path, even applaud it.

If the stars align, you may find that going ‘ethical’ will be a boon for your business. If so, happy days. But even if it doesn’t immediately catapult your profits into the stratosphere, you should still be content with knowing you’re doing the right thing