Can An Eco-Friendly MLM Really Be Ethical?
If you’re on social media, you’ve probably experienced the 'good vibes only' wrath of MLM huns.
"Hey hun 🤩"
Jokingly called hunbots due to their reputation for cold messaging strangers with pet names and copy and pasted compliments, successful network marketers all have the same goal - recruit, recruit, recruit.
While it is easy to have a joke about these "consultants" or "ambassadors" (they call themselves different names so they can say they're different to other MLMs), a closer look reveals a serious problem that isn't funny at all.
MLM reps are real people (mostly women) tangled up in unpaid direct sales jobs they've often invested hundreds in with no option but to recruit or fail.
The truth is, it is not the women that failed. It is the fault of the pyramid-shaped business model that has a 1% success rate (source).
With that in mind, can an eco-friendly company that uses multilevel marketing truly be ethical?
The short answer is no. Some of these MLMs may be selling eco-friendly products but they are operating a little bit too like pyramid schemes for my liking. Keep reading to learn why MLMs are unethical.
Disclaimer - this article is based on my opinions and the experiences of network marketers that currently or previously worked in MLMs.
Coming up:
What is multilevel marketing (MLM)
What is the difference between multi-level marketing and a pyramid scheme?
What makes a company ethical and sustainable?
Which eco-friendly brands have an MLM branch?
Five reasons an MLM isn’t ethical
How much are eco MLMs profiting?
Is Tropic a different MLM?
Can eco-friendly MLMs really be ethical?
1. What is multi-level marketing?
"Multilevel marketing (MLM) is a strategy that some direct sales companies use to encourage existing distributors to recruit new distributors" - Investopedia.
Network marketing has been around for decades and thanks to thousands of people losing money, the word MLM has a bad reputation.
To avoid stigma, the people involved often like to call it direct selling or social selling.
Although reps like to say they have started their own small business, the company they are selling for is usually a large organisation made up of thousands of individuals selling products at home, mostly via social media, pamper parties and local craft fairs.
Signs a job opportunity is an MLM:
You have to pay to join or buy stock (or subscribe to the company’s services).
Some MLMs expect you to pay a hidden or monthly fee of some kind, this may be for a website or admin fees.
You will make the most money by convincing other people to sign up to be a sales rep. Anyone you recruit is your downline.
You get a percentage of your downline’s commission.
You are expected to do unpaid training.
You may feel like you need to buy more products even if it isn’t a requirement, or you are encouraged by your upline.
The products are either overpriced or extremely cheap.
2. What is the difference between multi-level marketing and a pyramid scheme?
What is a pyramid scheme?
Pyramid selling schemes are illegal and most people that join them lose a lot of money.
Pyramid selling happens when participants in a scheme are financially compensated by other people paying into the scheme rather than by the selling of a product or service. - CMA
The people at the top of the pyramid make a large amount of money off the recruits at the bottom of the pyramid.
What is the difference?
A multi-level marketing scheme has a pyramid-shaped business model which is why there is some confusion. The key thing to note is that an MLM is legal if the reps are able to make money selling products without recruiting. If a consultant must recruit to make money then it is a pyramid scheme.
It also has to follow certain guidelines (which differs depending on the country), like not making misleading claims about income possibilities.
It is worth being cautious because there are pyramid schemes with products pretending to be MLMs. Herbalife, LuLaRoe and Advocare have been fined millions for acting like pyramid schemes and causing huge amounts of financial loss, while others, like Arbonne, have been accused in lawsuits.
3. What makes a Company ethical?
Words like “eco-friendly,” “ethical,” and “sustainable” are intertwined - they all mean something slightly different, but they’re connected.
It is relevant because the public deserves to know who they are financially supporting.
Ask yourself, what happened to get that product in front of you? Who made it? And where is your hard-earned money going?
SUSTAINABLE: meets the needs of the present without compromising the ability of future generations to meet their own needs
ETHICAL: contributes to society in a positive, responsible way and does not harm people, animals or the environment.
ECO-FRIENDLY: does the least possible damage to the environment and biodiversity.
Not only will it not harm the environment, but a truly sustainable company will not exploit workers through unethically low wages, use child labour or avoid paying taxes.
A genuine ethical brand will not use its business to profit while the people in its supply chain are suffering.
Why does sustainability matter?
Eco-friendly is an unregulated term but it has a place because most consumers want to buy products that won’t harm the planet.
What you need to remember is environmental issues are also feminist issues; we can’t have environmental justice without social justice and gender equality.
Unfortunately, there are many brands that are directly profiting from the suffering of women.
Women in the Global South are particularly vulnerable. They grow and make the products that corporations sell but in return receive poverty wages and work in dangerous conditions where abuse is common. This is a risk for any company that manufactures overseas, regardless of the business model.
An ethical company will take responsibility for every part of its supply chain, ensuring its workers are safe, have dignity and are paid fairly. That includes the other end of the supply chain - the sales reps.
4. Which eco-friendly brands have an MLM branch?
The following MLMs have consultants using their environmental and sustainable values to sell or recruit. I’m not looking at whether their claims are true (some of them are definitely greenwashing), this is simply to help people identify which brands are using an exploitative business model.
A list of eco-friendly MLMs:
Neals Yard Remedies (NYRO)
The Body Shop
Tropic Skincare
Utility Warehouse
Wikianiko
Arbonne
Norwex
ENJO
Beauty Counter
Pure Haven
doTERRA
Young Living
Enagic
Clean Living
Forever Living
5. Five reasons an MLM isn’t ethical
Many of the MLMs listed above sell products that were made more responsibly.
Some are certified organic, which means ingredients were grown without chemical fertilisers and used safer pesticides. Others opt for Fairtrade, which means farmers were paid a fair price for ingredients, like coconut oil and sugar.
These certifications matter - they prevent the exploitation of people, animals and the earth.
A few of the MLMs, like Tropic and Neals Yard Remedies, have put a lot of effort into making responsibly-made products, but sustainability must include all people.
It must include the distributors.
Here are a few of the ethical issues that happen in all multilevel marketing companies.
Unpaid labour
Ambassadors are not paid for their time or effort. They don’t receive sick pay, paid holiday, pension contributions or maternity leave because their MLM has structured their workforce in a way that avoids them having to pay that right to their workers.
An ambassador’s role covers sales, advertising, recruiting, networking, delivering, photography, content creation, management, planning parties, hosting parties, creating videos and digital marketing. All of which is unpaid labour.
This all takes place in a culture of toxic positivity where uplines force a positive outlook so that reps stay silent about their struggles. Reps are told it’s their fault if they aren’t making enough sales which can make them blame themselves and feel a deep shame at their failure.
“If you aren't earning, you aren't working hard enough."
“If you want something bad enough, you’ll make time, not excuses.”
This is why it’s problematic not paying distributors for their time. You could invest £60 on new products, post fresh content on social media every day, advertise the brand to everyone you meet, help others with their problems, spend hours scrolling through Facebook groups waiting for someone to ask for a product recommendation… all of which is making the company money and increasing their brand recognition and trust. Something that non-MLMs have a budget for.
You could do all that every day for months but if you don’t make any sales you don’t get paid.
Research published by the Federal Trade Commission (FTC) revealed that 99.6% of people in an MLM don’t make any money once their expenses are factored in. More recently, a study by AARP Foundation revealed that although 90% of people join to make money, 47% actually lost money and 27% didn’t make anything at all.
This is where the pressure to recruit comes in.
If you recruit 10 people and then they recruit 10 people and they recruit 10 people, suddenly you have a stream of income trickling up the pyramid - only most of the sales are coming from the reps and their starter kits.
Consultants are quick to point out that it is absolutely not a pyramid scheme, however, the similarities are undeniable.
MLMs cause overconsumption
One of the reasons MLMs get a bad name is because distributors that recruit sometimes end up with large quantities of stock.
When consultants get promoted, they must continue to meet their sales targets in order to get paid.
This is problematic in companies like The Body Shop and Arbonne because their regular high targets result in desperate people placing huge fake orders so they can receive their wages that month. This leaves consultants with piles of unwanted stock they can’t sell.
Brands like Tropic and Neal’s Yard don’t appear to have this stockpiling issue, but they encourage overconsumption in other ways.
Overconsumption of products results in too much of the earth’s resources being taken. Plant-based products are better than petrochemicals but they are not without an impact.
Beauty products contain oils that can be destructive when demand grows too high. If we stand a chance at fighting climate change, we all need to buy less. The simplest way to reduce your environmental impact is to use a minimal amount of products (and packaging).
I’m not discussing the environmental credentials of individual companies today, but it’s important that we acknowledge the impact of this business model.
If reps were paid for their time rather than their sales, they would be able to promote responsible shopping habits. Instead, reps require people to buy more than they need so they can earn a commission.
And let’s not forget that to become a rep you have to purchase a starter kit containing hundreds of pounds worth of stock.
Clearly, these brands are more environmentally friendly than many other MLMs, but is it ethical to use environmental values to encourage overconsumption?
It’s just a shame that a more ethical business model wouldn’t result in such a huge profit for these companies.
MLMs target vulnerable people
Women, especially stay at home mums, are often the targets of consultants looking to create large downlines.
When you’ve started a family, it’s much harder to make money and the cost of childcare is extortionate.
New parents are enticed with promises of flexible work hours, unlimited earning potential and the opportunity to be their own boss.
(If it sounds too good to be true, it probably is.)
My first experience of someone recruiting me was when my maternity leave was due to finish and I was really struggling with the idea of going back to work and leaving my baby. I was desperate to stay home and struggling with postnatal anxiety and PTSD.
As a blogger and a mum, people try to recruit me on a fairly regular basis - complete strangers that cold message me. In the worst cases, they’ve pretended they want to be my friend for days just so they can try and recruit me (which is not cool at all).
MLMs are misleading
I almost signed up for a “non-toxic,” vegan network marketing company so that I could quit my job and stay at home with my baby. The woman made it sound so easy - I remember she was one promotion away from getting her own car. I now know that was a misleading lie.
The red flag for me was that I had to invest.
Consultants are tricked into believing that they are running their own business and they, therefore, need to invest in it. In reality, they have no control over any business, they are just unpaid sales reps earning money for a rich company.
Sometimes reps tell me they just want to make a little money on the side of their day job. What’s the harm in that?
It might not seem as obvious that they are losing money. Their salary will pay the bills and any commission they receive will feel like profit because it’ll go straight into their bank account.
Last year a Neals Yard Remedies consultant tried to recruit me. She told me that she avoided postage fees for her customers by personally delivering their orders.
The problem is, all these little expenses add up - the postage fees, the petrol, the phone bills, the samples, the stationary, the products.
Even if we ignore the time you spend getting the perfect photo, delivering products by foot, creating and editing videos, replying to comments, going live, writing content, messaging friends and adding complete strangers, if you’re not tracking your expenses and factoring in taxes then your profit isn’t what it seems.
Ask yourself, are you investing in your success or the MLM’s success? Because the MLM will be fine without you but your role doesn’t exist without them.
MLM reps are the best customers
One of the arguments against MLMs is that the reps are the customers.
They buy the starter kits, they use the products on a regular basis (many of which are advertised to have no strong preservatives so they won’t have a long shelf life), they buy them as gifts for friends… they even use them at work in salons or spas.
No matter how much reps claim to love the products, these are expenses and should be deducted from their overall profit. This is problematic when you realise how many of them hold stock. The Body Shop at Home is particularly bad for this, but anyone doing stalls at craft fairs will need to hold stock.
MLMs are not transparent
Companies use the multilevel marketing business model because it makes them a lot of profit with little investment. Unfortunately, most of these brands don’t provide an income disclosure so how much money their consultants make remains a secret… I wonder why.
One of my criticisms of many non-MLM companies, like fast fashion brands, is that the CEOs take home millions in salaries and bonuses while the hard-working garment workers receive starvation wages.
Because of the complex nature of supply chains, transparency is necessary to protect fundamental human rights. Transparency is how we know companies are being truthful.
In the UK, our minimum wage is significantly higher than in developing countries and we have working rights to protect ourselves when we’re not treated properly - like last year when The Body Shop was caught and fined for paying workers in its shops below minimum wage.
With multi-level marketing, there are not the same protections in place if you lose money.
This is why income disclosures are absolutely vital - people deserve to know upfront what they are getting into. If an MLM hopes to have a shred of honesty and decency, they will make it accessible to the public on their website.
6. How much are the eco MLMs Profiting?
Annual revenue - the amount of money your company earns from sales over a year; it does not include costs and expenses.
Net worth - the value of all assets, minus the total of all liabilities.
The Body Shop - annual revenue is £806,000,000 net worth is £187,000,000
(The Body Shop is owned by Natura who also owns the MLM Avon)
Tropic Skincare - annual revenue is £93,963,262 net worth is £12,700,000
Neal’s Yard Remedies - annual revenue is £39,000,000 net worth is £6,900,000
Doterra - annual revenue is $1.83 billion USD
Young Living - annual revenue is $7.95 million USD
As you can see, MLM companies are doing very well thanks to their network marketing reps. Yet we know that most distributors don’t earn any money (after expenses) or worse, they lose money.
You may remember me saying that research published by the Federal Trade Commission (FTC) revealed that 99.6% of people who join an MLM will lose money once business expenses are taken into account. A number that is backed up by the income disclosure statements published by the companies themselves.
Is it ethical to make such a huge profit, without paying tens of thousands of ambassadors?
As the eco-friendly MLMs in the UK continue to keep their income disclosures a secret, they are proving there is nothing good to share. Secrets are red flags.
Just like every other networking marketing company, they are taking advantage of people (mainly women) who need extra income or want to work from home.
If ambassadors saw the true income potential before investing in an MLM, would they still join? Maybe not. Or would it create positive change and a fairer system that benefits everyone?
Tropic Skincare ambassadors selling a lifestyle
7. Is Tropic a different MLM?
Tropic Skincare believes they are different to other MLMs because they don’t pressure their ambassadors to recruit. I get what they’re saying, but I still don’t believe they are ethical.
It costs £198 to sign up as a Tropic Ambassador and then you get a 25% commission on any sales you make through your shop link. Because of that £198 joining fee, you will need to make £800 worth of sales before you can even start making a profit.
I’m sure the starter kit is nice, but unfortunately, discounted skincare products aren’t going to pay the bills.
Say you manage it, what’s next? You have to keep this up every month so you quickly need to find more customers.
It’s been a challenging few years - lots of people have lost their jobs and way too many people rely on food banks. Unless you’re friends and family have disposable income, they’re not going to regularly be buying expensive Tropic products.
To make just £300 a month with Tropic Skincare, you have to sell £1200 worth of products every single month. But once you factor in expenses, it will be less.
There is absolutely no way someone can sell enough for this to be their main source of income, so if you want to earn enough money for it to be worth it, you would need to recruit. Making huge amounts of sales is hard work and there are incentives and bonuses if you recruit.
Sure, nobody’s ever encouraged you to start recruiting people, but if you do you might be able to get a free luxury holiday!
But don’t worry because Tropic is Carbon Neutral! AKA they pay into schemes that offset their carbon footprint.
Let’s be clear here - offsetting doesn’t erase your carbon emissions. A newly planted tree can take as many as 20 years to capture the amount of CO2 that a carbon offset scheme promises. Saving a forest could mean deforestation gets moved elsewhere.
Don’t get me wrong, it is a good thing to offset, but it is not the solution. In fact, I’d argue it is greenwashing to make such a big thing out of your offsetting scheme without telling anyone what your carbon footprint is. Tropic Skincare produces a lot of plastic packaging which is made from crude oil (a fossil fuel) and they collect ingredients from all over the world, including palm oil derivatives.
As they treat their ambassadors as individuals with their “own businesses,” has their carbon neutral certification included the carbon footprint of their 43,000+ sales reps? Unless they decide to start reporting more honestly, rather than marketing the good statistics, there is no way to know how green they actually are.
And while we’re on the topic of donating to charitable causes, let’s discuss their partnership with UWS.
One of the main selling points the ambassadors use is that Tropic donates days of education to children in Cambodia. While it’s great that they’ve chosen to partner with such a worthwhile charity, let’s not treat this as a huge act of selfless generosity.
Charity donations are a great use of the marketing budget and Tropic’s marketing budget goes much further than most because their ambassadors pay for most of the marketing for them.
When companies offset and donate to charity, the extra cost is added to the price of the product (and Tropic’s prices are higher than most) so it is really the customer that is covering the cost.
Charitable donations are great publicity and the ambassadors use this to push their agenda that Tropic is the most ethical company on the planet.
8. Can an Eco MLM ever become ethical?
As long as a company is profiting from workers earning less than minimum wage, no, it cannot be ethical.
What the sales reps are taught to call profit is actually gross turnover. Once they take off the operational expenses, that commission rate shrinks dramatically. Once they divide what is left by the number of hours they spend working (and I mean every time they mention the brand’s name in person or on social media because that counts as work) the hourly rate wouldn’t come anywhere near minimum wage, let alone a living wage which is what an ethical company should be paying.
Ask yourself this, if a business is truly ethical, why would they choose a business model that exploits women when they are vulnerable? Why wouldn’t you change things once you realised they are losing money? Why not pay them a basic income?
…Because that wouldn’t be profitable.
There wouldn’t be anything left to trickle up the pyramid to the few sitting on the top.
If you need help getting out of an MLM, there is a community of ex-distributors called Ban The Scam on Facebook that accept active reps and offer support to anyone struggling to leave a network marketing company.
I’d love to hear your thoughts on the topic but please try to be respectful to others if you comment :)
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