What constitutes moral or ethical practice on behalf of a company? It’s largely a subjective matter –what one person considers fair play, another may not. Of course, there are certain behaviours that we would all agree fall on the wrong side of the fence – defrauding the Treasury; providing unsafe conditions for staff; fly tipping hazardous waste; fuelling industrial machinery with the tears of kittens – that type of thing.
But with others it’s harder to say for certain. If a company finds a perfectly legal loophole that means they can dramatically decrease the amount of tax that they pay, is this entrepreneurial or immoral? As it cannot have escaped your attention, this is a very pertinent question at the moment.
Other question marks can be raised over the way that some companies treat their employees, their methods in sourcing suppliers, the ingredients they source and the work they do as a ‘socially responsible corporation’.
Here at Know Your Money, we’re not ones to preach. But we are in the business of getting the best deal for everyone. If you’re looking to spend your money in a way that suits the greater good, here’s a list of things you might consider.
1. Boycott the tax dodgers
Since we raised the issue of tax earlier, we’d best start here. Given the fact that the vast majority of us as individuals all pay our taxes and have no loopholes to exploit, we are of the opinion that corporations should do likewise.
Amazon, Google and Starbucks have all been in the press over the last few weeks after it emerged that they have been paying considerably less tax in the UK than they might have been expected to. One way they can do this is paying royalties to a sister company in another country – one that has much smaller rates of corporation tax – to rent their brand, or to pay for the supply or retainer of inter-company goods and services at inflated prices. Another is by transferring the debts they have in other territories, ones they are currently developing, onto their UK balance sheets to apparently reduce the profits they earn here, thereby also reducing the amount of tax they pay.
These machinations are perfectly legal, but they certainly leave a sour taste. The easy answer is to boycott the companies involved. This has already had a notable effect – in response to the public outcry, Starbucks have announced that they will up their taxes over the next two years above their legal requirements (which isn’t difficult given that they paid absolutely nothing over the last three years).
Incidentally Research released this week from UHY Hacker Young found that the average FTSE company pays 24.5% tax today – almost a third lower than the 35.8% of four years ago. While economists say the economic downturn goes some way to explaining this, the Coalition government has played a part too, having reduced the UK’s corporate tax rate from 28p in every pound to 24p since coming to power in 2010. They also plan to axe the rate significantly again, down to just 21p by 2014.
Their argument is that by lowering the rate it will it would give companies more money to invest in innovation or growth of their businesses which should then result in larger revenues, higher employment and reinvestment into the extended value chain. They also hope that large multi-national companies would be more likely to choose the UK as a base for their operations than elsewhere in the world.
Whether you agree with this logic or not should be a factor in the way that you vote come the next general election.
1. Buy Fairtrade
This one is a relatively easy one to spot and to work into your shopping habits. The long established worldwide Fairtrade initiative, run by the Fairtrade Foundation, seeks to ensure that purchasers of foodstuffs and other materials from lesser economically developed countries receive a certain price for their goods, have adequate labour standards and that the purchasing companies invest in social development.
With a wide range of items covered, including fruit, coffee, cocoa, cotton, tea, spices, sugar, wine and more, you’ll know if a product is Fairtrade because it will bear the distinctive cylindrical black, blue and green logo.
However, some Fairtrade is fairer than others. Companies are able to display a proportionate amount of their products by the total percentage of FairTrade ingredients they buy. So if a coffee brand buys a fifth of its coffee beans from Fairtrade sources, it can put the logo on one in five of its bags. However, since all of the coffee beans will be mixed together, you can’t tell whether the product you buy actually contains the Fairtrade beans or not. Furthermore, by spotting the logo on a pack in store, you might be under the impression that all of the company’s beans are sourced Fairtrade; they’ll be no means of instantly finding out otherwise. Therefore, check your favourite brand’s website to find out their percentages and look out for those that boast ‘100% Fairtrade’.
2. Ensure no animal testing
Similar to the Fairtrade scheme, the People for the Ethical Treatment of Animals (PETA) Foundation issues a ‘leaping bunny’ logo for any cosmetics or cleaning product that does not test on animals.
Testing on animals for cosmetics products is actually now banned across the European Union and an update on the rules that will come in this year will means shops are banned from selling any products that are tested on animals. Until the law comes into force though, you may still find products on shelves that are tested on animals. If you want to check that the brand you use is definitely safe, check Peta’s accreditation lists here.
3. Stand up for your peers
Unfortunately, the issue of sweatshops is still a massive problem and dozens of retailers are called out in the press every year for apparently outsourcing production of their goods to companies that operate with poor conditions for staff. One of the major problems is that often the retailers themselves are unaware of what the conditions are like in the places like Bangladesh and China that they send their production to.
Before you next hit the high street – physical or virtual – check what your favourite retailers say on their websites about the manufacturing conditions they use.
On UK shores, many companies have taken redundancy measures over the last few years. Many of these will have been entirely necessary for the company to stay afloat in the context of the depressed economic markets. Yet other companies have been accused of opportunism in a bid to maximise profits for shareholders. More companies still have been accused of denying their employees basic rights such as the right to unionise.
If you feel your peers are being unjustly untreated by a certain company, make a stand and take your custom elsewhere. Sign up for alerts from the major trade unions to keep up to date with worker policies and disputes. They include:
Workers of the World: www.iww.org
A full list of trade unions, including those for specialist industries, is available here.
4. Choose ethical banking
The big high street banks played a huge part in bringing on the crisis that brought the economy crashing to its knees in the late 2000s, and some of the biggest names had to be bailed out with billions of pounds of tax payers’ cash to stop them going out for business. Yet still they pay their executives obscene bonuses and refuse to lend money for mortgages – a key factor in getting the economy moving again.
You do have an alternative. So called ‘ethical banks’ are rising in popularity in the UK, with self-imposed charters to be socially responsible. With some this includes only lending money to responsible people or for social regeneration causes, with others it means reinvesting their profits into green or social projects.
You could also consider a building society or a mutual society where as a member you will share in the profits, rather than other external shareholders.
Click here to read Know Your Money’s Guide to Alternative Banking.
At the very least, even if you stay with one of the traditional banks, you can opt for paper-free banking which means you access all of your statements online, instead of receiving them by post, and will help to save some trees.
5. Buy environmentally-friendly
With any product you buy, there will be some environmental impact that emanates from the way that it was made, where it has been transported from and how, the amount of energy it uses and the ways that it will be disposed of or recycled at the end of its life.
Large electrical goods such as boilers, fridge freezers and washing machines in the UK have their energy ratings and other environmental impact displayed at the point of sale, as per European law. Many other products offer this information voluntarily as a marketing technique. If you want to check a specific product or company, email them to find out how they operate.
In supermarkets, try to buy products that have minimal packaging, especially those with the types of plastic containers that can’t be recycled.
6. Support small, local and independent stores
A functioning economy which provides choice for consumers and evenly distributed wealth requires a full spectrum of businesses, from one-shop firms to the huge chains with thousands of outlets. But the smaller businesses are being squeezed out by the corporates who offer increasingly lower margins which they can afford to do through economies of scale.
It might cost you slightly more but there’s a lot of merit in visiting your local corner shop to buy a few groceries rather than the Tesco Metros that are now littered a mile apart across the country.
The same goes for clothes shops too. Britain is famed for its independent fashion boutiques but they are becoming increasingly hard to sustain in the current economic climate. You’ll miss them when they’re gone.
7. Check the Corporate Social Responsibility reports
Encompassing some of the above, it is worth checking the annual corporate social responsibility (CSR) reports of the companies you use. Any corporation operating in the UK will include details of their CSR activities for the year. This will include the strategies the company has adopted to ensure it provides the best return for shareholders (which inevitably remains almost all public companies’ chief concern, whether they state so or not) but also all of the work that they are doing in areas of environmental sustainability, employee rights and development, and community support.
Whether it’s directly making donations to charities, providing employee resource for regeneration activities, investing in environmentally-friendly technology or anything else, each company chooses its own particular philanthropic axes to grind. There will inevitably be a large amount of spin included, and certain programmes may have been developed with the companies’ own interests ultimately at heart, but the activities should ultimately be of benefit to the wider society to some extent.
Essentially your task is to ensure that the activities the company you shop with marry up with your ideals.
8. Check Buyer’s guides and boycotts
The Ethical Consumer website carries out research on an extensive range of companies and products. It produces buyers’ guides in which it weighs up ethical concerns and rates the companies operating in a particular market by their performance, with criteria related to animals, environment, politics, sustainability, and people.
The website also lists any boycotts on particular companies or even countries that recognised protest or action groups have called. It claims to have the most extensive of any such list in English language on the Internet.
According to Ethical Consumer, the top five corporate companies operating on British high streets today are:
Lush: For refusing to test on animals, supporting campaigns against it, largely using natural ingredients, and sourcing most of its supplies in the UK.
The Cooperative: For its on-going commitment to actively tackling issues in climate change and global poverty.
Marks & Spencer: For its commitments to environmentally-friendly practice and fair trade supply.
Monsoon: For an ‘excellent’ ethical policy and transparency in highlighting its own shortcomings and setting out resolutions.
John Lewis Partnership: For its almost unique business model in profit-sharing with all employees – or Partners – who also have a say in the way the company runs.
If you have any ethical shopping tips please let us know in the comments thread below.
Author: KYM Editor