Why business transparency is crucial for building consumer trust.
In competitive markets, companies do all they can to connect with consumers, investors, and other businesses, as well as to build and maintain those relationships.
How do businesses successfully keep these relationships thriving? While brand appeal, product and service quality, and customer relations are all essential to maintaining relationships, there’s a crucial way that brands can take to ensure they connect with others: business transparency.
By being transparent about different practices — particularly in the supply chain — companies can further build trust and maintain relationships with consumers, employees, investors and more.
When businesses are transparent, everyone — from the supplier to the consumer — benefits from the knowledge of being candid about practices.
Business transparency is when companies are open, honest and straightforward about their business practices.
Some areas where companies may focus on transparency include:
Material and product sourcing
Business performance
Pricing, revenue and profits
Internal processes
Company values
Companies may go a step further with transparency and focus on environmental, social, and governance (ESG) principles. These help customers and investors have a clearer picture of a business’ practices, principles and ethics.
ESG principles focus on three key areas of a business and its practices.
Environmental
This area evaluates a company’s environmental impact.
It includes things like energy use, pollution, waste, recycling and carbon footprint.
This evaluates environmental impacts throughout the product and service lifecycle from farming and sourcing materials, up to consumer use and beyond.
Social
This area evaluates a company’s relationships with suppliers, the community and employees.
Areas of social focus may include human rights, labor standards, working conditions, gender and diversity, community involvement, and relations.
This should evaluate all areas of social impacts, from fair pay and worker rights in factories, to volunteering and community involvement.
Governance
This area is more focused on overall business ethics in different relationships and interests.
This may include political contributions, investor/board member interests, conflicts of interests, illegal practices, and accounting and audits.
Governance focuses on making sure that there aren’t any unsavory interests or motivations — even if it may be from a supplier or investor and not the company itself.
By focusing on ESG principles, companies can ensure they are being transparent in all areas — from supply chain manufacturing to consumer use and beyond.
Corporate transparency helps hold businesses, suppliers and all others accountable.
When business practices are out in the open, it pushes companies to hold themselves to a higher standard. If there are areas where a company falls short, it motivates them to take action and be a more ethical company that people are proud to support.
Additionally, if companies work to be transparent in all areas — from manufacturers and suppliers to board members voting on business practices — it pushes everyone involved to reach that same bar that’s been set.
One key area of transparency businesses can focus on is the supply chain.
Clothing brands are one of the first that often comes to mind when people think of companies that are not transparent. How often have you bought clothes from a company only to find out in a news article that they’ve gotten in trouble for using child labor or don’t pay employees living wages?
The supply chain is one area where companies face increasing pressure to be transparent.
Both governments and consumers are pushing brands to disclose practices in all areas of the supply chain, including:
Raw materials
Inbound logistics (raw materials and products being received at a warehouse)
Goods in the warehouse
Product/service manufacturing
The outbound warehouse
Outbound logistics (products being shipped out to retailers/directly to the consumer)
As seen with clothing brands that are found to be using manufacturers with unfair labor practices, a lack of transparency doesn’t fall just on the factory — but the company that chooses to use that factory also.
The supply chain includes all steps in product and service production. By ensuring that all business practices and sourcing are out in the open, it pushes companies — and the suppliers and transporters they work with — to be transparent.
When businesses are aware of and transparent about their ESG practices — and help ensure consumers, investors and others are, too — it helps all areas of the company become more transparent.
Many companies work to give consumers and investors clarity on their business practices. The most transparent companies, however, go above and beyond to share their ESG practices and/or disclose information on their supply chains.
Below are a few great examples of transparent companies.
The software development company discloses everything including direction, strategy, projects and metrics.
They focus on six key values, including: collaboration; diversity, inclusion, and belonging; efficiency; iteration; results; transparency.
The company also publicly discloses individual employee actions — like file updates, comments on merge requests and more — revealing ultimate transparency.
GitLab’s company ethics can be found in a handbook that has over 13,000 pages of text. It covers things like marketing, engineering, finance, sales, product processes, internal auditing and more.
Every 22nd of the month, GitLab releases a development reveal.
GitLab goes above and beyond revealing any possible investor biases — and keeps a rolling update of employee and company actions, showing the ultimate transparency for ESG practices.
Known for their denim, Levi’s has also made a name for itself as a transparent brand with ESG principles.
Environment
Acknowledging areas the company has seen the potential for sustainability growth.
Tailor shop to repair and redesign clothes.
Reporting water saved and reused in recent years.
Working toward 100% sustainably sourced cotton in the coming years.
Reporting reductions in greenhouse gas emission in supply chains.
Helping consumers find ways to recycle jeans.
Terms of engagement: supplier requirements as outlined by the United Nations Millennium Development Goals (MDGs).
Working with stakeholders, governments and others to raise wages across the fashion/textile industry.
Compliance and monitoring programs focusing on: labor rights and conditions of workers, workplace safety and workplace health.
Worker well-being initiative: partnership with nonprofits across 12 countries to support family welfare programs, provide health education and financially empower people.
Partnered with Harvard’s SHINE program to help ensure textile worker treatment across the manufacturing industry.
Working to fight social injustices, like segregation in the 1960s and for LGBTQ+ rights for decades.
Levi’s Music Project to help give youth access to music education programs, community resources, and more.
adidas took the initiative to list every single supplier and give a breakdown of those involved in its supply chain.
The compiled list discloses supplier information including:
Name (account and parent organization).
Location (including the country, city, and address(es)).
Product category (ie: apparel, footwear, accessories, etc.).
Worker count.
Tier — primary, subcontractor, material, trims, etc.
The list also includes licensees, which are suppliers linked to the brand through an intermediary (go-between), and wet processes, which include things like fabric dyeing and finishing materials.
The company also focuses on areas like worker’s rights and compensation, policies and standards, overall sustainability, and more.
Business transparency is key to success in your company — not just to build trust with customers, employees, investors and others — but so you can track your own metrics.
When you are empowered with knowledge about your supplier’s practices and data surrounding the production of your products and services, you can be confident that your business is doing all it can to be a brand that people are proud to support.
