Why ethical startups are big business today

ethical startup

Consumer habits are changing as the Baby Boomer generation gives way to the Millennials. This latter cohort of customers born between 1976 and 2004 have grown up in a world defined by online consumerism, and they are the generation that has been the focus of most marketing attention. They have distinct spending habits, using their mobile devices to shop, order and pay for goods and services, and distinctive values. And it is these habits and values that are shaping how ethical and responsible start-ups are quickly becoming the new business model for our times.

Socially responsible consumerism

Back in 2015, Nielsons Global Corporate Sustainability Report highlighted that 73% of millennials surveyed showed they were willing to spend more money on a product from a sustainable brand than one that was not sustainable. These consumers clearly indicated that the people they were going to be spending their money with had to demonstrate ethical and socially responsible practices. This meant sustainable manufacturing and production, socially responsible business standards, and a clear declaration of corporate citizenship.

In practice, these consumers are actively looking for companies who want to “give something back” and who are transparent about the way they work and the methods they deploy. They are looking to do business with organisations whose priorities include being aware of the impact (both social and environmental) they make on the world around them. Once this was realised, it was a game changer for a number of corporate organisations, but for the smaller ethical company, it was an opportunity to demonstrate how effective this business model actually is.

Ethical business practice

The model does work, as demonstrated by the growing success of companies like Elkie & Ark, founded in 2016. This Australian company is now exporting their 100% Global Organic and Fair Trade Cotton luxury bedlinen across the globe with products that can all be traced back to the farms where the cotton was grown, spun and made. The transparency in the process is what has made this small company very successful, and larger corporations are now reviewing the way in which they now do business.

A number of international corporations are also partnering up with non-profit organisations in order to demonstrate their ethical and transparent practice. They see social responsibility now as big business and hope their consumers are going to pay a higher premium for products and services produced with a higher ethical standard.

Consumers want to know more about the food on their plate, the clothes that they wear, and ensure the holidays they take will benefit the local economy, as well as not leave a big carbon footprint. They also want to be able to “trust” the organisation that they are doing business with, and this is where the smaller ethical companies are ahead of the game. 

Stakeholder Centred Management (SCM) – the new business model

In 2016, the Harvard Business School published a book called “Conscious Capitalism: Unleashing of the Heroic Spirit of Business”. It recorded the types of businesses who embraced the business model centred on how companies related to the stakeholder, and how successful they became in terms of profitability. With the SCM model, business ethics is around the balanced relationship between the stakeholders and the shareholders. It is about a shared vision of getting goods and services to the consumer.

SCM businesses are those that engender trust with their customers, and this trust brings rewards in terms of not just profitability but also attracts those who are willing to invest in this way of working (both in terms of their time as well as their money). Their products and services are safe and to be relied upon, and these ethical and socially responsible companies deliver in a consistent fashion and with integrity. The key stakeholders are not just the consumer, the supplier, the investor and the staff but also the environment and the local community the business impacts upon. 

The importance of experiences

The small ethical and responsible business recognised early on that the new millennial consumer, or “digital natives” as they have been dubbed, were also eager for unique and personal “experiences”. These were not to be manufactured but offered as an organic process. For example, visiting new places and staying with local people is something that cannot be downloaded, but has to be experienced.

However, sharing these experiences through social media and reaching out to new and potential consumers is something that smaller ethical companies have been doing for some time. Without the luxury of a large marketing budget, they have, through using social media and digital marketing strategies, built up a dialogue with current and potential customers, and this has now become the norm.

Business models are changing along with the times, and the number of ethical and responsible businesses looks set to grow. This has important implications for both potential start-ups and existing corporations so don’t be so quick to dismiss this “Millennial trend” – quite simply, your company cannot afford to. 


About the author

Belinda Roach is the founder of Trailblazers Travel, a responsible travel company that creates adventures while also changing the world. With 20 years of independent travel experience under her belt, Bel constructs the company’s unique and immersive travel itineraries from scratch to ensure that her clients get a real, authentic experience. More importantly, Trailblazers Travel donates part of their proceeds to micro-finance entrepreneurs in developing countries as well as to WaterAid, which helps to give access to clean and safe drinking water.