Construction projects are inherently complex with many variables and partners. That complexity creates opportunities for unethical practices. A recent analysis found that fraud in construction, including billing and procurement schemes, can reach up to 10% of commercial construction spending, adding up to $98 billion annually.
More than the bottom-line hit, unethical behavior erodes trust among workers, owners, clients and the public. According to a 2024 study, corruption and weak oversight in the international construction sector doesn’t just cost money, it can cost lives. Workers must trust leaders to comply with regulations and keep them safe on every jobsite.
WHY CONTRACTORS MUST PAY SPECIAL ATTENTION
Contractors face specific ethical pressures every day. They operate under tight margins and intense competitive pressure, which can tempt corners to be cut.
They often interface with multiple tiers of subcontractors and suppliers, which magnifies risk.
Public and private owners alike increasingly demand transparency and risk management with contracts that may include ethics clauses, anti-fraud language and audit rights.
Because of this environment, unethical leadership can lead to: delays due to conflict, safety incidents due to shortcuts, financial loss from fraud and reputation damage that costs future work.
WHAT ETHICAL LEADERSHIP LOOKS LIKE ON THE GROUND
Ethical leadership in construction shows up in many ways daily.
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Transparent decision-making: When change orders, scope changes or delays occur, ethical leaders communicate clearly and honestly. For example, recognizing when a subcontractor is stretched too thin and not pressuring them into unsafe working conditions.
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Strong reporting culture: Workers should feel safe raising issues whether it’s a safety hazard, an unfair subcontractor practice or a bid irregularity. Building a culture of trust enables more near-miss and risk reporting, which improves outcomes.
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Robust procurement and controls: With procurement fraud, bid-rigging, vendor collusion and change-order abuse floating around, contractors need solid systems. In 2023 the International Anti-Corruption Resource Center updated its guide to help identify change-order fraud in development projects.
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Leading with values: Beyond rules and controls, it’s about tone-from-the-top. A 2024 survey found that 93 % of workers say moral leadership is more urgent than ever, and teams under strong ethical leaders report higher trust, more experimentation and increased speaking up when something seems off.
STEPS CONTRACTORS CAN TAKE NOW
Here are practical steps for construction firms to elevate ethical leadership:
Codify your ethics and communicate them: Don’t assume everyone knows what “ethical behavior” means. Develop a simple code of ethics tailored to your firm covering things like change orders, subcontractor treatment, safety trade-offs, procurement transparency. Hold a toolbox talk or supervisory meeting to walk through real examples.
Train leaders and supervisors: The people in the field set the tone. Train superintendents and project managers not just on technical leadership, but on ethical judgement: conflict of interest, kickbacks, favoritism, reporting channels.
Set up safe reporting channels: Workers and subcontractors should know how to raise concerns confidentially and with protection. Share OSHA resources so everyone knows their right to report.
Monitor outcomes: Track metrics like number of incident reports, near-misses reported, subcontractor turnover, change-order volume. These can signal cracks in your ethical climate.
Model the behavior: If leadership says “do the right thing” but then excuses late certification, over-time rule-breaking or undocumented decisions, the message is lost. Ethical leadership is more about consistency than perfection. Lead by example.
Partner against corruption: The World Economic Forum’s Partnering Against Corruption Initiative (PACI) is piloting sector-specific solutions in real estate and construction to align with peer-driven standards and tools.
THE BUSINESS PAY-OFF
When you lead ethically, you get more than “doing the right thing.” You build a foundation for better business with:
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Reduced risk of fraud, fines or investigation.
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Stronger worker engagement and retention.
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Better reputation with clients and partners.
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Fewer safety incidents and schedule disruptions.
As the construction industry becomes more digital, more global and more scrutinized, ethical issues will only get sharper. AI, robotics and data management are raising new questions about transparency, accountability and bias in construction workflows.
Despite changes on the horizon, ethical leadership will continue to be a foundational skill that all construction leaders will need.
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Photo Credit: Photo Courtesy CONEXPO-CON/AGG 365
