Pricing for an ethical business

Kindness and success are not mutually exclusive

A company designed to do good is often confused with a company that gives everything it earns back to its chosen cause AND does not charge its customers very much for the products because ethical products ‘should be’ affordable to everyone. So you end up in the double bind of feeling obliged to give away all your profits when your profit margins were minuscule to begin with. Sound familiar? 

You are not a not-for-profit. Therefore you are a for-profit. Profits allow you to reinvest, innovate, adapt and improve. If you aren’t making money then you necessarily are not helping the people you set up your business to help… so what are you doing?

If you don’t make a profit then, in fairly short order, you won’t have much of a business. And similarly if you give everything away as donations, profit shares and contributions, what is left? Don’t confuse frugality with morality because if a company fails to make money then it will cease to exist - and you will be unable to support the people, campaign and activities that you so passionately believe in.

Discussing money and ‘making-money’ often makes people cringe. It can be genuinely uncomfortable talking about money at the best of times, but when it comes to businesses that focus on ethics as well as profits, then there’s a whole other layer of cringeyness that comes into play. But this is hugely counterproductive.

You have to charge prices that enable customers and clients to afford your products whilst covering your suppliers and overheads, giving back, donating to charity, investing in the company AND paying yourself a living wage.

I agree that there can be push back from customers to the idea that some of their money, spent with you, will not go straight back into the cause they want to contribute. They view spending on anything other than direct ‘doing good’ as a waste or even somehow deceitful.

But this can and should be countered.

Fair pricing should not equal lowest price.

You cannot succeed as a business with ethical values and a vision for social change if you continue to fit into this way of doing things. Cheap at the point of sale covers up a process that can’t necessarily be defined in purely financial terms. 

Look around you - people increasingly want to spend their money on things that they both need and that they consider to be ‘giving back’ rather than ‘extracting from’. Businesses that put purpose before profit are multiplying both to meet that public demand and to address the needs we see around us. You’re in a growth industry. It's an exciting place to be. 

Communicate your value

How do you convey all this to your (potentially cynical) customers? I don’t mean justify as that still suggests an element of having to defend yourself. I mean explain the facts of your costings rather than the emotions around them.

Explain, clarify and educate. Given the society we are in, people have come to expect low prices as a standard. There is increasing public awareness around how those prices are achieved and the damage it causes but there is still so much more to be done in terms of expanding this message. 

A certain portion of your clients will already be people well versed in sustainable and ethical shopping, and in that sense you are preaching to the converted. But what about those people who may not be so well informed? How are you explaining your value system and convincing them that real value for money lies in buying produce that positively impacts environment around us? 

Telling your story automatically communicates why you charge what you charge. Textiles crafted in India are incredibly labour intensive - tell people about who make these beautiful fabrics and why you support them. Coffee produced on small farms in Kenya has to come a long way to get to the UK - how are you covering those transport costs and mitigating your carbon footprint? Do you subsidise lower prices on certain products to increase their affordability, meaning other products are slightly more expensive to cover the difference? Sell your products on the whole story behind how they arrive on your shelf - there's a million reasons why they aren't and shouldn't be 'cheap'.

People buy so much more than just the item itself and finding a way to convey the backstory will help enormously when it comes to rationalising your pricing. 

Think about the future too....allow your imagination to run riot in terms of all the things you would like to do one day but my killer question to you is how will you afford it?? 

To invest in innovation, reach new markets and adapt to change all takes investment and by investment I mean energy, time and MONEY. It may not be much but I’m pretty sure none of your future plans will come for free.

I am aware that there are some big mindset shifts - and that doing something is far far harder than simply thinking about it.

On that note I will leave you with my final thought on the subject - by continuing to undercharge for your products, you inadvertently continue to support the very systems you are hoping to change. Over-consumption, abusive employment, cheap production and polluting manufacturing are not the way of the future. The alternatives have higher cost implications and these are costs we should all happily embrace.