The latest enterprise risk management news from around the world

Businesses hoping to ride out the economic downturn by reducing customer service or ditching their environmental and social commitments may find themselves punished by consumers, according to new research by management consultancy Baringa.

In a recent survey, Baringa found that 79 percent of 1,002  UK respondents said that, in the context of the current economic downturn, they are more likely to purchase from companies they considered ‘kind’. Only 6 percent of UK respondents reported the downturn made them less likely to buy from a kind business because they would base purchasing decisions on price alone.

80 percent of UK respondents reported they would avoid buying from a company who had recently laid off large numbers of staff – with 40 percent claiming they would do so even if this decision cost them more. Likewise 54 percent of UK respondents said they would accept higher costs to avoid firms who were known to have treated their staff poorly, and 53 percent would pay more to avoid firms who treated their suppliers badly.

Overall the survey polled 6,028 consumers worldwide and when asked ‘If a company were known to have the following attributes, how would that make you respond to the company?’ the results were as follows:

  I would avoid buying their product or service if the price was the same I would avoid buying their product or service even if the price was cheaper I would not avoid buying their product or service
They were known to treat their suppliers poorly 45% 52% 12%
They were known to treat their staff poorly 44% 53% 12%
Their customer service is notoriously poor 45% 51% 12%
They behave in a dishonest way towards customers* 44% 56% 10%
They were known to be involved in cruel behaviour with animals 45% 55% 12%
They have acted unethically towards the communities in which they operate 43% 54% 12%
They had recently laid off large numbers of staff 40% 41% 25%

* Such as charging hidden fees, or employing misleading information or forceful behaviour.

Guy Dent, a partner at Baringa, said: “The assumption is that when times get tough, ethical choices become a luxury and people make decisions based on price. But the increased awareness of unkind business practices might be changing this. As we head into a possible recession, we are seeing more people prepared to take a financial hit to choose kind firms, often in an act of solidarity.

“The lesson for recession-hit companies is reputation and ethics should be weighed alongside traditional concerns such as cost. If you ditch your environmental and social commitments, lower your customer service standards, switch to unscrupulous suppliers, or cut staff in a manner that is plainly arbitrary and unfair, you risk improving your balance sheet today only to damage your sales tomorrow.”

“There is a school of thought, going back to economist Milton Freedman and beyond, that the point of business is to make money and everything else is immaterial. But in a connected age where the consequences of business decisions are instantly transmitted worldwide, people are faster to make moral judgements about firms, and to act on those judgements. The smartest companies will respond by increasingly incorporating a review of the ethics of their actions into their planning. They should do this for self-interested reasons; unkind firms will be increasingly punished by consumers.

Jon Fletcher, founder of the Big Clean Switch, one of many firms consulted as part of Baringa’s research into kindness amongst businesses, said: “Rigid, inflexible businesses are poorly placed to adapt to a rapidly changing world, to new competitors, or to new consumer behaviours. Ultimately, it’s the businesses that ask the difficult questions, that support their people in meaningful ways, and that look to the future who will survive and do well. In short, kinder businesses prosper.”

Want news and features emailed to you?

Signup to our free newsletters and never miss a story.

A website you can trust

The entire Continuity Central website is scanned daily by Sucuri to ensure that no malware exists within the site. This means that you can browse with complete confidence.

Business continuity?

Business continuity can be defined as 'the processes, procedures, decisions and activities to ensure that an organization can continue to function through an operational interruption'. Read more about the basics of business continuity here.

Get the latest news and information sent to you by email

Continuity Central provides a number of free newsletters which are distributed by email. To subscribe click here.