Transparency is good - isn't it?

31st October 2014


Transparency

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  • Business & Industry ,
  • Management ,
  • Reporting

Author

Simon Coppack

Demanding that a company is completely open is not always best, suggests Jiggy Lloyd

In almost every walk of life, there are examples of people striving for greater transparency - to provide it, to receive it or both. This is not just an observation from the world of corporate social responsibility (CSR) and sustainability.

Politicians must be more open about their business interests; the press about their information sources. The boards of publicly funded bodies hold meetings in public; healthcare professionals know that patients will have access to records. With social media, we are told we now have a "climate of radical transparency".

I am in favour of transparency - by which I mean a willingness to disclose. But I have been working in the CSR and sustainability field for long enough to know that a blanket demand for transparency can be misguided. That is why a more measured approach should be adopted.

The good...

Let us start with the question: why is transparency a good thing? There are probably three main reasons. The first is practical. Without transparency, regulators, shareholders, analysts, voters, consumers and a whole host of others would not be able to do their job or exercise their rights as stakeholders. We need information on which to base judgments; transparency makes the information available to us.

Second, transparency has the status of a "surrogate" indicator - we rely on it as a measure of things that are harder to assess. In all walks of life, there is a tendency to "take comfort" from disclosure; there is a belief that a willingness to disclose is indicative of good behaviour, while secrecy suggests the opposite. There are obvious dangers in relying on transparency in this way, and the scope for misinterpretation or even abuse is obvious.

In a recent survey of socially responsible investment (SRI) analysts, it was found that more than half relied on participation in the Dow Jones sustainability index as an indicator of good practice, regardless of the score obtained. Nevertheless, to be reassured by transparency is an understandable human tendency and to act transparently is - I hope - still a reasonable indicator of underlying values and performance.

Third, we come to what might be considered the real reason. Many will argue - and I am one - that if something is relevant to an individual, perhaps affecting their livelihood or wellbeing, it should be shared with them. And in an interconnected world, a lot of things are relevant and should be shared. This is a tricky road to go down because, sooner or later, you meet that other important value, "privacy", coming the other way. Striking the balance between transparency and privacy is a challenge for all, including the sustainability professional.

...and the bad

Simple advocacy of transparency raises concerns, however. One is the risk to "thinking out loud". Every organisation, be it a private company, public body or non-governmental organisation, requires space in which its members can reveal their thoughts and opinions in the course of decision making. Many environment professionals will have attended a "public" meeting of a public sector body that was preceded by a private or pre-meeting session.

Until we inhabit a world that is not shaped by soundbite and single-issue point scoring, we have to allow privacy (and hence deny transparency) for an organisation to develop its thinking before the "considered" view emerges. If we don't, we may be throwing the "baby" (a better organisational decision) out with the "bathwater" (secrecy).

I am also concerned that demand for transparency contributes to greenwash. We live in a world where words are easier to deliver than actions. This is especially true of organisations in which management is less hierarchical but more dispersed. If organisations are expected to articulate policies on everything, and those expectations come without corresponding attention to relevance or robustness, there will be a temptation and a tendency to greenwash. Lawyers skilled in cross-examination say you should never ask a question to which you do not know the answer. Perhaps the sustainability profession should adopt a similar mantra: do not seek information that will have no bearing on your decision-making.

This is not to say that I condone poor organisational practice where policies are not actually delivered. All policies should be robust, evidenced thoroughly and wholly reliable. But as anyone who has worked in an organisation will testify, that is difficult to achieve.

Lastly, there is the question of cultural attitudes. It is an inescapable fact that attitudes to transparency vary according to culture. Contrasting my professional experience in north America with that in parts of Asia - and generalising for the sake of brevity - I can say that the former tends to a climate in which improvements are emphasised to demonstrate that things are getting better, while in the latter it is uncommon to refer to weaknesses, past or present. Colleagues working in Japan report similarly; respect for your predecessors and seniors (in age or authority) must be evidenced in all communications.

Relevant information

Just as financial disclosure reflects global economic history, there is a certain European hegemony in CSR and sustainability reporting. Yet there is increasing evidence that transparency is a growing trend internationally. Indeed, there are now more CSR/sustainability reports produced in China than in the US; though more than half of the total worldwide are still from within Europe. Coupled with integrated reporting, we can look forward to more access to relevant information.

But it is still the case that organisations responding best to expectations of full disclosure tend to be large and operating internationally. This is not representative of the economy worldwide. There are many organisations - small, not-so-small, private and public - whose activities are significant to us all, but to whom the requirements of the Global Reporting Initiative, for example, would seem intrusive, excessive or even bizarre. Significantly, many such organisations are not averse to sharing information, but do so in a different way.

SRI analysts and others will affirm to the willingness of these organisations to respond to a specific approach, or a specific question, where the purpose is clear and where there can be a dialogue more akin to a private conversation.

Transparency is good practice, but it does not of itself deliver accountability and it can be a distraction. CSR and sustainability professionals can help to ensure that the trend to disclose heads in the right direction by upholding the principle with qualifications. It should be relevant, robust, responsive and respectful of both culture and privacy.

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