In today's world, ethical consumerism is a significant driving force in purchasing decisions, with consumers making more conscious decisions that factor in sustainability, fair trade, animal welfare, and other socially responsible practices. Consumers want to make a positive impact; they want change for the better, and the most impactful way to achieve that is through their purchasing power and consideration of long-term financial outlook.

No one can escape ethical consumerism; more of us than ever are being driven by a growing awareness of global issues such as climate change, labour exploitation, and inequality.

According to the 2020 FCA's Financial Lives survey, 80% of respondents desired their money to ‘do some good', while also providing a financial return. 71% wanted to ‘invest in a way that is protecting the environment' while an equal percentage would not put their money into ‘investments which are unethical'. Even during a cost-of-living crisis, another survey found that 41% of consumers remained willing to pay more for sustainable products and services.

Are firm's missing the ethical link under the Duty?

Consumer Duty (also known as ‘The Duty') has grabbed everyone's attention. Huge resources have been allocated across the industry to be ready for the impending 31st of July deadline. Firms are actively enhancing their processes and gathering enriched data to better understand their customers' needs and preferences and ensure positive outcomes. However, the question arises: are businesses adequately considering the demands of an ever-growing segment of ethical consumers, who expect sustainability-focused products and services? Are they aware that the frameworks being built under the Duty could be used to form the foundations of impending sustainable regulation?

The regulator wants a shake up

The upcoming Sustainability Disclosure Requirements (SDR) share the same objectives as the new Duty, where both aim to raise consumer protection standards and requires firms to support and empower customers in making well-informed financial decisions. Firms must test their consumer-facing disclosures under the Duty, and once the SDR go live, this will encompass sustainability-related claims, ensuring consumers' choices align with their financial and sustainability objectives.

Regulators such as European Securities and Markets Authority (with the Financial Conduct Authority considering this) have integrated sustainability factors into assessments and product governance, further promoting sustainable outcomes. Ethical consumerism goes beyond traditional considerations of price and quality, which many firms have been focussing on under the Duty.

How can businesses measure ethical outcomes?

Firms need to incorporate additional layers of due diligence and deeper insights when dealing with consumers who consider the ethical, social, and environmental impacts of their purchasing choices. It's not just a ‘nice to have', to support customers in making the right decision, but businesses will be expected to do that under the regulation.

Measuring the outcomes of ethical consumerism will also be challenging and require a multidimensional approach. In addition to tweaking traditional metrics like customer satisfaction and ethical sentiment surveys and measuring product performance, businesses should consider other indicators such as:

• Ethical impact assessments that evaluate a company's carbon footprint, labour conditions, and supply chain transparency thereby providing deeper insights into the social and environmental outcomes associated with consumption choices.

• Monitoring the market share and growth of ethical products within specific industries indicates the influence of ethical Consumer Duty on consumer choices. Increasing demand for ethically sourced or sustainable products reflects positive consumer outcomes.

Challenges and Future Outlook

Affordability, accessibility and measurement of ethical products and services remain a significant challenge. Making ethical products more affordable and accessible is essential to mainstream ethical consumerism. Strategies to bridge the sustainability-affordability gap include reducing price gaps, educating consumers about long-term benefits, and emphasising value beyond the environment.

As consumer awareness grows, businesses face increasing pressure to adopt sustainable practices. This will drive innovation and collaboration in the development of new, sustainable solutions. Advancements in technology, such as blockchain and supply chain traceability, will enhance transparency, enabling consumers to make more informed choices while supporting firms in providing data to measure outcomes.

Conclusion

Ethical consumerism and measuring consumer outcomes are interconnected. Incorporating an ethical lens into the application of Consumer Duty, encourages businesses to better understand consumer preferences and tailor their offerings accordingly. Businesses can modify the design of their products and services to better serve their customers and of course profit from creating products that ethical consumers crave. Embracing an ethical Consumer Duty allows businesses to gain the trust and loyalty of conscious consumers, fostering a more sustainable and responsible business landscape.

The name is indeed Consumer Duty, ethical Consumer Duty - shaken and not stirred (yet) - and its impact on society is far-reaching.

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Author Bio: Zoe Keen is a highly experienced finance professional with over 20 years of expertise in Investment Banking Compliance. Currently a Senior Consultant at Leaman Crellin, Zoe focuses on regulatory consulting and training, specialising in Sustainable Finance and Consumer Duty. Leaman Crellin is a consultancy firm that excels in providing regulatory consulting and training services to financial institutions. With a team of experienced professionals, including Zoe Keen, the company assists in navigating complex regulatory environments, designing effective governance and risk frameworks, and ensuring compliance with relevant regulations and policies. Their expertise and dedication to Consumer Duty and sustainability issues position them as a key player in guiding financial institutions toward more responsible and ethical practices.