We use cookies on this website to analyse browsing, help enhance your experience, provide social media features and for you to view embedded content such as videos. Please click accept if you are happy with our use of cookies. You find out more about how we use cookies in our Cookie Statement.

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

interview

The impact of government intervention on the ethical market

Ethical Consumer founder and co-editor Rob Harrison looks at the relationship between the government and the market for ethical goods.

When ethical consumption is at its most successful it’s often due to a collaborative approach taken by consumers, campaigners, companies and governments. The usual pattern is that campaigners lead the way, providing information (and a good deal of pressure) on which the others can act.

“If consumer demand does not immediately move companies to action they can be driven to make changes by targeted campaign action.”

Rob Harrison, Ethical Consumer

If a change in consumer demand is immediately evident then companies tend to move quickly to meet it. For example, we see this in the rise of Rainforest Alliance accreditation. While in many ways it is designed to be a weaker accreditation than Fairtrade, its rapid rise to prominence has been due to the general consumer demand for ethically accredited food and drink products. Nowhere is this more prevalent than the tea sector where ethical labels now adorn the vast majority of products available at supermarkets.

Rob Harrison, Ethical Consumer

Rob Harrison, Ethical Consumer

If consumer demand does not immediately move companies to action they can be driven to make changes by targeted campaign action. We see this now in the clothing sector where consumer demand is still centred around the low budget, low ethics end of the market.

However significant pressure from campaigners, especially around Rana Plaza and also around the use of toxic chemicals, is seeing movement from many companies. It has led, for example, to new regulations from the Bangladeshi government and also to a new ‘Accord’ on safety inspections with trades unions which now has more than 200 companies participating.

Government intervention
Where a larger systemic change is needed to stimulate the supply of ethical products, campaigners can ask for government support, demand a change in the regulatory framework, or for financial stimulants such as subsidies or tax breaks.

The impact of government intervention has been clearly mapped in the latest Ethical Consumer Markets Report. The 8% growth in sales of ethical products in 2014 was in no small part driven by strong growth in the sale of Tax Band A rated cars which rose from £5bn to £7bn in that 12 month period, encouraged by tax incentives. And tax incentives for consumers in turn encouraged companies to produce more models with lower impacts. Thanks to these interventions ‘lower impact’ car models are now making up nearly 70% of new car sales.

Unfortunately the opposite is also true. The 2015 Ethical Consumer Markets Report showed that green electricity tariffs continued to suffer with a 6% decline after a change in government policy in 2012.
This is because most of the big electricity companies abandoned their green electricity tariffs during in 2012 following regulatory changes forcing them to simplify their pricing structures. In total the value of this sector has slipped from £378m in 2012 to £206m in the 2015 report.

We also saw the impact of government intervention around home renewable energy installations in 2014. In the 2014 Ethical Consumer Markets Report the biggest decline in sales (-55%) occurred in the installation of home solar panels. This was after the generous feed-in-tariff scheme set up by the government came to an end in April 2013 and we saw, as predicted, a big fall in the rate of take up. Encouragingly, sales rose by 25% in the following year despite no change in the government incentives. Dramatically falling solar panel purchase costs are largely held responsible for this.

“Unfortunately it looks like the current government is trying to dismantle many of the positive developments which have occurred in this space – ironically, given their supposed ideological commitment to freedom of choice and markets.”

Rob Harrison, Ethical Consumer

What does the future hold?
The current Conservative government is, to put it mildly, not showing a lot of enthusiasm for environmental issues. The current system of taxation which encouraged the growth in sales of lower impact cars will come to an end in 2017 and the evidence suggests that this will have grave consequences for the move to lower emissions vehicles. The only fig leaf is that zero emissions electric cars will remain zero rated.

In addition new legislation around planning has adversely affected the market for wind energy, while changes in the tax system are failing community energy projects and subsidies for home insulations have also been cut reducing demand in this area.
As we’ve seen, the government can have a huge positive influence on the market for ethical products and services. At ethical consumer we have a manifesto which identifies useful government interventions in five key areas :

1. Encouraging government departments and local authorities to purchase ethically
2. Requiring companies to publish more detailed information on their policies and products
3. Using tax incentives to encourage the purchase of ethical products
4.Using regulations to require minimum ethical standards of some products
5. Controlling corporate power

Unfortunately it looks like the current government is trying to dismantle many of the positive developments which have occurred in this space – ironically, given their supposed ideological commitment to freedom of choice and markets. They have, for example, recently announced plans to prohibit local authorities from boycotting or divesting from companies producing arms or operating in Palestine.

 

words: Rob Harrison

Email newsletter_triodos bank

What do you think of "The impact of government intervention on the ethical market"

Please enter a comment

Please enter your name