5 Reasons Why Millennial-Focused Brands Cannot Afford to Ignore Social Responsibility

At AI, our extensive experience providing Ethical Audit Programs for some of

the world’s largest brands and retailers has given us unique insights into ensuring

ethical supply chains worldwide.

www.AsiaInspection.com - © 2016 2

“Millennials are the

largest generation alive today, counting 1.8 billion people globally.”

Toms. Patagonia. Lush Cosmetics. What do these brands have in common? They all target Millennials, and they’re winning by making social responsibility one of their top priorities.

In the past, it was not uncommon for companies to source goods from overseas with little concern for who was making them, or for the labor conditions they were manufactured in. With the rise of socially conscious Millennial consumers, it’s clear that brands can no longer afford to ignore ethical compliance throughout their global supply chains.

Millennials' buying decisions are heavily influenced by social responsibility, more so than those of any other demographic. Here are five reasons why companies need to be aware of the issues that matter to this group.

1. Millennials are a huge group with growing purchasing power

Millennials, also known as Gen Y, are typically defined as those born between 1980 and 1995. Their influence on today’s global economy can hardly be overstated, offering huge profit potential for companies that win their business:

• Millennials are the largest generation alive today, counting 1.8 billion globally.1

• Millennials account for over $1 trillion in consumer spending in the United States alone, and around $10 trillion globally.2,3

• Millennials will outpace Baby Boomer earnings by 2018, when their spending power is forecasted to exceed $200 billion worldwide and $2.5 trillion in the US.4

MILLENNIAL SPENDING HABITS5,6,7

58%purchase, on average, at least one luxury item a year , compared to 25% of Baby Boomers.

45%Male Millennials

annually compared to older generations.

SPENDTWICECLOTHING

AS MUCH ON

love to shop,compared to 40% overall.

47%

$$

of female Millennials shop for clothing more than twice monthly, compared to 36% of non-Millennials.

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2. Millennials hold brands to a high standard of social responsibility

Social responsibility plays an important role in Millennial buying habits. In fact, 87% of Millennials are more willing to purchase products with a social or environmental benefit, and don't hesitate to switch brands in favor of one they consider more ethical.8

However, when the Millennial consumer is satisfied by the brand's product and CSR efforts, they tend to develop strong brand loyalty. A 20159 report shows that 60% Millennials are often or always loyal to their chosen brands, especially when they feel that the company behind it listens to their feedback.

These figures show that socially responsible companies can strongly benefit from a good relationship with Millennials, and vice versa:

• 91% of Millennials would switch brands to one associated with a cause;

• 88% would stop buying a brand's products if they learned of the company's unethical or deceptive practices;

• 82% would tell their friends and family about the CSR efforts of a brand they support;

• 86% want companies to tell them more about their efforts to operate more responsibly.8

3. Millennials care about multiple social issues

Compared with other generations, Millennials are concerned with a higher number of social issues. Their formative years took place in the era of unprecedented globalization and child labor scandals. They are also the first generation to grow up with “cause marketing” carried out by companies in support of a wide variety of causes, from anti-trafficking to world hunger. These factors have shaped their expectations for companies – namely, that businesses should solve social problems, not make them worse. In fact, 86% of Millennials expect that companies must do more than make a profit, but also address social and environmental issues.8

Among the top issues that Millennials are expecting companies to address are:

• Economic development

• Poverty and hunger

• The environment

• Human rights

• Education5

“86% of Millennials

expect that companies must do more than make a profit, but also address social and environmental issues.”

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4. Millennials are willing to pay more for ethically sourced goods

Research shows Millennials will open their wallets more readily for ethically sourced goods. More than half of Millennials seek out products with social responsibility benefits and will choose them over unethically produced goods.5 Additionally, among the 55% of global consumers willing to pay extra for socially responsible products, roughly half are Millennials.10

While low-cost retailers remain popular, unethical manufacturing practices continue to generate negative headlines for many of them. Millennials are more likely to leave a brand after learning about its unethical conduct, because they believe that their choice of brands paints a picture of them as a person.11 This is also why they tend to actively seek out ethical labels and cause-oriented companies.

For example, look at the popularity of Toms, a company that donates a pair of shoes for each pair purchased at regular price. A base model pair of Toms sells for $48–which may seem a relatively high price for fairly simple shoes, but one that consumers are willing to pay, knowing that their extra expense funds a charitable act rather than the brand's bottom line. In addition to their giving programs, Toms also emphasizes supply chain transparency, regularly auditing their manufacturers to prevent unethical labor practices.12 This example clearly shows that higher prices do not deter Millennial consumers from ethically sourced goods.

5. Social media gives Millennials massive influence on other buyers

If there was one defining attribute of Millennials, it would be their use of technology and social media. Not only do Millennials make decisions based on social media perceptions, but they can also use social networks to directly confront a company about irresponsible practices, launch petitions or boycotts, and quickly spread negative word-of-mouth advertising.

• Social media is a key outlet for Millennials' activism. Roughly two-thirds of Millennials use social media to engage companies on social issues. Even more importantly, 26% of them take to social media to share negative information about companies that fail to live up to their commitments.8

• Millennials are constantly connected. Millennials spend an average of 5.4 hours on social media daily. Facebook remains a popular platform for getting news, but the younger side of the Millennials is shifting towards other social networks, such as Twitter, Tumblr, and Reddit.13,14,15

• Millennials wish to genuinely engage with brands. Brands that use social media for transparent and authentic communication will get more attention from the Millennials. On the contrary, companies that are overly promotional, self-centered or dishonest will have a hard time connecting with this group.16

“26% take to social media

to share negative information about companies that fail to live up to their commitments.”

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THE RISE OF THE MILLENNIAL INFLUENCER

U.S. Millennials visit social media sites daily

6 10INare less likely to purchase from

brands their friendsdisapprove of

1 4IN

say they influence the buying decisions of peers

and other generations

3 4OUTOF

#Child!abor share negative information about companies on social media

26%

7:30 PM

?

Millennials are also known for being strongly influenced by peer perceptions, with 90% trusting their friends for product recommendations,17 and 1 in 4 being less likely to purchase from brands their friends disapprove of.18 This influence is not limited to the same generation: Millennials also frequently influence their parents' buying decisions.

Now more than ever, consumers are leveraging social media to effect positive change. A Facebook campaign challenging Hershey on child labor issues collected over 50,000 petition signatures, ultimately forcing the company to change its practices.19 Interestingly, Hershey had already signed an agreement promising to fight child slavery in the industry, over ten years ago, but only took real action when faced with social media pressure.20

How to Build an Ethical Supply Chain

Meaningful progress and transparency in corporate social responsibility requires active engagement in your brand's supply chain – namely, auditing, corrective action, re-auditing and monitoring the findings.

Key capabilities to look for in ethical audit service providers include:

( Total supply chain transparency. Audits should not only ensure ethical compliance, but also verify the GPS coordinates of finished goods against the factory coordinates, to prevent unauthorized subcontracting.

( Real-time supply chain intelligence. Online supplier management provides brands with a centralized platform to track KPIs and high-risk issues, helping them make better sourcing decisions faster. Online reports should include clear grading and category scoring, plus benchmark data by country and industry, for easy comparison.

Child and Forced Labor in the World

168 Million Child laborers worldwide

85 Million Child laborers

performing hazardous work

21 Million Victims of forced labor

globally

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( Closed-loop audit protocols that include a corrective action plan. Too many disasters result from problems that were identified but never fixed. Having a defined follow-up strategy is crucial to ensuring issues are actually solved.

EDUCATE & TRAINMEASURE & CORRECTENGAGE

• Ensure visibility into your supply chain and know who your high and low performing suppliers are.

• Suppliers implement AI’s Corrective Action Plan.

Withdraw Supplier?Potential 2nd Follow-up

Approved for 1 year

Desktop Review

RED

AMBER

GREENGREEN

Action Plan +Follow-up Audit

DesktopReview

Initial AuditFull Re-audit

RED

AMBER

GREEN

AsiaInspection is committed to these best practices, performing more than 10,000 ethical audits annually. AsiaInspection programs adhere to internationally recognized SA8000 or Sedex (SMETA) standards, offering additional options based on the Ethical Trading Initiative(ETI), Global Social Compliance Programme (GSCP)or client-specific protocols.

To learn more about how ethical audits can help protect your reputation with Millennial consumers, check out more of our other free resources at www.asiainspection.com/whitepapers or email us at info@asiainspection.com.

www.AsiaInspection.com - © 2016 7

About AsiaInspection

AI is a global leading quality control and compliance service provider that partners with brands, retailers and importers around the world to secure, manage, and optimize their supply chain.

AI performs Supplier Audits Programs, Product Inspections, and Laboratory Testing. Clients from over 100 countries worldwide benefit from web-based mobile friendly account management, fast scheduling, and highly competitive all-inclusive pricing: $309 for Product Inspections and $629 for Factory Audits.

AI guarantees on-site arrival within 48 hours of booking, and a same-day inspection report available online.

With over 800 inspectors and auditors classified by product range, and account managers speaking over 20 languages.

Connect with us

sales@asiainspection.com

www.AsiaInspection.com

NOTES

1. U.S. Census Bureau International Database, 20122. Brookings Institution, "11 Facts About the Millennial Generation," June 2, 2014 (http://www.brookings.

edu/blogs/brookings-now/posts/2014/06/11-facts-about-the-millennial-generation) 3. Total Youth Research, "Millennials and Their $1 Trillion Buying Power," June 4, 2015 (http://www.

totalyouthresearch.com/millennials-buying-power)4. Forbes, "The Millennial Customer Has $200 Billion To Spend (But Wants A New Style Of

Customer Service)," January 21, 2015 (http://www.forbes.com/sites/micahsolomon/2015/01/21/the-millennial-customer-has-arrived-has-200-billion-to-spend-and-wants-a-new-style-of-customer-service/#33cb7ed1717b)

5. Shullman Research Center, “Millennials Attitudes Towards Shopping,” 2013.6. Boston Consulting Group, “Millennial Passions,” November 2012.7. Luxury Daily, "Millennials more likely to purchase luxury items: report," May 29, 2015 (http://www.

luxurydaily.com/millennials-more-like-to-purchase-luxury-items-report)8. Cone Communications, 2015 Cone Communications Millennial CSR Study, 2015 (http://www.

conecomm.com/new-cone-communications-research-confirms-millennials-as-americas-most-ardent-csr-supporters)

9. Elite Daily, Millennial Consumer Trend 2015 Study, 2015 (http://elitedaily.com/news/business/elite-daily-millennial-consumer-survey-2015/)

10. Nielsen, “Investing in the Future: Millennials Are Willing to Pay Extra for a Good Cause,” June 23, 2014.

11. Fortune, "Why Ethical Brands Must Engage More: Millennials," October 6, 2015 (http://fortune.com/contentfrom/2015/10/06/ethical-brands-engage-millennials/ntv_a/gd4BATQoEAfxgFA/)

12. Toms, http://www.toms.com/supply-chain-transparency.13. Entrepreneur, “Want to Reach Millennials? This is How They Spend Their Time,” October 9, 2014.14. American Press Institute, How Millennials Get News: Inside the Habits of America’s First Digital

Generation, March 2015.15. American Press Institute, "How Millennials Use and Control Social Media," march 16, 2015 (https://

www.americanpressinstitute.org/publications/reports/survey-research/millennials-social-media/)16. Forbes, "5 Ways Successful Brands Win With Millennials On Social Media," January 26, 2016 (http://

www.forbes.com/sites/laurenfriedman/2016/01/26/5-ways-successful-brands-win-with-millennials-on-social-media/#c85ff4d1ae00)

17. Cuker, "Millennials: Marketing for the Next Generation," October 15, 2015 (http://www.cukeragency.com/blog/2015/10/15/millennials-marketing-next-generation/)

18. Boston Consulting Group, The Reciprocity Principle, January 2014.19. Business Insider, “Group Used Facebook to make Hershey Act on Child Slavery,” February 1, 2012.20. YaleGlobal, “Can Social Media Campaigns End Child Labor?” February 10, 2012.