Transparency, as understood by the OECD, is the concept of showing information and data to the public in a way that is easy to understand. It is sound to say that this expression has been trending the last decade, up to the point where it became the ‘Marketing Word of the Year 2016’. Although the concept is quite easy to understand, it is normal to question its utility in the business world. Is it a logical outcome of society’s evolution or is it a tool to differentiate oneself from competition? Is it linked to technology?
The answer is more complex that it seems. First of all, transparency is required from multiple stakeholders, from institutions to whole countries, especially to fight corruption. Sometimes the information is made available by the entities themselves, sometimes it is the result of NGO’s work and even of some individuals. Regarding the business world, there are plenty of different situations but the latter is not the sole purpose for its corporate existence. The sector exposure experiences a lot of variation, the way companies can stand back up from a blowback at the transparency level affects some while others do not seem to feel threatened.
An excellent example to highlight this would be GAFAM members like Facebook or Google, who treat political transparency in a different way, depending on the geographical location: these companies provide high transparency in their political adds for 35 and 30 of the world’s countries. Should you live in one of the other countries, there is basically no guarantee regarding this matter. By looking at some markets, one could think that companies failing to comply with transparency measures are threatened? Not at all. Both these companies are taking the hit quite well, with increasing number of users, despite the fines and public audiences.
On the other hand, the fashion sector is seeing major changes linked to the privacy matter. The consumers tend to distrust the companies and now expect to have a total access to the supplier change through social medias. Guess how these companies reacted? While in 2017 there were 28 out of 200 ready to disclose their processing facilities, today there are 38. Even more interesting is the number of brands that are ready to disclose a list of factories: according to the Fashion Transparency Index 2019, there were 70 out of 200 (39%) ready to undergo that process, in opposition to the 48 out of 150 (32%) companies in 2017.
How does it come that companies happen to be willing to disclose this much about their supply chain? Is it because technology allows it? Are the newest generations at the root of this sudden change?
According to YouGov and the Global Poverty Project, 74% of the consumers are ready to pay a higher price for a product if they gave the guarantee that the workers are getting paid fairly. 52% of the millennials, as well as 45% of the generation Z, admit to doing background research before buying. Depending on your target, you’d obviously want to hand out some information regarding your supply chain. As claimed by KPMG in their 2018 Retail Trends report, the customers are nowadays ready to spend time debunking what is authentic from what is not, in order to determine whose brand they will back up through their purchase.
On another end, we assist to the appearance of technology that allows a certain degree of transparency, like the blockchain designed by Satochi Nakamoto in 2008 and made famous by the Bitcoin. Put simply, this is a distributed ledger that signalizes any change in the data recorded to the whole system it evolves in. It is impossible to alter previous data and allows thus an easy tracking.
Social media play a major role in the transmission of information and can either help build or break the reputation of a brand. Samsung SDI experienced a half billion dollar dip in their market value following a tweet of Elon Musk following a tweet saying Tesla worked with a competitor for a new electric car in 2016 .. before he himself faced a federal lawsuit following another tweet two years later. Half of the millennials admit they have been influenced by social media for their purchases according to EY, brand endorsement is progressively replaced by everyday influencers and today some companies build their whole communication based on their transparency. Buffer is one of the latest example of how you can put this behavior at the core of your company, since they provide access to their equity formula, their pricing, salaries. This allows them to get rid of bias and ambiguity in several decision taking processes.
As a conclusion, it is still unclear whether transparency is a tool, a movement, a new state of mind…or all of them at the same time. The technology, through the social media and its new tools are a way for business to respond to a ‘conscious consumer’ movement as labelled by KPMG. While tech savvy customer have a wish of knowing what is behind their favorite companies, there seems to be tremendous opportunities behind it. Even if one does not want to seize them, transparency remains nonetheless a topic every company should pay attention to. In today’s Bel20, only 2 out of 20 companies mention transparency in their values. For how long?
D. Andrew Austin and Jane G. Gravelle, “Does Price Transparency Improve Market Efficiency? Implications of Empirical Evidence in Other Markets for the Health Sector,” CRS Report for Congress, July 2019