Financial Success and Ethical Consumption

Donna writes in with a great question:

Hi Trent!

I am really struggling with balancing ethical consumption with my dreams of financial success. Quite often, getting the most “bang for the buck” for a product involves buying from a company that cuts a lot of ethical corners in terms of their products. […] Looking for some insights into how to balance those concerns.

First of all, let’s look at what ethical consumption actually is. From Wikipedia:

Ethical consumerism (alternatively called ethical consumption, ethical purchasing, moral purchasing, ethical sourcing, ethical shopping or green consumerism) is a type of consumer activism that is based on the concept of dollar voting. It is practiced through ‘positive buying’ in that ethical products are favoured, or ‘moral boycott’, that is negative purchasing and company-based purchasing.

What does that mean in real world terms, though?

Ethical consumption just means that you choose not to buy products from companies that do things you consider unethical and you choose to, whenever possible, buy products from companies that do things in a way you consider ethical.

Let’s say, for example, that MegaCorp makes a particular brand of popular discount laundry detergent. The chemicals used in making the detergent is harsh and it is discovered that MegaCorp not only is exposing every employee in their company to these chemicals with no protection whatsoever, but they’re also dumping that chemical into a river that provides drinking water for five million people and they’re doing their best to cover it up. Meanwhile, Beautiful Babies LLC offers diapers that are hand made by well-paid artisan craftsman without chemical treatment, and zero waste is being produced from the Beautiful Babies factory. There are several ethical and moral reasons why a person might choose to buy diapers from Beautiful Babies rather than MegaCorp.

It’s important to note that not everyone subscribes to the exact same system of ethics, so I’m going to do my best to avoid pointing fingers at specific companies in this article. Instead, I’m going to try to use hypothetical examples that use extreme moral and ethical standards so that the difference is clear cut, like the one above.

So, what’s the problem here? It makes sense to not buy products from companies who do things that morally and ethically disgust you.

The problem is that companies that cut moral and ethical corners can often produce products at a lower price than companies who do not cut such corners. In the diaper example above, MegaCorp isn’t having to deal with the expense of handling that chemical waste or providing adequate protection for their employees, which enables them to sell diapers at a lower price than Beautiful Babies.

This comes into conflict with many of the core principles of frugality and financial improvement. One of the best strategies for financial self-improvement is to seek out the maximum bang for the buck with every purchase in order to conserve your financial resources to get out of debt and build a better future, right?

So, imagine you’re a parent who is trying to do just that – build a better financial future for yourself and your children. You’re standing in the diaper aisle and the box of MegaCorp diapers costs half as much as the box of Beautiful Babies diapers.

Which do you buy?

It’s not easy because you’re feeling two different deeply held values smashing against each other. On the one hand, you want to put you and your family on the strongest financial path, so the low price on the MegaCorp diapers looks really tempting and the high price of Beautiful Babies diapers is worrisome. On the other hand, the behavior of MegaCorp disgusts you deeply and you feel as though you’re rewarding that behavior by buying that product, so the MegaCorp diapers take on a negative light, and you also want to reward the ethics of Beautiful Babies so they take on a more positive light.

It’s an issue that anyone with a social conscience eventually deals with, and if you’re also invested in your financial future, you’re going to deal with it over and over again.

How do you resolve it? It’s not easy, I can say that for sure. It’s something I’ve struggled with many, many times over the last several years as I try to make purchases that simultaneously make financial sense and align well with my values.

Here are some of the strategies that I use.

Think Deeply About Your Values and Define a Few Very Clear Ethical Rules

Let’s say, hypothetically, that you’re upset by the notions of sweatshop labor and of chemical dumping into rivers. Those are two things that upset you deeply because you value paying people fair wages and keeping public resources clean.

Let’s say one company is known to be dumping several tons of industrial waste a year into a river just upstream of a major American city. Their primary competitor, on the other hand, keeps their factory clean, but it’s an overseas factory employing workers for $1 an hour under cramped conditions without proper safety gear.

Which company’s products do you buy if you have to buy one?

It’s not easy, is it? If you really care about both of those values, both companies might seem repugnant.

That’s part of the challenge of ethical consumption. Every single company in the world is likely doing something that you would ethically disagree with. Maybe they’re not paying their workers adequately. Maybe they’re not trading with their supply chain fairly. Maybe their factories produce a lot of waste. Maybe their factories run on unclean energy. Maybe their products feature a lot of wasteful packaging. Maybe they have hiring practices that you don’t like. Maybe their board of directors/CEO/president are involved, collectively or individually, with political causes that you disagree with.

Ethical consumption, in the end, means buying products from a company that is doing something that bothers you less than the behavior of another company. It’s going to be comparative, because no company is perfect.

What does that mean for you? You have to decide which particular values are most important to you and how they relatively rank. Do you buy products based entirely on their environmental impact? What about how they treat their workers? What about how hard they bargain with their suppliers? What about the sources of their energy? What about the political actions of their senior executives and directors? Which of those questions (or the others you might imagine, depending on what you personally care about) is truly the most important to you? Where do other questions rank behind it?

That’s going to seem incredibly hard at first. There may be a wide array of values that you care about deeply. However, if you don’t have a pretty strong sense of how those values compare for you, it becomes essentially impossible to make comparisons. If you don’t know how you feel about the importance of paying fair wages versus the importance of cutting down forests, how will you compare two different paper product companies, one of whom is involved in clear cutting while the other strongly underpays their workers?

Here’s why this is important. If you are not clearly pushing a central value or two with your ethical consumerism, your “voice” becomes deeply muddled and almost meaningless. If you’re trying to balance a dozen issues you care about, you’re going to constantly be compromising some of those issues with every purchase and your ethical purchases aren’t going to send any sort of clear message to anyone.

In the end, you need to decide on one or two issues you care about the most and upon which you make your buying decisions, while other factors become “tiebreakers” of a sort. If you don’t do that, then your ethical consumption won’t lead to any sort of change that you might want to see.

Let’s say, hypothetically, you’ve decided to support products that are made in America from ingredients provided by American suppliers if possible and you’re willing to pay extra for things that are made in America from American suppliers.

How much is that really worth to you? Are you willing to double the price of an item in order to make sure that it’s American made? Triple the price? Does that extend to literally everything you buy, or are you mostly concerned with a particular type of good, like clothing?

Again, this comes down to what exactly ethical consumption means for you. You’ve defined a central value that you care about the most in the previous step, but now you’re trying to figure out what it’s actually worth to you and how far you extend it.

Also, as before, it’s easy to just take a lazy answer here and say that you’re just going to generically “buy American,” but that doesn’t actually mean anything because if you’re not hitting a precise target with your purchasing dollars, your message becomes muddled and you quickly end up compromising what you value.

For many people who aren’t wealthy and are trying to build financial success for themselves, I think the most effective route is to define a few ethical rules that they’ll follow regarding some specific types of goods and then follow those rules regardless of dollar amount. That way, you can actually say something meaningful with the dollars you spend instead of just muddying the message and saying nothing at all. For other types of products, don’t worry about it because the ethics and morals you’re expressing with the purchase are likely to be muddied.

Cut Through the PR

You’ve decided on a few very specific buying rules that you’re going to follow. That’s great! If you stick to those rules, you’ll actually be making an ethical statement with your purchases.

The next step is to make sure that you’re actually following those rules, at least to the best of your ability. It’s time to start really researching specific companies and products related to those buying rules that you figured out.

Let’s say, for instance, that you decided to buy clothing made in America with supplies made by Americans, even with a price premium. That means you need to find companies that manufacture everything from t-shirts to underwear and coats to shoes that are made in America with supplies made by American. Time to do some real homework to identify those companies!

Many companies out there will issue press releases that tout that their product subscribes to particular common values out there, like “made in America.” Those press releases are often very selective in their claims, making the best “made in America” case that they can make but often excluding elements that might undermine that claim. For instance, they might show pictures of American workers working at that American factory, but if all they’re doing at that factory is stitching together two bolts of cloth imported from a foreign sweatshop, is that really “made in America”?

Dig deep. If you find a potentially good company, figure out where their factories actually are. Figure out where they buy their supplies.

You’ll probably find that companies that tout a particular value aren’t always 100% perfect in regards to that value. That’s okay. What you’re looking for is companies that are obviously trying to be far better than their competitors regarding that particular value.

As you go along, you’ll likely find some brands that claim to follow a value but really don’t do a good job of it and you’ll find other brands that do follow that value really well. Save all of this research. Start a document with links to all of this stuff. It’s more valuable than you might think at first.

The end result of all of this is that you’ll typically find a small handful of companies that are really the best in class in terms of their efforts to follow the value you care about. You need to not only support these businesses with your dollar, but champion them.

Make Your Voice Heard (But Be Polite)

It’s one thing to be an ethical consumer yourself and make purchases that really follow a particular value. It’s another step entirely to share that information with the world in a meaningful way that can persuade others. For every single person that you can persuade even a little bit to make a purchase that’s more ethical, you’ve amplified your personal ethical consumption.

The best way I’ve found to do this is to share the word with your friends in a polite fashion on social media. Simply state that you’ve made a personal choice to follow a specific ethical rule in your shopping because it’s important to you and in trying to follow it, you’ve discovered a handful of companies that really follow that ethic. List those companies, along with the evidence, and then point out that many other companies in the same field fall short and list many of the common reasons they do fall short.

You should share this in every place where it’s reasonable: places where people are listening to what you’re saying, like Facebook, and places where people are discussing the types of goods you’re thinking about, like specific messageboards where you’re already a member.

Be polite about it. Don’t demand that others follow your lead. Just share the information because you think they might find it useful. Share it all at once in a big batch and only provide an update if you’ve found a number of new companies. Don’t make it the only thing you talk about. In other words, be polite and reasonable about the whole process and others will actually listen when you do speak.

Think of it this way: by talking about your decision to buy something ethically and the research you’ve done into companies you’ve found that cater to that ethic in a polite fashion, you’re amplifying the value you get out of every extra dollar you spend on those more ethical purchases. You’re not only personally supporting companies that do those things with your dollar, you’re also using your voice to persuade others to check out those companies and perhaps spend their dollars in that fashion.

Change the Boundaries of the Question

Let’s change gears a little bit and move away from simply being a more effective consumer to bring about the change you want to see.

Another effective strategy for ethical consumption is to simply change the boundaries of the question in your life. In other words, if you’re buying products from an industry loaded with companies practicing ethics you don’t like, can you change your life a little bit so that you don’t need those products at all?

Let’s jump back to that comparison between MegaCorp diapers and Beautiful Baby diapers from earlier. Rather than having to make the choice between cheap and ethically concerning diapers or expensive and ethically pure diapers, maybe the choice is to simply not buy those kind of diapers at all and just use cloth diapers.

Maybe instead of trying to decide between several different clothing brands to add to your wardrobe, the solution is to not buy any of them and just go with a smaller wardrobe.

Maybe instead of buying a computer game that would support an unhealthy developer ecosystem or buying a game from a developer that has taken ethical stances you disagree with, you just choose to not buy any at all and play some of the games you already have in your library.

Maybe instead of continuing to buy electricity from an energy company who is doing basically nothing to make themselves sustainable, you decide to invest in solar panels or a small wind turbine to generate some or all of your own power.

In short, maybe there is a way to remove yourself from the buying equation if all of the options are either unacceptable in their ethics or far too expensive. Do you have to buy this product at all? Are there other options, particularly ones that might pay off over the long term?

Make Things Yourself

This is something of an extension of the previous idea, but it holds very much true.

Let’s say, for example, that all you can find for a particular vegetable at the store is an imported version of that vegetable coming from a farm in another country grown under who knows what kind of soil conservation and who knows what kind of pesticides or herbicides. Rather than buying that product, you might simply choose to start a garden for yourself.

Let’s say, for example, that you’re at the store looking at a cake mix and you have no idea what half of the ingredients are. Rather than buying that cake mix, you just buy flour, butter, baking powder, eggs, sugar, and some milk and make a cake from those ingredients yourself (a cake mix is really just flour, sugar, baking powder, a dash of salt, and trace amounts of flavoring to which you add milk and eggs and maybe butter). I have a friend who makes her own “cake mixes” from those ingredients and stores them in Ziploc bags until she needs them, for example.

You can make many of the things that you buy in a store yourself from more basic ingredients, ones that might be easier to source. It’s easier to figure out where flour and butter come from than to figure out the sources for all of the ingredients in a cake mix, for example.

Another advantage of this approach is that it is often cheaper to make things yourself than it is to simply buy that item in the store. Not only does this route make it easier to control the ethics of a particular item that you use, it can be a money saver. This is part of the reason that many people have their own gardens, for instance.

Final Thoughts

In the end, there are really two main approaches to ethical consumption.

One is to simply define a handful of clear ethical rules that you’re following, research them thoroughly to find products and companies that follow those rules, and then share that evidence loudly and clearly. This maximizes the “ethical value” you get out of every extra dollar you have to spend.

The other approach is to look for ways out of the question entirely by finding other products that fulfill your needs or simply making those products yourself.

Regardless of the path you choose for solving your ethical consumption dilemma, remember that simply throwing money at the problem doesn’t really help your situation long term. If you’re going to spend more to be ethical, make sure that it actually is ethical, that there’s not another path that doesn’t involve that extra spending, and that the results of your investigation are known to others.

Good luck!

Trent Hamm

Founder of The Simple Dollar

Trent Hamm founded The Simple Dollar in 2006 after developing innovative financial strategies to get out of debt. Since then, he’s written three books (published by Simon & Schuster and Financial Times Press), contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.