Tide turns on businesses which sell harmful products

Governments are pushing back on costs, signalling a shift of responsibility that boards must navigate. With the rise of sustainability, ESG and transparency, we are seeing a philosophical shift to “safe seller” business.

Have we been making poor choices or have businesses been selling us harmful products? Many have come to believe that if you smoke, gamble or eat ‘junk’ food, then the negative consequences are your own fault. Governments have stepped in to take responsibility with campaigns such as ‘Life Be in It’, ‘Do the Right thing, Put it in the Bin’ and ‘Gamble Responsibly’.

However, with the rise of sustainability, ESG and transparency, are we seeing the beginning of a much bigger, philosophical shift? Recent developments in relation to cigarettes, pokies, litter and fashion are indicating a shift from ‘buyer beware’ and the idea of individual responsibility, to that of ‘safe seller’, with responsibility now back with business.

Buyer Beware Beginnings

Generations of business leaders and consumers have been raised on the idea of ‘buyer beware’ or caveat emptor, a concept based in common law doctrine that places responsibility on the buyer to do their own research and take the risk. This idea focuses on personal responsibility. The role of governments has been to set minimum standards of safety that companies must meet, with no further moral obligations (sometimes referred to as a bare moral minimum). Buyer beware originated in real estate, where an asset is transferred at a point in time. However, should this philosophy of personal responsibility ever have been applied to products that have delayed and cumulative negative consequences, such as cigarettes and food?

The Freedom of Choice Myth

From buyer beware, we have accepted the idea of ‘freedom of choice’ and companies have reinforced this personal responsibility framing, even when it has had negative consequences. The basis of this idea is that if you choose to smoke, gamble, or eat junk food then you are to blame for the consequences. But what if our ability to ‘choose’ has been impaired?

The field of Commercial Determinants of Health (CDoH) points to the role of marketing in impairing our decision-making. The field of Social Determinants of Health (SDoH) points to our socio-economic status and where we live as playing a role in how well we can make decisions about what we eat and do. These fields are weakening the ‘freedom of choice’ argument.

Signs of a Shift in Responsibility

Governments across the globe are signalling a different approach to responsibility for harm linked to corporations. Here are some examples that Boards would be wise to understand for their broader implications:

1.     Last year, the Biden-Harris administration in the US announced a plan to introduce new standards to make cigarettes less addictive by lowering nicotine to minimally or nonaddictive levels.

2.     In 2021 in the UK, the Government strengthened standards on gambling by focussing on responsible product design and in April this year, they vowed to get tougher on operators which fail to protect people.

3.     Late last year, a new bill was proposed in Germany where plastic manufacturers will be forced to pay for litter collection.

4.     In June this year in Australia, the Minister for the Environment announced a levy of 4 cents per item for clothing importers and garment makers in an effort to reduce waste and landfill. The scheme is commencing as voluntary, with a warning that if it doesn’t raise enough, it will be imposed as compulsory.

5.     In 2018, the WHO called for a worldwide ban on trans fats. Forty countries now have best-practice trans-fat elimination policies in effect. Food policies remain a priority for many governments with labelling systems constantly critiqued. Either way, the food industry is on notice.

6.     The Australian government’s recent announcement that they will restrict vaping stands in stark contrast to the historical approach to tobacco. The federal Health Minister has made it clear that the target of these reforms are the importers and the vendors, not consumers.

Economic Pressure

It's not just about fairness for the individual, it’s also about fairness in relation to costs and economic impact. Governments have largely borne the cost of big tobacco, big soda and big food. Consumers and their families bear another cost with early death, disease, disability and dysfunction.

The reality is we have accepted the privatisation of profits and the socialisation of costs. In many cases, taxes raised have been insufficient to cover the costs, most notably in relation to tobacco, which is well documented. As the economic position of countries is set to worsen, the drive to hold business accountable for costs will likely increase, further cementing the shift in responsibility from the individual back to the corporation.

The Future

ESG and sustainability agendas will keep the pressure on business, along with sustainability professionals within businesses who must correlate corporate responsibility promises with known harmful consequences. Public health experts are honing their messages and promoting their research to an audience of business leaders and a director community attuning themselves to issues of social equity and intersectionality. Data sources are edging closer to full as they expand to include health and medical evidence. The finger of blame, for so long pointed at the individual, is now not so firm in its direction. Perhaps a more ethical world awaits.

About Clare Payne

Clare Payne is a former employment lawyer and co-author of A Matter of Trust. She holds the roles of Fellow for Trust and Ethics at EY (Oceania) and Honorary Fellow at The University of Melbourne.