Capitalism's Social Side

Is the evolution of the Internet having an effect on way companies view consumers? There's been a lot of talk about it lately. Consumers are gaining unprecedented power. They're less and less passive, given the prevalence of user-generated content like blogs, wikis, amateur video, and ratings and recommendation engines. Many companies -- media companies are a good example -- have already been forced to change the way they view their traditional businesses and innovate like crazy as consumers take more control.

Individual creativity and dialogue are building. And I can't help wondering whether consumers' newfound power may have repercussions in business and investing that aren't even fully understood yet.

For example, maybe companies that don't act responsibly on certain key issues will become increasingly vulnerable to disruption, too.

Do the right thing
I've long believed that more and more consumers are voting with their wallets and shopping with their values in mind. However, it's difficult to quantify a trend like that, other than observing that companies like Starbucks (Nasdaq: SBUX  ) and Whole Foods Market (Nasdaq: WFMI  ) have been good examples of extremely successful companies that try to act with a great deal of responsibility and seek to exceed expectations for shareholders, customers, employees, and communities alike.

However, I recently ran across a survey conducted by Fleishman-Hillard (a public-relations agency owned by Omnicom (NYSE: OMC  ) ) and the National Consumers League. It queried 800 random respondents on issues having to do with corporate social responsibility, and some of the results were rather surprising.

It's tempting to think that most consumers don't take all that much into consideration when they make their purchasing decisions. Conventional wisdom might imply that low price or luxury brands would be the most compelling elements that drive average Americans to support certain companies. However, 52% of the respondents in the survey said that they actively seek out information about a company's track record in social responsibility "all of the time" or "sometimes."

Furthermore, when participants were asked what elements drive them to buy products, two of the usual suspects were well represented -- 20% cited lower price and 20% cited easily available products. But then again, 35% of the respondents said that whether a company made socially responsible products also gave them reason to buy.

Meanwhile, the respondents also gave the impression that corporate social responsibility would make a difference in the companies they invest in. An impressive 63% said a company's track record would be "extremely" or "very" influential in whether they would invest in a company.

Signs of the times
Another interesting element of the survey was how respondents defined corporate social responsibility. That's one of the sticking points of socially responsible investing, after all -- it's a subjective term that may mean different things to different people. It seems most people related corporate social responsibility to the way corporations treated their workers, which seems like a pretty simple issue to wrap one's head around. After all, nobody likes to hear of a company that pays its CEO millions of dollars yet lays off a large number of workers.

On the other hand, even though consumers seemed to view corporations' treatment of workers as a very important element of being socially responsible, a whopping 82% said a company's environmental impact was "extremely" or "very" influential when it came to products they bought.

The survey implied that consumers are coming up with ideas on their own, as opposed to relying on experts' opinions on these issues. (Ah, the wisdom of crowds in action!) The Internet is obviously a big influence on empowering consumers more than ever to research and reach their own conclusions about the world around them.

True, it's just one survey, and surveys can be flawed. And let's face it -- oftentimes people answer surveys as they would like to imagine they "should" behave but perhaps don't.

Regardless, though, there are more and more signs that people are looking with an increasingly critical eye at some of their purchasing decisions, and many smart companies are making moves to meet the demand.

In southern New England, Dean Foods (NYSE: DF  ) and Hood demanded that regional dairies provide milk without artificial growth hormones -- Monsanto's POSILAC. Organic milk has been a growth segment, and apparently the demand is too significant, at least in that market, for Dean Foods and Hood to ignore. News items like that imply a more serious shift than people might have previously thought.

Privately held American Apparel made a name for itself with sweatshop-free factories here in the States. Chipotle (NYSE: CMG  ) includes organic ingredients on its menu. Volcom has launched a green clothing line called Verde. Why on earth has Toyota's (NYSE: TM  ) Prius done so well, again? And Wal-Mart (NYSE: WMT  ) -- maybe the first company many critical consumers think of when it comes to putting profit above most other considerations -- wouldn't be spearheading so many environmental initiatives right now if it weren't in its best business interests to do so.

These are just a few examples. You could argue it's all a fad, but I don't think it's unreasonable to wonder whether a revolution is at hand. Maybe emotional dividends are more important than anyone would have imagined a decade ago.

Bright future of opportunities
There's bad news for corporations, at least according to this particular survey -- respondents believed that companies have a dismal track record when it comes to being socially responsible. And it's obviously not lost on many companies' public-relations departments, since most companies have plenty of materials to try to make the case that they are socially responsible and perform any variety of good deeds -- all of which should be taken with a grain of salt, since it's pretty obvious that such materials can be the equivalent of good marketing.

Meanwhile, another interesting element of the survey was that people said they often use the Internet to research companies' track records on the issues that influence what they buy, and why. It also implied that blogs and user ratings are viewed as more trustworthy sources than traditional media coverage, which is a big part of my premise that a major shift is gaining momentum.

Of course, any kind of disruptive influence also has the silver lining of catalyzing creativity and building a better solution at its core. A kinder capitalism -- one in which caring about people and the world in which we all exist can, in fact, build a better long-term business and higher profits -- shouldn't be viewed as a contradiction in terms, but rather a challenge to innovate that will be rewarding on many levels. And if companies view creating good businesses with a holistic view of responsibility and giving people what they want as paths to great opportunities down the road, that sounds like a win-win situation to me.

With the Internet's increasing democratization of ideas and information, disruption is certainly at hand. In more ways than one, a revolution -- and evolution -- in the way businesses work and conduct themselves may be under way.

Here's some related commentary from the last year:

Whole Foods Market and Starbucks areMotley Fool Stock Advisorrecommendations. Wal-Mart is aMotley Fool Inside Valueselection. Volcom is aMotley Fool Hidden Gemspick. All of our newsletter services come with a 30-day free trial.

Alyce Lomax owns shares of Starbucks. The Fool has a disclosure policy.


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