How do you create change in an environment where there is a poor work ethic ?

That is exactly the situation  where change is required don't worry about the poor work ethics and take a step ahead to achieve your goal i.e., change management.

Respecting each other and give help in difficult situation should encourage colleage to work openly..

Too much friendly at work envoirement may reduce the productivity. so be helpful , respecting and give praise when required is key to increase work ethics....

When there is poor work ethic and poor work culture when good work is not rewarded and negligence is duty is not punished the whole process becomes sloppy.

The only way is lead by example and lead from the front. If I am the supervisor I should curtail my breaks and work overtime without pay. Should also come on weekly offs and set an example. Most of the people will understand and follow.

The next step would be to make the employees understand the PMS ratings.

Make the employees aware or the internal job postings. Delegate authority and responsibility to deserving candidates and groom them for the next position.

Recognition of performance financially or  otherwise  will also improve the situation to a great extent.