News from the front desk – Issue No 401: Whether it’s the disgraceful conduct revealed by the Financial Services Royal Commission, growing scandals around non-compliance and poor quality in the building sector or the unforgivable shenanigans in parliament this week, at root we need to look at the question of ethics and where it fits into our economy, society and policies.
Behaviours in financial institutions like charging fees to dead people, not following due diligence in approving loans, or unfairly foreclosing on drought-embattled farmers, stand in stark contrast to the bright green initiatives those same corporations have been celebrated for.
The basic question is, at what point is corporate responsibility marketing bling rather than core business?
The Fifth Estate put the conundrum to executive director of The Ethics Centre, Dr Simon Longstaff.
He says that if an entity like a bank is pursuing a CSR agenda to garner a better reputation with the public and its stakeholders – essentially just a “wrapper” – then it is being “misleading and deceptive”.
“It is actually counter-productive,” he says, because in the long run, “people will see through the veneer”.
Genuine CSR is embedded at the heart of an organisation, and flows through everything. Longstaff says that means an organisation has a clearly defined purpose, values and principles that inform everything including dealings with clients, dealings with colleagues, company policies and its conduct with the broader community.
We’re not just talking holding the odd fundraising sausage sizzle here. Doing good deeds is not, in and of itself, something that can outweigh unethical behaviour.
“There isn’t some kind of moral calculus where you add up all the good, and add up all the bad, and subtract one from the other to get a net result,” Longstaff says. There are some things that are just “so wrong” no good deeds can excuse them, particularly in the eyes of the wider society.
At the same time, good deeds are not entirely invalidated by bad ones. Significant acts of goodness deserve credit. The big banks for example have been early adopters of green bonds, and have delivered Green Star rated buildings.
“Each of these things need to be weighed on their own value,” Longstaff says. “The challenge the banks and others face, is that unless they can achieve that very difficult state, where all things are in alignment, all the good things they do, like green bonds, will be seen as window dressing by a cynical public. That doesn’t mean green bonds and green buildings are not good things… but with the Royal Commission, people are now asking, what about the core business?”
Revelations, such as charging dead people fees – the public “can’t get past that”, Longstaff says. “It cuts so much to the core, people can’t forgive or forget [these kinds of things].”
He says the energy companies are in a similar position. There is a fundamental, structural issue in terms of the fossil fuel involvement that cannot be ignored or defended.
Coal mining is another sector where a few community feel-good initiatives can’t hide the big problem. To prevent environmental catastrophe we simply must stop adding to the emissions problem via new coal projects. The rhetoric needs to be called out for what it is – lipstick on a pig.
Longstaff says that Adani, for example, is using the lure of job creation as the good-for-us lure.
But, anyone who has observed modern mining knows there are few long-term jobs in it, with automation replacing humans throughout the production process including blasting, extraction and haulage.
It’s also a project that cannot succeed without government support both moral and financial.
The farmers fighting expansion of coal mining on the Liverpool Plains – some of Australia’s most fertile agricultural land – argue that government support for mining is inappropriate compared to retaining the land for agriculture.
If we apply the ethical lens, supporting the future potential for feeding people instead of destroying productive land and hastening climate change is a no-brainer.
In property, the ethical lens also reveals some confronting truths.
Longstaff says that one of the things that makes property different to other industries is that transactions are large, but “few and far between”.
A consumer’s dealings with property sales people and the developers behind them are widely separated in time.
The industry itself has a structure that is all about moving onto the next thing.
Longstaff says this is almost an incentive to lower standards for some. Because of the sporadic nature of transactions the public will have “little contact” with those in the industry who are fundamentally committed to doing good.
Consumers must seek companies that are not just ticking off specifications with an eye to the payoff. Companies should be delivering ethical outcomes because doing good is something they believe in for its own sake.
Until the whole industry shifts in this direction, we will continue to have a sector where everything becomes “a function of regulations, intervention and penalties”.
The stark fact is, “no-one is able to step aside from that taint”.
It is like the sword of Damocles. We know that substandard dwellings exist both in ageing building stock and in new buildings being handed over to buyers carrying huge mortages. We know that some projects do not meet building code requirements because of a lack of oversight and enforcement. But we also know that greater enforcement and oversight would fuel the usual arguments about red tape and regulation making homes less affordable.
How many times have we heard “leave it to the market and the market will deliver”?
And look where that has got us.
Despite abundant evidence that apartments expanses of unshaded glazing, no back-up power systems and poor thermal performance is akin to developing human-broiling or freeze room death traps, recent inquiries around two massive apartment projects in Western Sydney by The Fifth Estate found that code minimum is as far as they are going.
It’s just not good enough – and no-one can say we don’t know better. Especially in Western Sydney where we know that extremely hot days will quadruple within five years.
Embedding ethics could be the answer.
Longstaff says that everybody who develops, manufacturers or markets a product has an obligation to ensure it is fit for purpose.
So, if a developer, architect, engineer or builder is party to delivering an apartment block in an area where extreme heat is an established risk, merely defaulting to code minimum is not good enough. It is not fit for purpose, as The Fifth Estatehas been told by people who have lived in some of these solar ovens through the heat wave months.
If the risks are foreseen, it is incumbent on everyone not to “transfer the risk to buyers”. Even “enlightened self-interest” should be telling the property industry this much.
But we have a deep cultural problem when it comes to property, which can be seen clearly in the situation with rental homes.
Energy Efficiency Council Policy Advisor Rob Murray-Leach sums it up when he says there is a “cultural issue” in Australia that accepts homes, particularly rental ones, will be of extremely poor quality in terms of comfort and performance.
“Most homes are not fit for human habitation,” he says. “More than 50 per cent of rentals are totally substandard housing.”
Introducing minimum standards is a logical step, but that is for the states to implement. The federal government can encourage them by ensuring owners are able to do what needs doing to bring their properties up to minimum standards.