Transparency is perceived as a scary, radical and impractical way of providing information about your business because you have to tell the truth about the good and the bad aspects in the same manner. However, an increasing number of companies is trying to adopt the new model of corporate behavior and thus is moving transparency into the mainstream.
In this era of technology, communication via Internet allows consumers and activists to find positive as well as negative information about a company, start discussions and ask tough questions straightforwardly. These people want to participate in the company’s decision-making processes. Building transparency makes them perceive the company as trustworthy, credible and accountable. There is less to criticize when a company announces its mistakes itself and reports the areas where it failed in an honest way. Therefore, the risk of getting a bad reputation does not increase. On the contrary, critics can be turned into collaborators, helping the company solve its problems and achieve its business goals.
If consumers and key stakeholders are not involved in the improvement process, dishonest acts can cause long-term reputation damages. In our reputation economy, every single brand will be affected if the industry is suffering from scandals. Nevertheless, the company can profit from a crisis by meeting activists and appropriate institutions, and possibly correct their misperceptions.
On the whole, becoming transparent is comparable to the product lifecycle: Transparency is not a state of being but an endless process. It includes observing the industry, activists, NGOs, changes in society’s values, business expectations as well as the competition’s action. You have to benefit from the “first-mover advantage” by reacting as quickly as possible to signs of movement. As in production, there is a learning curve for the evolution of the societal issue the company is facing. Eventually, with the help of stakeholders and society, the company moves its business into the desired direction. During this cycle, as the company offers information in a more transparent way, the demands for transparency increase, too.
Patagonia
Probably no other company has spent more time calculating and mapping its greatest negative effects than Patagonia, the pioneering outdoor apparel and gear producer. The notion that companies should operate with maximum transparency is written into the “Our Values” statement that the deep ecologist Jerry Mander penned for Patagonia long ago. Because of those values, Patagonia was one of the first U.S companies to take a hard, uncompromising look at its activities’ environmental toll. In order to do that properly, the company relied on another one of its core values - to ask tough questions, delve into deviously difficult problems, and push for solutions. And so it was that in 1991, the Ventura, California - based company set about casting a cold eye on the environmental footprint of the four major fibers that go into its wares: wool, polyester, nylon, and cotton. They knew even before the study that petroleum-based synthetics were enviro-villains, but the big surprise was that the creation of so-called “natural” products made from cotton and wool was every bit as bad.
Patagonia founder Yvon Chouinard dispatched a team of environmental-impact scouts to bird-dog the company’s wool and cotton supply chains all the way back to their respective sources. The team soon found that wool soaks up chemicals at each stage of its processing, and conventionally grown cotton is even worse. For an outfit whose fundamental raison d’être is to “inspire and implement solutions to the environmental crisis”, chemically grown cotton was a poison pill that could potentially weaken the brand and afflict the company’s core principles.
Instead of worming its way around the cotton conundrum, Patagonia followed its injunction to think through the problem, find a just principle, and apply it. Thanks to the founder’s prodding, Patagonia’s board of directors voted to dump the conventional cotton and switch to 100% organic. To adopt “good cotton”, Patagonia would have to convert farmers and clothing manufacturers to the good-cotton cause. In order to achieve this goal, Patagonia took the following steps:
- open-sourced the dark side of its performance. The company made the results of its environmental impact study accessible to anyone who asked.
-made it real. The organic agriculture activist Will Allen led a busload of Patagonia’s apparel-manufacturing reps on a tour of cotton farms.
-made it personal. Chouinard wrote a stirring essay in which he mapped out the moral case for going organic.
-took responsibility. The company held a three-day conference where they showed an introductory video underlining Patagonia’s flinty resolve to assume responsibility for its own actions.
After two years, Patagonia finally switched to all-organic cotton, which sparked a decline in sales at first, but eventually the company right-sized itself by demonstrating that it’s better to pay a little more upfront than to postpone even higher payments for the hidden environmental costs of chemical cotton. Along the way, Patagonia built a better-quality line of clothing, stayed aligned with its principles, and influenced far bigger companies, such as Levi Strauss and Wal-Mart to follow its lead.
Patagonia’s most ambitious experiment with radical transparency grew out of its frustration with conventional corporate responsibility reporting. The effort to gather all of the GRI’s compliance data and assemble it into a standardized format proved an enormous time sink. The lesson learned for Patagonia from the experience was the desire to share in a way that felt true to Patagonia’s tell-it-like-it-is culture. Given that the Web was fueling consumers’ desire to learn more, Patagonia decided that it would use its website to tell more.
In the spring of 2007, Patagonia’s head honcho (coll.) for environmental initiatives, with the help of a few people, created an interactive microsite called “The Footprint Chronicles,” which launched in the fall of that year. The site cuts through the great swaths of data that so often overwhelm conventional CR reporting by homing in on the environmental impacts that matter the most: miles traveled, waste produced, carbon dioxide emitted, and energy consumed. Whereas companies too often slink past the bad news in their CR reporting, Chronicles confronts it head on, through two boxes appropriately titled “The Good” and “The Bad”. In the building of the Footprint Chronicles were followed three design principles:
1) Success breeds that powerful motivation called fear: The effort to launch the site got a lot of adrenaline when the April 2007 issue of Fortune featured Chouinard on its cover. Although pleased with the recognition, staffers were queasy over the possibility that the celebrity treatment could prove to be a contrarian indicator. In a sense, Patagonia’s fear of the article repercussions overcame its fear of transparency.
2) Perfection is not required: There are questions for which there are no easy answers, and only by understanding it they could begin to enlist consumers help in crafting solutions
3) Write tight: There is no space for explanations and justifications. Context is clutter; excuses are excluded. What remains are simply the unadorned, unvarnished facts of each product’s environmental impact.
Timberland:
With roughly six thousand employees working across the United States, Europe and Asia, and 2008 revenues of $1.36 billion, Timberland is far bigger than Patagonia and certainly more mainstream.
In its pursuit of radical transparency, Timberland is almost as fearless and arguably as innovative as Patagonia.
Timberland has moved from issuing unhurried annual CSR reports to fast-forward, quarterly updates of key performance indicators. It has cut through the complexity of those lengthy reports by developing a "Green Index" tag, modeled on a nutrition label, which gives consumers a quick take on how some products are rated in terms of their impact on the environment. Also it has moved from "corporate statement" to "stakeholder engagement" by launching quarterly phone dialogues with CEO Jeffrey Swartz, in which callers can zero in on a critical issues of the moment, such as eco-labeling and sustainable sources. According to Swartz, our world is in an environmental crisis, and Timberland is part of the problem, that's why it has to fix things now. Transparency is about urgency!
In the 1990s , Timberland watched protesters denounce two giants in its industry, Nike and Gap, for sweatshop conditions in their suppliers' factories. Timberland used similar sourcing processes as other brands, which made them just as vulnerable. According to Beth Holzman, Timberland's manager of CSR strategy and reporting: "That realization really started a lot of conversations about what we could publicly divulge".
Transparency depends on data; a company has to audit its social and environmental performance, in order to know its impact on society and environment; for example, greenhouse gas emissions. To calculate the amount of carbon dioxide released in creating its boots, Timberland chased down both its greenhouse-gas emissions and those of its suppliers. Timberland found out that 90 percent of Timberland's greenhouse gas output comes from cows and from converting their hide to leather. (Grass munching cows emit staggering amounts of methane, which converts to CO2 in the atmosphere). That revelation led Swartz to understand that they need to find ways to use less leather and still produce a boot that sells.
Timberland's tool for change is the Green Index tag. It is a label that assesses, on a scale of 0 (best) to 10 (worst), each pair of shoes' impact on climate change, as well as the resources and chemicals used to make them.
Novo Nordisk
Novo Nordisk is a Danish health care company that supplies the majority of the world’s insulin. Novo Nordisk understands that if the company admits its mistakes, activists are less likely to criticize it. In that way, the company uses critics to improve its social and environmental record. Being transparent about ongoing agendas of social issues, the company turns critics into collaborators and benefits from their contribution.This includes, for example, bioethics, such as animal testing and gene research.
During the 90s, the Animal Welfare Society protested against living conditions of laboratory animals; the situation led to a long standing collaboration and world-leading standards for housing laboratory animals humanely.
Despite the fact that some workers at Novo Nordisk didn’t agree with transparency implementation, the company managed to overcome the issues. It even won society’s approval by engaging the shareholders on controversial issues such as animal testing. This conversation extended to the highest levels of organization ; this made sure the final decision came with the senior management’s approval and thus carried actual weight.
That’s why, for the purpose of being up to date with ongoing social issues, Novo Nordisk employs a powerful tool called the “Learning Curve” to track the evolution of a societal issue that might threaten the company, as it’s critical to react in the early stages.
Talking about 90s experience of Novo Nordisk, they understood that the activists were right after their own investigation discovered that housing condition for laboratory animals were indeed inadequate. That’s why meeting with key people in the Animal Welfare movement helped them to explore ways to forge a partnership, so as to develop improved standards for housing animals and a set of principles for their use and testing. Later, these standards were incorporated into the Council of Europe’s revised guidelines on the protection of animals used in research, which led to a joint presentation by a drug-producing company and an animal-welfare group at a pharmaceutical industry conference.
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