Ethical consumption ranks high on the Indian shopper’s agenda – what does this mean for businesses?

By George Harb, Regional Vice President, Business Ecosystems, APAC, OpenText

In an inter-connected trade world, every event has a cascading impact. Indian enterprises too have been affected by global supply chain issues resulting from a number of connected systemic issues such as labour shortage and port closures. This has a rippling effect, as can be seen from the example of passenger car sales being impacted due to shortage of semiconductor chips. Last year, it was the pharmaceutical industry which faced a supply chain crisis due to the overdependence of raw materials on one country. To consumers, these developments are concerning and frustrating in equal measure and signal to retailers and suppliers that transparency is of growing importance in effective supply chain management.

In addition to the supply chain challenges, organisations also need to keep in view the changing shopping behaviour of Indian consumers. The COVID-19 pandemic has fundamentally changed shopping habits and accelerated the shift to online shopping while further fuelling a consumer culture of instant gratification. Another development to note though is that it also shifted consumer priorities and motivations. Consumers increasingly expect their products to be ethically sourced and are prioritising buying from companies that have implemented ethical and sustainable sourcing strategies, according to our recent global research. We found that shopping habits have evolved since the onset of the pandemic. However, not all consumers share the same motivations for prioritising ethical sourcing.

Understanding consumer priorities for ethical products

Consumer motivations for demanding more ethical practices can vary. We found that what consumers value can depend on demographics, such as age and region of origin. For instance, older shoppers stated that they are concerned about working conditions during the production process whereas young shoppers prioritise reducing their carbon footprint and shopping locally.

The research from OpenText revealed that consumers place high value on buying from ethical brands. A massive 94% of Indian respondents in the research were willing to pay more if they were sure that a product was ethically sourced or produced. The survey also showed that close to a third (29%) of Indian consumers would never buy from a brand again if it was accused of working with unethical suppliers. Instead, they would look for an alternative brand that engages in responsible sourcing.

The increasing consciousness highlights the need for proactively ensuring all suppliers in their supply chain operate ethically. For retailers, understanding these different priorities and motivations is the first step to meeting consumer demand for more transparent and ethically oriented supply chains.

Indian customers want businesses to be ethically responsible

Consumers’ expectations for sustainability and transparency are evolving rapidly and are prompting businesses to adjust their behaviours accordingly, as our recent research shows. When shopping online, 76% of Indian consumers now make a conscious effort to purchase locally sourced or produced items to support local businesses and reduce their carbon footprint.

Almost four fifths (79%) of Indian consumers agree businesses have a responsibility to ensure their suppliers abide by an ethical code. Nearly three quarters (74%) believe that businesses that cannot monitor where their goods have come from and don’t know if suppliers are sourcing goods ethically, now need to rethink their supply chain. A majority (80%) of Indian consumers agree that government should introduce regulation that holds businesses more accountable for responsible sourcing. An even bigger majority (90%) also think that online retailers should clearly mark whether or not products are ethically sourced where they can. Nine in ten (91%) respondents admit that knowing where a product has originated from or where parts are sourced is important to their buying decision. For 46%, this information always impacts their buying decision.

Sustainability is the new competitive advantage

Investing in ethical supply chain initiatives makes a strong business case as consumers begin to view it as a differentiator and are willing to pay higher prices for ethically sourced goods. The survey reveals that 65% of the respondent base were willing to pay a premium of more than 25% for that product while 35% were happy to pay 50% more.

Businesses can utilise this opportunity to create a competitive advantage. Survey also shows that 94% of consumers are willing to pay more to do business with brands that source products in a responsible and sustainable way

As ethical shopping becomes a key priority for consumers worldwide, retailers have to adjust their practices to realise the competitive advantage of an ethical supply chain. Instead of simply focussing on cost and time efficiency in their supply chain, companies can proactively implement measures to future-proof their operations.

To begin with, businesses need to evaluate customers’ ethical priorities to gauge their stance by conducting consumer surveys, for example. The next step will be to invest in suitable technological solutions that allow end-to-end visibility into supplier and company operations to deliver more transparency.

Business leaders can deliver on both, pleasing consumers with sustainably sourced products, while strengthening supplier relationships. Upholding high ethical standards from the get-go ensures seamless collaboration with regulators, governments, and other key stakeholders.

In the end, sustainability must be enforced throughout the entire supply chain, from manufacturing to final delivery. Creating a transparent supply chain by utilising technology that enables end-to-end visibility will ensure that businesses can balance efficiency and sustainability in the face of future supply chain crises.