Andy Newman byline photograph Photo: Bill Smith Copy: Andy Newman For: Archant Archant © 2009 01603 772434

Two of the most profitable businesses around have faced some difficult business ethics issues this month, a timely reminder that a potential consumer backlash against bad corporate behaviour – perceived or actual – is an ever-present threat for even the most successful company.

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The travails of Apple and Tesco over the past couple of weeks have demonstrated just how important a strong ethical stance is to a business’s reputation, and how much damage can be quickly done when firms ignore this simple truth.

Newspaper headlines were full of criticism of Apple for the alleged horrible working conditions at the factories in China which assemble its achingly-trendy iPhones, iPads and other gadgets. Stories of overworked, underpaid factory workers being driven to apparent suicide spurred Apple to announce its own enquiry into the way its Chinese operations are run, prompting headlines such as ‘Apple, Rotten to the Core?’

Apple, of course, has in the past been very successful in building an image of being the good guys, in contrast to the picture it paints of arch-rivals Microsoft as the uncaring corporate colossus.

It’s interesting to see that perception starting to shift subtly, as Machiavellian business practices by Apple start to chip away at that homespun image. This will only be exacerbated if the company cannot convince the world that its huge profits are not made on the back of unacceptable worker exploitation.

Closer to home, our own love-it-or-hate-it supermarket Tesco has come under fire for a job advertisement which appeared to be asking for people to undertake work on an unpaid basis, just for the experience.

Although Tesco has claimed this was in fact an error, the row has highlighted the widespread use of unpaid interns, with ‘mandatory work activity’ on its way for those long-term unemployed who want to keep receiving benefits.

The attractions to employers are obvious – there is no cheaper labour than free labour, and if you can fill your jobs with people you don’t need to pay, you can lay off all those unreasonable employees who insist on earning a wage.

As Tesco is finding out, the prevailing consumer mood is turning against those who choose to exploit. It is interesting that their great rival Sainsbury’s has taken the moral high ground by refusing to have anything to do with Government-backed mandatory work activity, and although they might miss out on the economic benefits of using slave labour, I suspect they will reap the benefit in the longer term from an improved reputation.

The importance of supplier-chain ethics cannot be understated, and is well demonstrated by the growing success of campaigns such as Fairtrade Fortnight, which comes around again at the end of this month.

Initially established by the Fairtrade Foundation to highlight exploitative business practices in Third World suppliers to the west, it has mushroomed into a catch-all campaign to promote fairness and decent business practices everywhere. It has succeeded by encouraging pressure by consumers direct onto business, and its success is visible not just in niche stores, but on every High Street, as large corporate grasp the fact that their customers will punish them if they are seen to act unethically.

Companies like Apple, whose point of differentiation is essentially one of fashion, will fail very quickly if they let their ethical reputation slide. Bullying competitors and exploiting dodgy employment practices at emerging-world contractors may have an attraction in that it will boost short-term profits, but it has no place in building the kind of reputation that will ensure long-term success.

Fairtrade Fortnight runs from February 27 to March 11

Andy Newman runs Newman Associates PR