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Karen Fraser is one of the UK's leading experts on corporate ethics. She has a background in psychology and advertising. She's the instigator of the Ethical Reputation Index (ERI), the UK's first monitor of consumer perception of corporate ethics, and of the communications channels that influence those views. Some of her work was included in the Harvard Business Review's Breakthrough Ideas List for 2007. Yet, she admits, when it comes to judging the harmfulness (or otherwise) of her shopping, "I'm still no clearer on what's 'the truth' and what is not."

No wonder so many ordinary consumers are "conflicted," to use Fraser's preferred term. "A conflicted consumer is someone who may buy your brand or buy your products and services but doubt your company's ethical practices. And there are lots of them," she told the London Business Forum at Millbank's Lewis PR centre. "My work shows that up to one-quarter of consumers in the UK at the moment fall into this category." Any company that wishes to maintain a good reputation while building shareholder value therefore has to understand "what conflicts are going on in consumers' minds at the moment".

Complacency is not an option, Fraser stressed. The general public is becoming more and more interested in the provenance of the products it buys and the behaviour of the companies it patronises. And she should know. At Leo Burnett, the international advertising agency, she was carrying out research into customer perceptions at McDonald's when Morgan Spurlock's film Supersize Me - a documentary account of what happened to the director when he ate nothing but McDonald's food for 30 days - won huge acclaim and a general theatrical release worldwide.

"Media itself fuels online conversation," Fraser said. "[At the ERI], we've discovered that's happening rather rapidly. In 2006, we saw that 49% of people were likely to discuss corporate reputation with another person - a family member, a friend or a colleague." People are increasingly using the Internet to advise one another on ethical purchases, and to vet the suppliers of products and services. And of course, with more choice than ever before, they are looking for more compelling reasons to remain brand-loyal. "The primary reason consumers continue to shop with a brand," Fraser warned, "is because they believe there's no alternative."

On the upside, she added, "up to 26% are willing to pay more for an ethical brand or product." And as evidence for this, she cited a study by Harvard University, carried out at a home goods store in the US. The study compared the sales of two sets of towels - identical in thickness, quality, colour and price. One set was labelled "Fair & Square," to denote a more ethically sound provenance. The Fair & Square label, Fraser explained, read as follows: "These towels have been made under fair labour conditions in a safe and healthy working environment, which is free of discrimination and where management has committed to respecting the rights and dignity of workers." Over five months, the Fair & Square towels sold better than their unlabelled counterparts. "What's even more interesting," Fraser added, "is that when, after a couple of months, the researchers raised the price of the Fair & Square towels, their sales continued to be higher."

It seems that people will make an ethical choice, given opportunities and information. But there are still many degrees of ethical shopping behaviour. As Fraser pointed out, "There have been all manner of studies with all shades and hues of green shopper. [For example, in US studies]: 'new greens,' 'muted greens,' 'faded greens,' 'true-blue, active and light greens,' 'armchair bright green sprouts,' 'apathetic greens,' 'dark greens,' and one of my favourites, the 'has-been greens.'" The key thing to remember while the general public is developing a bit more of a conscience, it is not prepared yet to make major sacrifices for altruistic reasons. "About 10% of people in the UK at the moment are committed or so-called 'dark' or 'deep' greens," Fraser said. "The large majority of us - about 65% - do care, but you've got to make it easy for us, and we still want to consume, so we're not overly keen on changing our lives to reduce our overall consumption."

One of the knock-on effects of this trend is that shareholders are forcing companies to consider their ethics more carefully. For example, a retired solicitor recently got support from 100 fellow shareholders in Tesco to demand that the treatment of suppliers in low-wage companies was discussed at the company's AGM. "Quite a lot of older people we survey on the Index are really heavily into these types of issues and care a great deal more than they're given credit for," Fraser commented. "So even though we think young people are the more radical people in society, it's actually people who are a little older and who have experience of life and how to make changes who are taking more action."

Regardless of age, people are not fooled for a moment by so-called "greenwash," she said. "It doesn't matter what age [people] are, how rich or poor, they're remarkably savvy when it comes to telling what's real and what's not." For example, when BP began it's "Beyond Petroleum" campaign, ostensibly as a commitment to more sustainable energy solutions, the perception was that it was spending more on advertising than on genuine change. Even so, Fraser pointed out, BP still ranks way above Shell on the ERI. She suggests this could be attributed to the fact that the company now bases its management incentives on sustainability criteria as well as financial performance; and that it won a "Healthy Communities" award in 2004 from the Business in the Community (BITC) network.

To succeed, a national or international campaign needs to connect with the public at a grass-roots level, Fraser suggested. "Where the corporate campaign isn't in line with what's happening at that person's local [outlet], he's feeling a disconnect. Unless we manage to resolve that for him then he's going to be a conflicted consumer himself."

It also needs to use language that is completely transparent, or the public will assume it is mere obfuscation. This is particularly important, Fraser said, if the history of your organisation is not "snowy white". To demonstrate this point she read out two genuine, and very different: statements on corporate ethics

1. "The company prides itself on creating healthy, high-quality turkeys, maintaining the highest standards of agriculture and bird welfare, and meeting all regulations and standards and bodies."
2. "We are moving all our fresh turkey, duck and pork to free range."

The first one sounds "as if it was signed off by the lawyers," Fraser said. "It's not too difficult to wriggle out of that one. The second one is much more blunt, confident and clear... it's difficult to shirk if you make a bold statement." You have to be bold in this way, she stressed, if you have genuine integrity and want everybody else to know about it. "Even if customers don't recognise or agree with what you're trying to do, at least you're being honest and open and transparent, and that can command respect. It's also very memorable that you're making this concerted attempt, recognising that things may not have been so great in the past."

For an example of a company that has got its ethical policy spot-on, look to Marks & Spencer (M&S). When the company found out that 75% of its customers wanted greener shopping, CEO Stuart Rose launched a £200m initiative - with no guarantee of a return - to demonstrate the company took the views of shoppers seriously. There are three main reasons why M&S was successful, Fraser suggested:

1. People believe M&S cares about the environment, or is at least keen to change for the better in this regard.
2. They believe M&S treats its workers well.
3. The way M&S does its advertising and promotions means that people believe what they're being told. "The thing that has really changed opinion in the last year is what's going on in the stores," Fraser pointed out, explaining that its flagship store at Marble Arch is full of in-store communications about new ethical policies - "a very strong, influential place to advertise their changes, right at point of purchase."

Ultimately, she concluded, "if a company is honest about its past behaviour and makes visible attempts to make differences, and if that company spends money on any problem that it helps to create, then they will win our trust. So the winning strategy without doubt is to act with integrity."