When a leading global provider of research on corporate environmental, social, governance (ESG) positions ethical banking as a feel good investment package, we should push back. Ethics is about what we ought to do. It is not about what’s expedient and driven by self-interest.
But it would seem that the advisers to the corporate world on best ethical practice lack an understanding of what they are discussing. A recent press release from corporate governance specialists EIRIS proclaims that its research reveals:
Although ethical banks currently have a small market share, these findings indicate that there is plenty of market potential. There is need for greater consumer awareness of ethical finance offerings and the accompanying need for more and visible marketing by these [retail] banks.” [Ethical banking – a big opportunity for Britain’s retail banks, EIRIS survey reveals]
EIRIS is seeking to capture the imagination of corporate leaders by claiming it can help them boost their bottom and top lines. Now, I’ve nothing against economic growth, increasing profits and market share. But for things to be kept ethical we need bifurcation.
Ethics does not ask or solve business issues such as how to increase sales. That’s what marketing does. It does not address perception issues. Neither does it help build relationships with others. That’s what PR does. It is not even governed by legal compliance. Not least because those are rules we must obey.
In contradistinction, ethics is about what people in business ought to do when they confront dilemmas: whenever choices are available. It is about the standards of behaviours that ought to govern how we do business from a moral perspective.
In other words, ethics is a discipline rooted in intrinsically normative criteria, which determines what we should do. Whereas in purely business terms, the normative criteria that govern our behaviour are determined by instrumental considerations.
Once we start mixing the two up, we run into some dodgy ethical dilemmas. For instance, what happens to good behaviour if being “ethical” proves unprofitable because, say, it decreases market share?
When corporate ethics is driven by instrumental motivations it suggests we will abandon our so-called principles when they no longer serve our purpose. That provides no grounds for building public trust beyond a contract.
The problem, I think, is that what EIRIS calls ethical practice is actually something completely different. Like the disgraced Co-op Bank, it sees ethics through the prism of pandering to popular prejudices to boost sales. The IERIS press release states:
43% of people would trust their bank less if there was media coverage of allegations that their bank’s lending may have breached ethical, social or environmental standards.
38% would trust their bank more if it asked customers for their opinion on what ethical, social and environmental issues it should consider when banking with businesses.
46% of people would trust their bank more if their bank made available to the public details of how their ethical, social or environmental lending policy works and the difference it makes in practice.
But you cannot outsource ethical and moral responsibility to the riptides of opinion. That works for marketing, but not ethics. Though for a while it worked for the Co-op Bank: see Co-op: the real fraud is ‘ethical banking’.
Ethics is an open-ended challenge that requires effort, experience and moral reasoning. For good reason, it is not a well defined discipline. At its most ambitious it insists on self denial and even martyrdom, whilst at its most limited it is barely more than a law abiding decency.
Anyway, if the alignment between ethical behaviour and profitable business was an easy-to-figure win-win, firms wouldn’t need much advice from anybody to do the right thing.
I say firms ought to aim for being frank and fair. That means at very least they ought not to dress up their marketing as ethics. If firms merely aimed for growth, competence and probity they might do much better. Then perhaps we would have been spared the banking and oil spill disasters.
EIRIS of course have a vested interest in muddying the waters, aligning eco, social and governance issues into their very own business opportunity. But they shouldn’t be allowed to call it ethics.