Businesses can’t afford not to be good

A famous New Yorker cartoon depicts a businessman sitting by a campfire, still in his suit, speaking to two young children.

“Yes, the planet got destroyed,” he concedes. “But for a beautiful moment in time we created value for shareholders.” 

The logic seems perverse, but more the worrying reality is that in reality, it’s quite pervasive. We’ve seen Royal Commissions into aged care and financial services, growing pressure on tech companies to address social issues and the overwhelming pressure for businesses to address climate change. Despite this, we have seen very few organisations making meaningful investments into ethics.

We should worry that we’re living in the campfire CEO’s beautiful moment in time.

At The Ethics Centre, we’ve spent over thirty years getting into what makes organisations tick. How they’re motivated, what they care about and what goals they serve. Time and again, we’ve seen how the real desire to act with integrity, uphold customer interests and attend to vulnerable people is pitted against business imperatives. 

No matter how many scandals we see, the message still seems to be the same: while you’re successful, you can be ethical. But if you’re not successful, you’ll need to park your ethics till you are.

This is the campfire CEO’s logic. By focussing on the (often illusory) short–term value captured that ethical shortcuts can at times promise, businesses lose out in the long run. And thanks to new research commissioned by The Ethics Centre, we now know exactly how much businesses are losing out on by giving away the Ethical Advantage. We also know how much courageous businesses gain by making ethics a priority. 

Research by Deloitte Access Economics has revealed that businesses who are seen as ethical – fair in business, transparent and open – enjoy a higher returns on assets. They are also less likely to have staff experiencing mental health issues, because when we believe the people around us are ethical, we experience less mental health challenges.

What’s more, if we are able to improve the ethical standing of enough people and businesses, we’ll not only boost business returns, we’ll improve wages and GDP. Nice guys are the tortoises of the business world. They finish first in the long run.  

Cris Parker, head of the Ethics Alliance, a community of businesses committed to a more ethical way of working, says “when organisations make a concerted effort to invest in ethics, they create an environment where good intentions are just the beginning.”

She believes it is when ethics shifts from being a leader’s obligation to being a shared responsibility that real change happens. “It’s the cumulation of every employee serving that purpose, doing the right thing that really makes the difference. “ 

Realising these benefits requires us to recognise the source of the campfire CEO’s error: economic narrow-mindedness. The willingness to destroy the planet in favour of business returns (which is, in fairness, a caricature of most of today’s business leaders) demonstrates a failure to recognise how dependent our economy is on the wellbeing of the planet.

Similarly, pursuing economic returns without considering the means by which they’re achieved ignores the crucial role that trust, integrity and character plays in preserving our economy.

We don’t trade with people we think are going to betray us. We don’t invest when we can’t trust others to be careful with our investments. 

Michelle Bloom leads The Ethics Centre’s consulting and leadership team. She believes ethical improvement requires us to embrace complexity rather than looking for simple solutions.

“Today, business leaders are dealing with very complex operating environments where action and bottom–line results are rewarded over reflection, perspective seeking and co-ordination. This haste to decide without deliberation limits leaders to mechanistic solutions where systemic, novel and context–specific approaches are required.”  

Unfortunately, realising these benefits is harder than it seems.

Much like an optical illusion you can only properly see by looking away from it, the economic benefits of ethics are only likely to be realised by those who seek it with integrity rather than a hunger for profit. 

Hypocrites and cynics need not apply for the ethical advantage. But for the sincere and the patient, results will come in time. However, it will require businesses to campaigning not just for their industries to be better as a whole, but for the large-scale Ethical Infrastructure investments Australia needs to ensure we have trustworthy markets, institutions and systems. 

For Michelle Bloom, alongside large-scale change, organisations need to get their own house in order. “Embedding an Ethics Framework into the organisational system and its processes is the first step,” she says. Next is developing your leaders’ systemic and ethical thinking to make good decisions in complexity as well as ensuring the culture of the organisation aligns to your Ethics Framework.” 

Each of these steps, alongside developing the capacity for good decision-making and embedding ethics into the design of all products and services, are markers of the kind of integrity that grants the Ethical Advantage.  

In our line of work, we often hear from so-called pragmatist who see ethics as a nice idea that doesn’t work in the real world. The numbers are in, and it turns out the most pragmatic thing to do is make ethics a top priority. Anything else would be bad business.