Ethics in the workplace: why bad business is bad for business

Focusing on just profit and loss makes the business environment worse for all concerned

Business schools inculcate an attitude that there is little more imporant than keeping your profits high and your losses low. Maximising shareholder value is the name of the game, and pesky corporate ethics - and even the law, if you think you can get away with it - must be jettisoned if they get in the way. But this isn't just bad for society; it may harm the very foundation on which economics rest.

Although ethics courses are taught in business schools, a recent Bloomberg op-ed by University of Chicago Business School professor Luigi Zingales points out that they are treated very much as secondary subjects, tought by low-ranking professors, perpetuating the idea "that ethics are only for those students who aren’t smart enough to avoid getting caught."

And it gets worse. The overwhelming push to view everything in cold monetary terms leaks into other courses where it is absolutely inappropriate. Zingales writes of a collegue, Gary Becker, who teaches the economics of crime. Comparing the expected value of success to the cost of punishment multiplied by the chance of being caught results in many crimes looking like quite good uses of your time (although not bank robbery, which, a recent paper in Significance magazine showed, only pays around £12,000 while resulting in jail in around a fifth of attempts). But Becker's students took that descriptive model as prescriptive: "They perceived any failure to commit a high-benefit crime with a low expected cost as a failure to act rationally, almost a proof of stupidity," writes Zingales.

It's not hard to see the direct link between the prevailing attitude at business schools and the recent actions of HSBC, which just admitted in a Senate hearing to transporting $7bn from Mexico to the US, ignoring "red flags that the volume of dollars included proceeds from illegal drug sales in the United States". HSBC clearly took a view of the potential profit and loss that could be made by weakening their adherence to money laundering regulations, and decided that the trade-off was worth it, without taking into account the broader societal reasons why those regulations are a good idea.

But even if they decide that it's not the best idea to act criminally, it's still problematic if we have a class of high-powered business people who think that ethics is for weaklings. Focusing too hard on the black and white difference between illegality and legality erodes all the shades of grey between "things you should do" and "things you shouldn't do". You aren't allowed to use slave labour to build your products in Britain, but is that really the only reason you shouldn't? That line of thinking often results in desperate attempts to prove that things which are undesirable are also unprofitable, leading to arguments that slavery is unprofitable, or BP would make more money if they stopped drilling up oil. Those things may or may not be true, but do we really want to base our prescription of how business should behave on changeable facts? If it suddenly became profitable to own slaves – say we find a really good way of making Battle Royale-style control collars – does that make it OK?

The fact is, the general undercurrent of ethics that we all live our lives by does extend to businesses. Any one of us could, if we wanted, steal from a hundred unattended coats, bags and desks every day, but we don't. Nor do we only keep promises when we have signed contracts, or only tell the truth if there is regulation making us do so. Similarly, many businesses have ample opportunities to, both legally and illegally, increase their profit. You can hold off paying invoices until you are served notice, encourage interns to work for free – or pay to work – and just generally be nasty. And while some don't take them, a growing number do.

A survey from "whistleblower law firm" Labaton Sucharow showed that 24 per cent of senior executives in US and UK finance said they believed "financial services professionals may need to engage in unethical or illegal conduct to be successful". We can safely assume that the number who believe that they need to engage in unethical but not illegal conduct is higher still.

But if you end up with a business system where a large proportion of people are acting unethically, then things slowly fall apart. Everyone starts lawyering up, as "verbal contracts" and "gentlemen's agreements" are replaced with real contracts exhastatively negotiated. What were ethical obligations become legal obligations, and where the legal system can adapt fast enough, it jettisons the parts that are holding it back.

Take, for example, the "charity tax". The idea of using the tax system to reward philanthropy is something which, on the surface, makes sense. But then individuals who believe that they have a moral obligation to pay as little tax take advantage of it, the charities commission is forced to crack down on "fake charities" and eventually, pressure hits the government to remove the exemption.

The same pattern happens time and again. The safe-harbour exemption in copyright law is there to enable sites with user-generated content to exist; but it gets abused to justify wilful piracy, and SOPA is introduced in an attempt to remove it. "Carried interest" allows American investors to not pay full income tax on capital gains, but hedge fund managers abuse it to pay themselves tax free, and the "Buffet rule" is suggested. And the BBA allows banks to self-report their rate of borrowing, until Barclays mis-reports their rates for financial gain and ideas for post-Libor regulation involve billion-dollar mandatory loans.

Bad business is bad for business. In the long run, either they tighten up, or they force the law to do it for them.

J.S. Mill, ethicist and philosopher. Could businesses learn from him? Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Moonshots for the Earth: are there technological fixes for climate change?

As the world gathers in Paris for the latest UN climate change conference, are there technological solutions for global warming? And where are the tech-utopians working to find them?

This article originally appeared in The Long + Short

At the end of August, as the northern hemisphere’s hottest summer on record drew to a close, a group of inventors, designers and engineers assembled in a grand stone castle an hour’s drive west of Paris. Château de Millemont was hosting a five-week ‘innovation camp’ for the pioneers behind 12 new projects, chosen for their contribution to achieving a world without fossil fuels. POC21 (Proof of Concept) was set up as an active, grassroots foil to cop 21, the 21st UN Climate Change conference in Paris, which begins at the end of November.

“Global emissions have doubled since the first UN climate summit in 1995,” says the POC21 video, amid images of environmental catastrophe, so “Let’s move from talking to building a better tomorrow.” The objective was to create workable open-source technology in the fields of energy, food and waste – life, basically.

Products that made it to the final 12 included a pedal tractor, a smartphone-controlled greenhouse and an antibacterial water filter. Daniel Connell, one of the chosen inventors, travelled to Paris from the UK for the event. He was picked because he’d created an impressive cost- and resource-efficient wind turbine design. You can make it for about £20 out of aluminium sheets, a bike wheel, rivets, washers and nuts and bolts.

“It’s entirely built from recycled or upcycled materials, and can be assembled by anybody with basic hand or power tools,” says Dominik Wind, core organiser of POC21. “While this makes his design a perfect fit for the people that need it most (the poor, the marginalised around the globe), it’s also the perfect design to build upon: it’s the basis to start from with more customised, possibly also more complex and more expensive iterations.”

Connell has been creating prototype technologies and tutorials for solar and wind designs while moving around the world over the last 10 years, traversing Canada, France, India and Spain. A 3D animator by trade, he is self-taught – he describes the Solar Flower, a DIY solar energy collector he created, as “my degree” – and set out to make an existing design for a wind turbine cheap and easy for people to use. “Technically, it could be $5 if you just pay for the rivets and get plates and a bike wheel for free,” he said.

A seasoned squatter, Connell made his project possible by sifting through scrap heaps, fixing up bikes and living on a few pounds a day so he wouldn’t have to work and could devote his time to the wind turbine. Connell’s ethos is inspired by the self-sufficient communities he grew up in as a child in New Zealand, and that country’s culture of ingenuity and making stuff. Since POC21, his product has improved and he’s showing it to students, retirees and other people who want to get off grid via workshops.

Connell is one of a number of green inventors working to ease the world’s transition to climate change. As wildfires spread, countries sink, species go extinct, floods and drought increase, seas rise, storms devastate, glaciers melt, crops fail, pollution decreases life expectancy and the potential for conflict grows, eyes look to the inventors, geniuses and entrepreneurs who surely can figure out a way of saving the planet.

When Pope Francis, in an unprecedented speech earlier this year, rejected market solutions for climate change, attacked “unfettered capitalism” and made a forceful moral plea, it raised the question: if individual behavioural changes aren’t realistic or enough, can’t technology provide a route out of the problem? Where is that technology? And is ‘techno-utopianism’ realistic in the context of the climate crisis?

Major companies are already divesting from fossil fuels – most recently the Rockefeller Foundation, the Church of England and Norway’s £900bn sovereign wealth fund – as burnable reserves run out and the climate change threat becomes more apparent; but local attention is also turning to how to transition to a greener world.

In the bowels of an east London theatre on a foggy Sunday afternoon a month or so after POC21, a panel discusses whether Hackney Council should divest its pensions away from fossil fuels. “There is an energy transition happening,” says Carbon Tracker’s Luke Sussams. Dr David McCoy, an expert in global public health, says, “We face an existential threat in terms of eco collapse… My 14-year-old daughter’s future does not look good.” He explains how global warming will affect disease patterns and prompt conflict over scarce resources. Yet there is some optimism about green developments in electric cars, renewable energies and Tesla’s new battery technology.

Bill McKibben, the campaigner and author who brought global warming to public consciousness with his 1989 book The End of Nature, and more recently the founder of international pressure group, is positive and excited about innovation in the green world. “The price of a solar panel dropped 75 per cent in the last six years,” he said, speaking from his home in Vermont. “The world’s engineers are doing their job; and doing it extraordinarily well.”

The move to renewable energy is under way. An Apollo-style research programme to make renewable energy cheaper than fossil fuels recently won the backing of Sir David Attenborough and high-profile businesspeople, politicians and economists. Even Bank of England governor, Mark Carney, has warned that the “vast majority of reserves are unburnable” if global temperature rises are to be limited to below 2C. But others think that it’s not enough, and consider geoengineering to be the grand techno-fix.

First presented as a big-idea solution to climate change in the 1960s, geoengineering proposals range from the seemingly fantastical – brightening the clouds; stirring the seas to change their temperature and cool the Earth; turning the ocean into a gigantic bubble bath to reflect the sun; covering the deserts in mirrors and sending parasols into space; mimicking the cooling effects of volcanic eruptions like Mount Pinatubo – to the more mundane: removing carbon from atmosphere and storing it somewhere else.

Although a number of scientists and researchers – including the Royal Society, which held a geoengineering ‘retreat’ in Buckinghamshire in 2011 – think geoengineering is an option worth considering, no one is actually doing it yet. Well, apart from Russ George, the businessman, entrepreneur and “DIY rogue geo-vigilante” who dumped 100 tonnes of iron sulphate into the Pacific ocean, triggering a 10,000-sq-km plankton bloom (plankton blooms suck carbon out of the atmosphere). Though the efficacy of his actions is still unclear, George was criticised for eco-terrorism, and was said to have contravened UN conventions.

The big problem with DIY geoengineering, and any geoengineering for that matter, is its potential for danger: we don’t know what would happen. David Keith, a professor of engineering at Harvard who developed a giant air-sucking wall to capture carbon, told the New Yorker’s Michael Specter, “It is hyperbolic to say this, but no less true: when you start to reflect light away from the planet, you can easily imagine a chain of events that would extinguish life on Earth.”

On the other hand, carbon dioxide removal (CDR) doesn’t seem, on the face of it, like playing god with our weather systems or trying, fruitlessly, to find a dimmer switch for the sun. A company called Skyonics claims its Skymine process can capture harmful pollutants and turn them into marketable products such as baking soda and bleach.

But to what extent can sucking carbon out of the air work? Sabine Mathesius, a climate modeller at the Potsdam Institute for Climate Impact Research, wanted to see what CDR could achieve if five gigatons (an enormous, hypothetical amount) of carbon dioxide was removed from the atmosphere each year. Simulations found that the impact of this level of removal would not be significant at all, especially in terms of protecting the ocean, which is acidified by human-produced CO2.

“In the beginning I was surprised,” she said. “Like many people I also hoped that geoengineering could be a way to undo the harm we did with our CO2 emissions. But if you see how much CO2 we can get out of the atmosphere with the current technologies and what we are expected to emit in a business-as-usual scenario, you can already see that the impact of CO2 removal cannot be that big.”

CDR could be used as a supporting measure to avoid the worst scenario if emissions are reduced at the same time, Mathesius concluded. “What is not possible is just emitting the CO2 as usual and further expanding our industries and then using CDR to get the CO2 out of the atmosphere. Reducing emissions is the cheapest way to keep the CO2 levels low; and also the easiest way.” More promising technologies, such as bioenergy with carbon capture or artificial trees, would also require fertile land or would cost astronomic amounts, Mathesius says. So where then would she place her hope in terms of a techno-fix to solve climate change? “Clean energy to make it easier for people to emit less CO2.”

Carbon capture and storage gets short shrift from McKibben. “If you step back and think about it for a minute, it’s silly,” he says. “You can do it, obviously, but can you do it at a cost that makes any kind of sense? You can’t. No one’s been able to yet. You’re way better off just building the windmills in the first place. All it is is a solution designed to try and appease the power of the coal industry and offer them some kind of future.”

Those looking into this techno-fix are quite clear that solar radiation management or carbon capture is no substitute for reducing carbon emissions anyway. Bodies such as the Solar Radiation Management Governance Initiative (SRMGI) and the Royal Society contain wary caveats, that geoengineering is not an alternative to reducing carbon consumption. McKibben calls them an “absurd set of ideas where people throw up their hands and say, ‘There’s no way we can solve this problem, so instead let’s fill the atmosphere with sulphur’.”

On the last day of April, Elon Musk entered the stage at his Tesla Design Centre in Hawthorne, California to thumping dubstep, whoops and ripples of applause. The billionaire business magnate nodded to the crowd of adoring fans and set out his vision for a complete transformation of how the world works. His 20-minute speech explained how a new invention – the Powerwall battery – would advance a complete overhaul of the world’s energy infrastructure. “This is how it is today… it sucks,” Musk began, gesturing to slides depicting factories belching out smoke.

The solution to getting from fossil fuel hell to a renewable-powered future, he explained, was his new product. Because “existing batteries suck,” he had developed the Tesla Powerwall: a wall-mounted, household battery on sale for $3,500 (£2,300). His statements were punctuated by cheers and screams from the crowd, especially when he revealed that the whole event had been powered by solar and Powerwall.

Musk believes that transitioning to electric cars and solar energy will contain the worst effects of climate change. His electric cars are improving all the time; the mass-market model is expected to be ready before 2020. Tesla open-sourced all its patents and technology in 2014 to encourage other people to advance the electric vehicle industry; and lots of major names in the automobile world have followed with designs for electric cars. “We need the entire automotive industry to remake, and quickly,” said McKibben. Musk has also proposed the Hyperloop, a new transport system he describes as “a cross between Concorde, a railgun and a hockey table”.

Advances in batteries radically change the picture of renewable energy, electric cars and transport systems; and important improvements are happening. At the end of October 2015, a group of Cambridge scientists made a major breakthrough with a rechargeable super-battery that can hold five times more energy as those we’re used to and can power a car from London to Edinburgh on a single charge.

Improved battery storage will change everything for green energy enthusiasts like Daniel Connell in the next few years. “This is why, apart from [a lack of] political will, we don’t have renewable energy: because storage levels don’t reach grid level. But before the end of the decade they will,” he explains.

One of the projects chosen for POC21, the French eco-castle retreat, was a design by a team from Berlin. Sunzilla, a diesel generator without diesel, fuelled by the sun, can be assembled by anyone. Germany is leading the way in the energy revolution with its energiewende, driven by Green politicians and the support of local citizens. In 2014, just over a quarter of German energy came from renewable sources; in 2050, the goal is 80 per cent. The German Green Party politician Ralf Fücks, author of a new book called Green Growth, Smart Growth, is a techno-optimist with faith in society’s ability to find a way out of the ecological crisis, although he cautions against the hubris of large-scale techno-fixes. Investment in green technologies and renewable energies are more realistic, he writes, than carbon capture and storage.

Fücks speak slowly, carefully and with an obvious delight in the natural world. “Spider silk is a wonderful substance,” he says at one point. “It’s more flexible than rubber and more solid than steel and we now have the skills to discover [its] molecular composition.” He cites the smooth skin of the shark and the self-cleaning surface of the lotus blossom as examples of biological productivity we can learn from and use for our own purposes, while decreasing CO2 emissions.

But biomimicry is in its early stages, and renewables have already crossed to the point of no return, as Fücks puts it. On the plus side, though, costs for solar and wind power have decreased considerably over the last five years.

Fücks sees opportunities for young entrepreneurs and startups in a world without global celebrities such as Bill Gates or Richard Branson. The environmental reform of industrial society, in his view, demands a combination of big and small. There is room for more Elon Musks.

The world of food is fertile ground for big ideas and green tech innovation. Last summer saw the publication of new technology proposals to turn the waste shells of prawn, crab and lobster into nitrogen-rich chemicals for use, say, in pharmaceuticals, carbon sequestration and animal feed, which would avoid industrial production using fossil fuels.

Farmers, too, are innovating worldwide. In Devon, Rebecca Hosking is using new land management techniques to make a contribution to fighting climate change. She uses a grazing method that purposely locks atmospheric carbon back into the soil. Instead of ploughing, her long-grass grazing technique keeps carbon in the roots, ploughing release-carbon from soil into the atmosphere. The more organic matter there is in the ground, the more it can trap in the carbon.

“Once you lock it in, and as long as you don’t plough or let your grassland dry out, then the carbon stays in the soil,” she says. “You know that climate change is happening, we do our bit and suck out as much carbon as we can.”

This method, which French farmers are also keen to implement, is similar in the way it works to a new, low-methane, genetically modified rice. SUSIBA2, the new rice, uses smaller roots, and produces less methane, one of the chief greenhouse gases. Scientists have also developed a feed supplement for dairy cows that could reduce methane emissions by 30 per cent.

Global warming is posing serious challenges to water supply; and we all know that the melting of glaciers is one detrimental effect of climate change. Cue another climate hero: Chewang Norphel, an 80-year-old retired civil engineer, has made 12 artificial glaciers in the last 30 years to provide water for the people of Ladakh, India. The Ice Man, as he is called, realised he could divert water through canals into frozen ice sheets, which would melt in spring and provide water for irrigation, agriculture and general local use. “Getting water during the sowing period is the most crucial concern of the farmers because the natural glaciers start melting in the month of June and sowing starts in April and May,” he told online news portal the Better India.

Ocean farmers are also growing kelp again to encourage a move away from environmentally costly meat-based diets. Indeed, 3D ocean farming proponents GreenWave quote a study that found a network of seaweed farms the size of Washington state could provide all the dietary protein for the entire world population.

Pope Francis’s recent address sounded a note of caution around technology as a solution to climate change. “Our immense technological development has not been accompanied by a development in human responsibility, values and conscience,” he said.

Bill McKibben believes the key is solving the “structural systemic problem rooted in the balance of political power on our planet.” To make a difference, he says, an individual must “join with other people to build the kind of movement that can change those balances of power.” In Naomi Klein’s book This Changes Everything, she writes about the Hollywood action movie narrative that tells us that, at the very last minute, some of us are going to be saved: “Since our secular religion is technology, it won’t be god that saves us but Bill Gates and his gang of super-geniuses at Intellectual Ventures.”

But, while some techno-fixes recall the Greek hubris myth of Icarus, there is work to be done and hope to be found. Around the world, people are working to improve 3D printing technology and the usability of tutorials to explain how to make Connell’s DIY wind turbine or the German Sunzilla. Demand Logic, a company based in London, is using data to sweep big, commercial buildings in the city and work out where energy savings can be made.

Of the UN Climate Conference in Paris, McKibben says it will be most interesting to see whether countries will come up with the money to help poor countries leapfrog technologically. But he maintains that engineers and innovators are focusing their efforts in the right place, speeding up the transition from fossil fuels. Despite the Pope’s cautionary note, the industry of technology is crucial in the shift to a newly balanced planet. McKibben praised the good, cheap solar panels we already have, but said they could be much more efficient and easier to adopt. “There’s no shortage of crucial and interesting work for architects, engineers and financiers, and none of it requires telling yourself science fiction stories, the way that you have to if all you can think of is, ‘Let’s put a giant piece of film in space to block the sun’.”

This article originally appeared in The Long + Short, Nesta's magazine of innovation, new ideas and how the world is changing. Follow them on Twitter, @longshortmag.