Principles of Responsible Business

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Acknowledge the traditional
owners of the land on which we
are meeting
Principles of Responsible Business
Week 8
The Ethics of Consumption
Part 2
Part 2
I am assuming you have listened to Part 1 and done all the activities I
have listed for you
Now we are going to focus on Advertising and its impact on consumers
I began Part 1 with a famous add for Cigarettes so that really got you
thinking about the large impact of advertising
Now with all the online impacts Ads are coming at us from all sides and
much more targeted to us as individuals than ever before
Very powerful tool that is used by the producers
What impact can it have on consumers and do we need to be
• Such ambiguity can result in significant consumer losses.
• Concealment of facts: ads never include information that is detrimental to the
• E.g. Weight Watchers tells consumers that its frozen meals contain no butter,
chicken fat or tropical oils, but fail to mention the high salt content.
• Industry insider reveals the common approach: “What can we say, true or not, that
will best sell the product? How can we best say it so that buyers are not
excessively disappointed, and the ad avoids quick and certain censure?” (Shaw et
al. p.216)
• Ad professionals have been accused of being morally mute, morally myopic,
lacking moral imagination.
Advertising aimed at children
Expenditures by, and for, children run into $billions.
young children are naïve, gullible and vulnerable to ads.
Advertisers understand that children tend to interpret ads literally and hence are
especially susceptible.
Ads directed at children have become big business over the last few decades,
especially food ads: McDonalds, etc.
Some ads also aim to create future customers.
Some argue that such ads undermine parent‐child relationship and endanger child
health e.g.. child obesity
Others counter that such ads are ok if they are truthful.
Do children really understand issues concerning, especially, nutrition and long term
impacts of poor eating?
Advertising aimed at children
• Studies suggest that proportion of Australian children that are overweight has
increased by 60%‐70% since 1980’s.
• Estimates range from 23%‐27% currently overweight, with 5%‐9% obese.
• In 2005, US meta analysis of 123 scientific studies concluded that exposure to ads
is statistically significantly associated with obesity in children <12 years.
• This does not definitively establish causation, but the suspicion is strong.
• This is especially so when popular cartoon characters e.g. Shrek, are used to
market poor quality foods to children.
• A few firms (Kraft) claim to have changed their marketing approach to young
children, but these are in the minority.
You need to refer to this link‐releases/back‐to‐the‐naughty‐
Think about the issues that are being raised in this article
Written by the Obesity Policy Coalition
Excessive consumerism?
• Supporters of advertising argue that ads are popular because they provide us with
what we need and value: similar to art/culture.
• Some ads are certainly very entertaining.
• But do ads simply promote a never‐ending consumption binge that leaves most
people, and the environment, worse off.
• Ken Galbraith argued back in the 1950’s that consumers are not independent and
rational, as economists typically assume, but rather that their needs and wants are
manipulated by firms via media that creates needs and wants, which are then
satisfied by firms.
Excessive consumerism?
• Critics of Galbraith argue that ads are not so powerful, and that in any case many
needs and wants have always been shaped by social forces.
• Nevertheless it is an indisputable fact that Western societies consume much more
today per capita than in the past. Why is this so?
• J. Schor (see moodle site) has some interesting ideas.
• First, some facts: despite much inequality (hence plenty in rich countries barely
subsist), the average US home has increased in floor space by 50% since 1970’s;
vehicles per person has increased as has their size and ‘luxuriousness’; $8 billion
spent on cosmetics in US; $17b on pet food in USA and Europe, etc. Probably
similar trend in Australia.
• Consistent with hypothesis of consumer ‘binge’.
Read the article by J Schorer
Consider the issues linked to
1. Work/spend cycle
2. Undervaluing the natural environment.
3. Conspicuous consumption
Take a break from this presentation and read the article that I have listed on
the moodle site.
Consider each of the issues
Excessive consumerism?
Schor is concerned that this consumption binge is ecologically, socially and
financially unsustainable.
Schor argues that there are three structural features in the economy that have
promoted excessive consumption.
1. Work/spend cycle: individuals can not decide hours or work/leisure, and firms
have a bias against ‘job share’.
So most jobs are long hours/’large’ pay.
Consumption then becomes major form of reward for long work hours.
Data suggests that h/h are indeed working longer, and consuming more, which then
demands more work, etc.
Survey data also consistent here: increased % who indicate they are family time
poor, stressed, fatigued, etc.
Excessive consumerism?
2. Undervaluing the natural environment.
If producers are allowed to pollute the environment costlessly (e.g. electricity) then
environmental damages are not included in the market price of goods and services
which are thus lower than they would otherwise be.
Hence we consume more than we otherwise would.
If prices reflected all costs, we would consume less because the price of goods
relative to leisure would increase.
A price on environmental damage would also make environmentally more benign
goods more attractive.
A carbon tax is one way of putting a value on environmental damage, but few
countries have such taxes because of political opposition.
Excessive consumerism?
• There is increasing evidence that we are consuming and polluting the natural
environment at an excessive rate.
• The CO
2 /global warming issue is just one manifestation of this excessive
• This problem is getting worse quickly as the 2.6b people in India and China try to
replicate the consumption dominated lifestyle of their Western counterparts.
Excessive consumerism?
3. Conspicuous consumption: argument is that consumption has become a
social competition.
Consumption for esteem, recognition, status, envy.
Schor argues that 50 years ago it was comparison amongst peers.
Now, the ‘reference group’ has become the rich, famous.
Decent lifestyle no longer sufficient: now many of us seek status and luxury once
reserved for privileged few.
Excessive consumerism?
Getting rich is now that #1 aspiration of youth in USA and likely in other Western
Schor argues that this change has been promoted by declining importance of local
community, and increasing influence of media and www.
Even if individual i wants to change, very difficult to do it alone: risk becoming an
Prisoner’s Dilemma: we would all benefit from different approach, but no one will
individually begin the process.
Schor’s conclusions? The three structural aspects that promote excessive
consumption are undermining our quality of life.
Excessive consumerism?
1.We have insufficient leisure.
2.We have excessive stress.
3.We are harming the natural world.
Yet at individual level, it is rational to behave this way.
Standard economic approach is inadequate: more is not always better than less:
individuals are not always able to act in their own best interests, pollution
externalities are not a small issue.
On positive side, Schor notes the increasing numbers in recent years that are taking
a different approach: challenging the dominance of the consumer culture.
Excessive consumerism?
Review the article by Schorer
Consider how you would approach the 3 questions
1.Do We have insufficient leisure?1717
2.Do We have excessive stress?
3. Are we harming the natural world?
Ethical Consumption
We are all consumers
If we agree in the issues that were raised by Schorer and others then we have to
be making more careful considerations before we consume
Read these articles and consider the following questions
Outline what you perceive as the key differences between being an ethical
consumer or a consumer.
Identify what you identify some reasons which might make it difficult to be
consistently an ethical consumer.
Ethical Consumption‐memories‐make‐it‐hard‐to‐shop‐
Ethical Consumption
What is the basis of being a consumer‐Economics approach
A consumer will decide to purchase a product or service to increase their utility or
Is it about needs or wants?
What role does price play‐Economists and the law of demand and supply would
say that the role of price is very important
How does being an ethical consumer change this relationship?
‐still striving to increase utility from the consumption
‐also need to consider the other issues other than price ie how the product is
produced, what are the conditions of employment, how much damage is done to
the environment
How much damage is done to the animal? 20
Ethical Consumption
Read this article‐free‐range‐fairtrade‐or‐vegan‐how‐ethical‐
Ethical Consumption
Read more: What comes first: the free‐range chicken or the free‐range egg?
Read this article and reflect on how you would decide between the
consumption choice of free range eggs versus non‐free range eggs?
Review the differences between the characteristics of being ethical consumer
or a consumer?
Issue of animal rights and the way we consider those rights in combination with
our desire to consume animal products –what is the connection with the price?
SDG number 12‐12/
Ensure sustainable consumption and production patterns
‐ In order for this goal to be achieved it requires the partnership between
economic agents
‐ Consumers producers and all levels of business and governments
1.Outline what being a consumers involves in modern business environment
2.Consider business approaches to product safety and quality.
3. Consider business approaches to product pricing.
4. Consider business approaches to packaging and labelling.
5. Consider business approaches to advertising.
6. Consider the proposition that, Western societies in particular, over‐consume
and, if so, why.
7. Discuss what is meant by the term Ethical consumption
8. Connection to SDG Number 12
Thank you end of Week 8

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