After Volkswagen scandal, can consumers trust anything companies say?
Adam Galatioto鈥檚 loyalty to diesel Volkswagens predates his ability to drive.
The 29-year-old鈥檚 parents first bought a Jetta TDI in 1998, and he drove the little sedan through high school, college, and a master鈥檚 program before selling it in 2013. Mr. Galatioto and his girlfriend now share a 2011 Jetta TDI SportWagen, which he helped encourage her to buy.
鈥淭hey get really good mileage,鈥� he says. 鈥淢ine got 50 m.p.g. on the highway. By proxy that means you are being environmentally friendly.鈥�
He鈥檚 not alone. Volkswagen has long enjoyed a reputation for reliable engineering, cheerful affordability, and, largely thanks to its efforts in clean diesel, sustainability. In Consumer Reports鈥� 2014聽聽on how people perceive leading car brands, the German automaker was singled out (alongside Tesla) for its fuel efficiency.
That made recent revelations that VW had duped environmental regulators for years, installing software on 11 million diesel vehicles worldwide allowing them to run cleaner during emissions tests than they did on the road, all the more unnerving.
鈥淚 don鈥檛 generally trust corporations on what they say, and this was so intentionally devious it just lumps them in with any other car company for me,鈥� Galatioto says.
This is a worst-nightmare scenario for companies trying to attract customers that increasingly want to make not just quality or affordable purchases, but ethical ones. It鈥檚 an impulse nearly every consumer industry is racing to capitalize on, from restaurant chains shifting to cage-free eggs and fair-trade coffee to retailers pledging to raise wages and give workers more predictable scheduling.
But with such promises being made left and right, and especially in the wake of Volkswagen鈥檚 fall, conscientious consumers may be wondering: Can any of them really be trusted?
Not always, clearly, but there is some comfort to be had on that front. Brands that fail to deliver risk even greater financial and reputational fallout than ever before (Volkswagen lost a third of its stock value when the scandal broke, and it faces billions in future losses from EPA fines, repairs, and lost sales). Combined with effective third-party oversight, it鈥檚 a powerful motivator for companies on the whole to behave better, experts say.
Consumers, particularly younger ones, are armed with easier access to information about what they buy than previous generations, and it鈥檚 affecting their choices. Millennials (adults ages 21 to 34) are more than twice as likely as their Gen-X and baby boomer counterparts to be willing to pay extra for products and services billed as environmentally and socially sustainable, according to a 2014 Nielsen survey. They are equally more prone to check product labels for signs of sustainable and ethical production.
鈥淭here鈥檚 an increased attention to more intangible characteristics of a product,鈥� says Dutch Leonard, a professor who teaches corporate responsibility and risk management at Harvard Business School. 鈥淲hen I buy a shirt, it has a particular color, it鈥檚 soft, or wrinkle-free. But now people are also paying attention to where it was made, if the workers are being exploited, and if the company is environmentally conscious or not.鈥�
This makes responsible changes effective marketing tools, which can create domino effects as companies try to keep up with and outdo standards in their particular industries. When Wal-Mart, the biggest retailer in the world, raised its minimum pay rate at the beginning of this year, competitors such as Target and Kohl鈥檚 quickly followed suit. The success of Chipotle, which has a carefully detailed food-sourcing policy, has been followed by major supply chain overhauls for McDonald鈥檚, General Mills, and other giants of the corporate food world.
聽鈥淐ustomers want 'food with integrity,' 鈥� Warren Solochek, a restaurant-industry analyst with NPD Group, a market-research firm,聽told the Monitor in May. 鈥淸Companies] that choose locally sourced, fresh ingredients can put that on their website and know that people are looking at it.鈥澛�
But especially for major corporations, 鈥渨hen you say you are doing things, you will attract attention from outside business groups," Professor Leonard says. "You can bet some NGO [nongovernmental organization] is going to try and figure out if that鈥檚 true or not.鈥�
Indeed, Volkswagen isn鈥檛 the first brand to have its positive positioning face pushback, especially as global companies work to strike an operational balance between ethics and profitability. Wal-Mart鈥檚 wage hikes were followed by cutbacks in worker hours when the retailer鈥檚 earnings suffered, a move that led labor advocacy groups to call the earlier wage hikes 鈥渁 publicity stunt.鈥� Earlier this week, the released a report showing that Starbucks has so far failed to live up to a much-publicized vow from a year ago to give workers more consistent schedules.
While Volkswagen eluded the Environmental Protection Agency, it was eventually found out by the International Council on Clean Transportation, an independent nonprofit aided by researchers at West Virginia University.
In addition to catching such discrepancies, watchdog groups can be helpful in weeding out credible claims of positive change from the less so. In the mid-2000s, the Unions of Concerned Scientists鈥� annual environmental consumer guide largely dispelled the idea that washable cloth diapers are significantly better for the environment than disposable ones.
Furthermore, some major corporations and industry groups have partnerships with independent, NGO-like organizations to set ethical industry standards and submit to outside monitoring. Unilever, for example, teamed up with the the World Wide Fund for Nature (WWF) in the 1990s to create the Marine Stewardship Council, a certification program for sustainable fisheries. In 2008, Starbucks embarked on a decade-long project with Conservation International to improve the sustainability of its coffee supply around the world. Home Depot sells lumber certified by an outside organization.
Such collaborations may not catch everything, Leonard says, but they are effective because they are 鈥渃onstructed in such a way that the [certification groups] are not beholden to an industry. We may not be able to get full agreement on the standards, but we might make real progress by creating safe harbors through development of standards that are negotiated in advance.鈥�
