New report highlights the ethical advantage
27 October 2020 at 6:15 pm
Researchers have quantified the benefits of ethics for individuals and the nation
Building a more ethical Australia and rebuilding trust in institutions could lift the nation’s GDP by $45 billion a year, according to new analysis from Deloitte.
The Ethical Advantage report – commissioned by The Ethics Centre – mounts the economic case for pursuing higher levels of ethical behaviour across society, using three new types of economic modelling and a review of extensive data sets and research sources.
Quantifying the benefits of ethics for individuals and the nation, the report found that by improving ethical behaviour to world-leading standards and consequently building trust, average annual incomes in Australia would increase by around $1,800.
This would result in a $45 billion net increase in total incomes (GDP).
The report found that ethical practices led to better business returns, with boosting a firm’s ethical performance found to increase return on assets by around 7 per cent.
The report’s lead author and Deloitte Access Economics partner, John O’Mahony, said while no one argued that pursuing higher levels of ethical behaviour was a bad thing, articulating the benefits of stronger ethics was challenging.
“How, and by how much, would individuals, businesses and the economy be better off were Australia to have, for example, the best ethical performance of any country?” O’Mahony said.
“Our report examines the case for improving ethics as a way of addressing these broader economic and social challenges – and the nature and extent of the benefits that would accrue to the nation if we got this right.”
Dr Simon Longstaff, The Ethics Centre executive director, said Australians’ trust in institutions had been tested by recent royal commissions into institutional and policy failings, coupled with constant business and political scandals.
Australian data from the 2020 Edelman Trust Barometer showed that the bushfire crisis earlier this year eroded trust in four institutions: government, media, NGOs and business.
Meanwhile NGOs were perceived as the only ethical institution.
Longstaff noted some of the direct costs associated with this breakdown in trust and ethics, such as the $1.05 billion that Australia’s six biggest banking and financial institutions have paid or offered to customers due to misconduct, and the $2 billion in fines paid by Australian banks for breaching anti-money laundering laws.
He said while Australians were generally ethical and generally trusted each other, trust has been on the wane for some time.
“Perhaps that shouldn’t be surprising given the serious ethical failures that have emerged in recent years, and that have dominated media headlines,” Longstaff said.
“There is scope for us to lift our levels of ethical behaviour and the trust it builds and sustains, and [consider] a different approach to understanding what ethics can deliver.”
The report identified five inter-linked areas of improvement for Australia and its approach to ethics, which are supported by 30 individual initiatives.
These areas are:
- developing an Ethical Infrastructure Index;
- elevating public discussions about ethics;
- strengthening ethics in education;
- embedding ethics within institutions; and
- supporting ethics in government and the regulatory framework.
Longstaff said it was now time for Australia to play its part by improving its ethical standards.
“The compelling moral argument that ethical behaviour binds a society and its institutions in a common good is now, thanks to Deloitte Access Economics’ research and modelling, also a compelling economic argument,” he said.
“Best of all, we need not be perfect – just better.”