The Living Wage: Business Sense and Morality Align

16/11/2012 11:08 GMT | Updated 16/11/2012 11:08 GMT

Ed Miliband's proposals to make the living wage a central tenant of the Labour Party's next manifesto have brought renewed attention to the role of ethics and social responsibility in business: we now have a rare opportunity to make the point that doing business responsibly is entirely compatible with both profitability and competitive advantage.

The living wage - which stands at £7.45 per hour across the UK and £8.55 per hour in London - currently has no legal status; instead, it is a voluntary benchmark suggested by the Living Wage Foundation and Citizens UK. The living wage isn't a new concept: it has been supported by both Ken Livingstone and Boris Johnson in their roles as London mayor and has been utilised by the Greater London Authority since 2005, as well as other employees across the UK. But recent discussions have focused on normalising the expectation of a living wage - making it the rule, rather than the exception. Miliband proposed that government contracts should only go to those firms who pay the living wage, while those who do not could be "named and shamed". Instead of receiving applause for committing to the concept, companies will be condemned for failing to adhere to it.

Ethical issues within business such as the living wage hold a special interest for marketers, as we're in the unique position of being charged with maximising profit, but also being the best placed people to drive the moral agenda of an organisation. Marketers are continually exposed to both the commercial needs of the business and customer sentiment.

In the past, business needs and social morality have often been thought of as polar opposites: the drive to maximise profit is assumed to be at odds with ethical responsibilities. But recent research has shown that, in these straitened times, people are more - not less - conscious of ethical business and CSR practices. Indeed, the long recession has brought moral and corporate interests into close alignment as consumers shrewdly differentiate between those brands that they connect with both as customers and as citizens.

Consumer commitment to ethical and social responsibility is clearly demonstrated by figures from the Fairtrade Foundation, which found that Fairtrade sales increased by some 43% in the UK during 2008 - despite the onset of recession. The Co-operative Bank's 2011 Ethical Consumerism Report highlighted the continuing trend: it showed that sales of ethical goods and services grew by almost 9% between 2010 and 2011, from £43bn to £46.8bn. This is a 250 per cent rise from the £13.5bn spent in 1999.

A commitment to ethical business in a time of economic hardship seems to be a phenomenon particularly prevalent amongst British consumers, with Tierney Bondy and Vishal Talwar demonstrating in the Journal of business ethics that Canadian and US fair trade consumers have significantly decreased their consumption of Fairtrade as a result of the recession, whereas UK consumers have not. It's clear, then, that what once made moral sense now also makes business sense.

At CIM we have long called for companies to engage with the principles of the triple bottom line - economic, social and environmental sustainability. The concept of the triple bottom line doesn't ask companies to commit altruistically to initiatives that could endanger growth and weaken business focus; instead it allows economic and moral initiatives to become aligned. While customers are, of course, concerned about cost and value, social responsibility is moving ever-higher up the agenda. By ensuring a commitment to social and ethical matters in both brand and practice, companies are able to make business smart decisions that consumers will respond to whilst also behaving in responsible ways which bring benefit to society.