Transparency is defined as “the characteristic of being easy to see through” by the Cambridge dictionary. This simple definition also serves for transparency in business too. It is sometimes linked to ethics, whistleblowing or financial disclosure. Often it’s something that’s referred to after a scandal almost as if it were a magical substance that would be nice to have, a cure-all only possible in a Utopian world. However, transparency is a quality that must permeate every aspect of business activity in our post pandemic world. Without transparency we will not be able to reach our target of zero carbon by 2050. That date seems like a long way off at the moment but is scarily close when you consider the scale of the journey we have to undertake.
Why is transparency important to sustainability?
If you’ve been reading my blog posts for a while this may be familiar to you. But if you’re in need of a recap here’s an extract from a previous post on the subject:
The 17 Sustainable Development Goals (SDGs) include “decent work and economic growth” (goal 8) and “responsible consumption and production” (goal 12).
Transparency is at the heart of our ability to achieve these goals. Think of transparency as knowledge. Knowledge gives us the information to make better choices about how we live our lives, both professionally and personally. Until we can answer the questions above we cannot know whether our choices are ethical or not. Transparency does not evaluate the ethical or sustainable credentials of goods or services. But it does show just how much information companies reveal about where their stuff comes from. It then allows us to make a better informed choice.
What gets measured gets done
Transparent financial disclosure is a big deal (pardon the pun). Anyone who is not a financial whizz but who has tried to read a set of company accounts will know what I’m referring to. Some companies will publish an infographic that makes it clearer but it is only a snapshot of the information the company wants you to know.
Therefore how a company reports its activities is key to transparency. This is an obvious statement on the face of it but not so obvious when you delve a bit deeper. Let’s look at transparency in investments. The power of large investment companies to shape our world is huge and largely hidden to the ordinary consumer. Step in the European Commission.
“From March 10th, 2021, every fund in Europe will have to disclose information on its ESG impact regardless of whether it is a green fund or not,” says Tara Doyle, Matheson’s head of the asset management and investment funds and also chair of the Irish Funds Industry Association working group on ESG. ESG stands for Environmental, Social and Governance criteria when looking at a company’s activities.To find out more about the Sustainable Finance Disclosure Regulation see the useful Bloomberg article at the foot of this post.
Investors are at last realising that investing in fossil fuels is not such a good idea. The European Commission Green Deal wants to see assets worth €1 trillion moving to green investment portfolios. The evidence for climate change is sadly close to home now with floods and very cold weather on our doorstep as well as in fires in Australia and California. It makes much more sense to invest in renewable energy that is going to be around long after the oil runs out.
Richard Kelly, head of client business with Legal & General Investment Management expands on ESG in a recent Irish Times article.
“It’s not just about climate change,” says Kelly. “Covid has shown the importance of the social aspect in how companies are run and how they treat their employees. Thus far, the emphasis has been on the ‘E’, but the ‘S’ and ‘G’ shouldn’t be left behind. We will be launching a fund that looks at the UN Sustainable Development Goals and the Paris Agreement objectives. Clients want to invest in the journey to carbon neutral, but they don’t want to invest in bad labour practices. We are increasingly seeing the SDGs being brought into investment decisions.”
What about retail?
When it comes to retail business, is transparency just for the brands who already have good sustainable credentials? Not any more. The VF corporation which owns Vans, The North Face and Timberland is now disclosing information on its suppliers for 46 products in a downloadable file. Information includes where they are based, what they produce, numbers and gender of employees, certification of materials, chemical management, as well as health and safety, worker wellbeing and community development. Plans are underway to increase disclosure for more products – up to 100 by December.
Consumers, especially younger and more affluent ones, are starting to demand more transparency from retailers. It’s hard to write anything about millenials without resorting to clichés, but there is evidence that when it comes to choosing an employer, product or service, values will be part of the decision-making process. Transparency gives businesses greater authority that its values are more than just a paragraph on their website.
Is this long overdue you may ask? Yes is the short answer as these issues have been reverberating around business for a while. Rather than waiting for the plaintive, post-scandal demands for “greater transparency” it’s time for businesses, retail and otherwise, to get proactive about transparency. Transparency can be motivated by the stick of the ESG from the EU Commission or to avoid a scandal, the carrot of gaining new loyal customers or the more urgent need to reverse climate change. Whatever the motivation, and however daunting it may seem at first it’s worth starting the process sooner rather than later.
If you’d like to have a chat about making your business more transparent and sustainable, book a free call with me.
PS Thanks to Elaine Butler for highlighting the Ecotextile article on the VF corporation.
Links to articles mentioned above
Irish Times Special Report on the Irish Funds Industry 12/02/21
Green investing is growing fast as companies learn the value of sustainability
Demystifying the Sustainable Finance Disclosure Regulation. Bloomberg 05/02/21
Transparency – what does it mean for your business and your life. Retail Renewal 24/01/20