You've Met Data Privacy Guidelines. But What About Data Ethics?

Closing the gap between privacy legislation and internal policies

Arpanet was created in 1969 as a way to share information between computers. It spawned not only the modern internet but also the first U.S. data privacy law, the Privacy Act of 1974, dictating how data should be handled by government agencies.

Thus, data privacy legislation was born, and by its nature, carries a legal mandate for how data is captured, stored and used, providing businesses with guidelines that are enforceable by law.

Since 1974, a host of data privacy laws have been enacted, both in the U.S. and worldwide. In more recent years, as data collection has increased, so has demand for internal company practices to follow ethical data guidelines. While companies are legally required to protect customer data, navigating data privacy with an ethics-based approach is different: It’s an entirely voluntary and highly individualized corporate decision, qualitatively driven by a company’s people, principles and purpose.

But data ethics can go above and beyond legislation, filling the gap between compliance and day-to-day process. It represents the promises a company makes to its consumers.

Businesses typically start by developing a data ethics agenda, which refers to principles and practices designed to ensure data usage methods are ethical, fair, responsible and transparent. The output is an implementation plan, including precise details like departmental ownership, cross-functional education, assessment and measurement. 

If you understand the functions and responsibilities of data privacy versus data ethics, you’ll quickly see that they can’t be combined into one person or even one team, which is why collaboration is so important: Data privacy needs a team of licensed, specially trained and often certified legal experts to track the ever-changing global privacy landscape, interpret new laws and ensure your company is taking the appropriate steps to be compliant.

Every department that touches data needs representation within a data ethics team to work together on data collection, data storage, audience creation, business strategy and marketing.

Marketing implications of ethically handled data

Data ethics is more than a corporate social responsibility initiative—it’s a smart and strategic practice that can improve customer relationships and cost efficiencies in marketing. 

Without a comprehensive understanding of legal requirements, consumers only see the actions an individual company makes in the context of their experience with that company. In fact, a recent study found just 14% of Americans agree that “companies can be trusted to use my personal data with my best interests in mind.”

Data ethics are critical for companies to define and put into practice because consumers want to trust the companies with which they do business—a full 74% of people now rank data privacy as one of their top values. 

Lack of consumer trust has direct business implications, as untrustworthy companies must work harder to build loyalty and brand affinity, resulting in higher marketing costs and lower marketing effectiveness, and consumers reward brands that have responsible data practices with 23% more purchase intent.

It’s critical for businesses to understand that adopting ethical data standards will not result in a loss for their bottom line—in fact, the opposite holds true, especially as consumers continue to look to businesses for societal leadership and demand more trust, evidenced by the 2022 Edelman Trust Barometer.

Creating a data ethics agenda

We’ve long been told that marketing’s job is to reach the right person at the right time with the right message. Technology allows us to do this, but failing to implement a business strategy based on ethical data standards means companies are still wasting money pursuing customers who don’t really want to hear from them, don’t want to sign up for that marketing email and aren’t interested in being retargeted across the internet.

Establishing a process by which you respect your consumers enough to be transparent and give them a clear choice for their data means your company will have valuable information to be used in developing better business and marketing strategies. Those in the trenches of day-to-day business will be able to categorize users into groups based on their affinity for your company to determine accurate customer lifetime values and adjust marketing strategies accordingly. 

While there is no one process to establish a data ethics agenda, businesses often account for corporate values, mission and vision, broad industry guidelines like WFA’s 2022 Data Ethics Guide for CMOs and cross-functional workshop-style inputs. The first steps to developing your own ethical data standards are to review what exists in the marketplace now and create an interdepartmental team to design principles that are unique to your business. This is a step worth taking now—according to the Trust Barometer, “distrust is now society’s default emotion.”

One thing is clear—U.S. data privacy legislation today doesn’t do enough to truly protect people’s data and, complicating it further, consumers don’t understand how their data is being used or what they’re consenting to, resulting in feelings of annoyance, helplessness and distrust.

As an industry that puts increasing value on data, it’s imperative that advertisers are leaders in going beyond legislation to incorporate ethical business practices into the collection, storage, use and sharing of data. Both data privacy legislation and data ethics will play critical roles in our data-driven world, and by understanding and embracing both, businesses can position themselves to promote positive social impact and business outcomes.