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Our Insights 2 Oct 2013

Six Elements of Effective Transparency

By Lorraine Smith

Image by ravensong75 via Flickr

Transparency on the rise

Corporate transparency is a wide and complex terrain, including everything from legally required disclosures to employee tweets, much of it having nothing to do with sustainability. However, an increasing number of transparency initiatives are focused on social and environmental outcomes, from the rise in sustainability reporting over the last twenty years, to more recent bursts of open innovation. This increase in transparency represents a tremendous opportunity for business, the environment, and society at large if six key elements are done right.

Transparency spreads far beyond reporting

With the generation and capture of ever-larger streams of data, many sustainability professionals are asking, “What is the future of reporting?” Given the pace and nature of the changes afoot, that might simply be the wrong question for those working to drive the sustainability agenda forward.

In fact this blurring of transparency and reporting has likely been holding progress back. The better question to ask is, “What should companies do to enable all internal and external stakeholders to make better decisions?” It is almost certain that the answer to that question won’t simply be, “Create a better sustainability report,” even as we continue to believe in the value of effectively measured, managed and reported triple bottom line data captured in those reports (just as we believe in the value of, say, paying employees fairly and on time—it should be a given at this point while debate may continue as to the details.)

Six elements to get transparency right

Murky though they may be, as we enter these uncharted waters we do have an idea of what the attributes of effective transparency will be. Exactly which tactics and tools will emerge to successfully bring about these attributes remains fuzzy, but they will need to entail getting these six things right:

1) Right information: Data needs to be correct. This sounds basic but we don’t need to think too long to come up with examples where it is hasn’t been quite so. We know that accurate information doesn’t necessarily mean stakeholders will make good decisions. Case in point: we have clear data indicating that smoking is bad for one’s health, but people are still taking up the habit today. However, fewer people are taking up the habit, and correct information about tobacco—previously obscured—is undoubtedly a contributor to these improved outcomes.

2) Right stakeholders: This correct information needs to reach the stakeholders who need it to make better decisions (others can have it, too, but they may not need it). Cotton farmers in Ghana should know how the difference in price between organic and conventional cotton might affect their livelihood before they grow it and take it to market. Teenaged shoppers in the USA maybe don’t need this information quite as urgently, and in fact they may be better served knowing how short-term clothing purchases will affect their long-term financial prospects, and/or how these purchases may affect local waste streams.

3) Right format: This is likely the most challenging for communications staff, for all manner of practical reasons. But it is a growing reality. For example, it’s a safe bet that most citizens affected by gold mining operations in Chile are not reading a 158-paged PDF about responsible mining. An anonymous, text message-based hotline might be an appropriate human rights reporting mechanism for factory workers in China where mobile phone usage is high, while not in Bangladesh or Haiti where the world’s poorest people are not yet as networked by electronics. Apps might engage urban American citizens, while information delivered by a leader at a faith-based gathering might better reach older, rural Americans. This pixelated mosaic of format options is going to form a high-resolution image of effective transparency.

4) Right time: Successful corporate transparency efforts should be timed in such a way that they enable stakeholders to act in order to improve possible outcomes. It’s not enough to state, “Here’s what happened. It was/wasn’t good.” An effectively timed effort will bend trends in the right direction rather than witnessing them as they unfold, because it will reach stakeholders when they are most ready and able to bring about positive change.

5) Right frequency: Similar to format, this one is happening at a rate that companies are scrambling to keep up with. This doesn’t just mean pumping out weekly e-blasts to everyone who has “liked” a company on Facebook, or yielding to the quarterly reporting cycle. It does mean providing internal stakeholders with effective systems and safeguards to find and share data, to create a sort of constant leaching of information that is effective and infectious. This will require a level of corporate disclosure—nay, of openness—that completely eclipses the current flow of “communications.” Key messages honed by Public Affairs, approved by Legal/Compliance and uttered by spokespeople will cease to be the norm (which it already has in many cases inadvertently, when calculated as a percentage of available data about companies). Rather, information will be shared in a semi-constant state. Just as a person can look at a watch and instantly (secondly, hourly, or monthly) find the time accurately reflected, companies will be a steady and reliable source of information.

6) Right intentions: This is potentially the nut of the thing; it refers to being genuine about why information is being made available. Is it a reaction to an issue (say, GMO labeling), or a proactive opportunity to serve a market (say, attracting green consumers)? Is it because the investors asked for it, or because the Global Reporting Initiative considers it a core indicator? What would be different at the company if this information were not shared? Who stands to gain from knowing the story or having the data? Who stands to lose without it? These facets of the why of transparency are often glazed over in a haze of reputational defense or communications habits, but a deeper review might yield more meaningful, opportunity-laden ways to use the resources put towards transparency.

There is no point in wishing the complexity away—it’s already here and informing everyone about what business is doing, whether it was reviewed and approved or not.

If companies get these six elements right, their transparency efforts may just enable the kind of decision-making that will create sustainable change. The successful business will see this collective intelligence as a resource, not a threat; as an imperative, not an option; and as a necessary evolution to meet society’s current needs while creating a better future.

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