Grant Smith, General Manager of Edelman Melbourne explores the notion of Social Regulation in part one of a three-part series.

There’s already a definition for social regulation, and depending on where you search you’ll probably find a variation of this from the OECD:
“Social regulations protect public interests such as health, safety, the environment, and social cohesion. The economic effects of social regulations may be secondary concerns or even unexpected, but can be substantial.”

In this post, I’m going to misappropriate the term because outside of the 858,000 returns Google provided me with when I typed in “social regulation”, I don’t think enough people seriously think about what it is that the rise of digital democracy is really about.

Influence

When we look at the rising influence of the internet as a vehicle for driving commerce (the central function of an economy), we’re observing the real-time evolution of an increasingly complex, and increasingly restrictive, social dilemma.

The social consumer

In the age of the social consumer, how much more powerful really is any one voice compared to five, 10 or 40 years ago? Much – not because the value of one voice is worth more, but with the technical capabilities of the internet it’s far easier to rally support around a minority point of view.

Social purpose

Since the early part of the new millennium, consumers have been on a philosophical pilgrimage towards a more socially integrated corporate landscape. Edelman’s extensive global research, both Trust Barometer and goodpurpose studies, show an increasing expectation from both opinion influencers and consumers that businesses will factor a social purpose into their operating remit.

For many consumers the purpose itself does not matter – the environment is important during periods of drought and flood, but is quickly relegated when social dislocation becomes the issue of the day. Significant investment in environmental projects by myriad multinational corporations has gone overlooked for the past three years as the global population struggles to come to grips with the continuing ramifications of the global financial crisis.

2010 data – because I haven’t got a copy of the 2011 set in yet.

Why do we care?

In truth, we didn’t know it was important to care about these things until someone told us. We didn’t intrinsically care where our shoes or clothes came from, until we started hearing about friends and families working in apparel who lost their jobs to offshore manufacturers. Then we started to express concern about sweatshops. We didn’t overly worry about where our tea and coffee came from until FairTrade came along and made us think about it.

The closest we came when I was a kid were the Tynee Tips bird cards that made your mum buy packet after packet just so you could fill in albums of bird pictures that you never looked at again. Now it’s impossible to walk through a supermarket without finding dozens of certified products populating the shelves.

We didn’t want it until someone else told us we did.

Word of mouth on the internet

This is an important consideration when we think back to the role of the internet, and particularly social networks, and how their uptake and integration into the fabric of daily life affects the way marketers and communicators view the world. The internet has changed our beliefs about what we, as consumers, are entitled to expect. And entitlement is a dangerous attitude for businesses to address.

Impact

In the context of growing consumer influence online, what we’re seeing is a growing ability for consumers to consciously, collectively, make decisions that shape the future of corporations. This has obvious upsides: better environmental management, reinvestment into local communities, better working conditions for employees.

There’s a downside though, and this is where I believe the term “social regulation” comes to bear.

Traditional regulation

We talk about market regulation, financial regulation, safety regulation – all external forces designed to limit the ability of organisations to behave recklessly. With increasing consumer power, the boundaries are redrawn yet again, but this time, by people who by and large only have self-interest as their motivator.

The Australian Competition and Consumer Commission acts on behalf of consumers. The Australian Prudential Regulation Authority acts on behalf of consumers of financial products. The Therapeutic Goods Administration acts on behalf of consumers of pharmaceuticals and medical devices.

These three organisations all provide some form of market regulation, and yet none act in their own interest, but rather in the interest of Australian consumers of products and services. While all three bodies are independent adjudicators of industry in various guises, they all employ a raft of experts with deep experience in the industries they oversee.

‘Social regulation’

Social regulation, in the hands of individual consumers, changes the game. Literally. No longer can corporations amuse themselves by opening the playbook of regulatory requirements and then chart a course to navigate through official regulatory complexity to an end goal that meets the company’s objectives, preferably exploiting a loophole or two along the way. Now, consumers and the marketing commentariat expect to be consulted informally, continuously, with actual impact on the company’s ability to make decisions.

There are two questions for business leaders to answer, and sooner rather than later:

Is this a good thing?

What can we do about it?

Read the next instalment in Grant's series on Social Regulation here.

Simpsons image source here.