Tim Nelson
A study in the Wall Street Journal today says “corporate responsibility” is good business.
To a point.
A new study by a pair of Canadian scholars at the University of Western Ontario found that consumers were willing to pay a hefty premium for “ethically produced” coffee and T-shirts in a carefully controlled test.
The study was meant to measure the economic effect of products from companies with “progressive” corporate policies.
Study subjects were informed of corporate practices like encouraging diversity and a commitment to customer safety; environmentally friendly production and respect for human rights.
The study found consumers were willing to pay a 64 percent premium for “good” coffee, above the price for menace-to-society coffee.
But the difference between products isn’t usually that clear.
The study found that “good” coffee fetched only a 17 percent premium over coffee that the consumers knew nothing about.
And then things get really interesting.
The price premium for “good” T-shirts, labeled as 100 percent organic cotton, was found to be only 6 percent above the price for a shirt without any distinction. But the premium price difference between a 100 percent organic shirt and a 25 percent organic shirt is a measly 2 percent.
The bottom line: it pays to be good, but it looks like you only have to be a little good to be paid.
