In recent years, “transparency” has evolved into a buzzword gaining momentum in the business sector.
Once a “nice to have” perk, it’s become a necessity for companies. Transparency is now essential to build trust in your stakeholders — from your customers to your employees and investors — as well as to drive success.
Let’s dive into why transparency is crucial so you’ll better understand how it impacts your business. I’ll also walk you through different steps to achieve it.
What does transparency look like in a business context?
Transparency involves sharing information, both good and bad, with all of your stakeholders. Doing so demonstrates your commitment to earning people’s trust and how much you value them.
It emphasizes being open, honest, and accountable and yields many benefits for your business.
Why is business transparency important?
Business transparency has become a key driver for success due to its powerful results.
Builds trust and loyalty
Trust between you and your stakeholders is fundamental to building a thriving brand. When you’re open about your practices, customers, employees, and investors feel confident about their actions and decisions concerning your brand.
Nurturing trust can lead to long-term loyalty, support, and even a performance boost for your company. Forbes surveyed employees to pinpoint the top reasons why they trust their employers, which are:
- Telling the truth – 65%
- Being open about company policies and practices – 52%
- Prohibiting toxic behavior – 39%
- Paying fair market rates – 39%
- Encouraging employees to speak up – 38%
Additionally, the study revealed trusted companies perform up to 400% better than their peers. Faith in one’s place of work is thus highly influential in business productivity, and transparency is an effective way to foster it.
Strengthens your reputation
Your brand’s reputation is one of your most valuable assets, so cultivate a positive image. Combined with consumers’ increased focus on the impact their purchases have on the planet, prioritizing areas such as corporate social responsibility (CSR) and sustainability can help you resonate with them.
Showcase your ethical and responsible practices to improve buyers’ view of your brand. An OpenText survey found 88% of consumers around the world intend to prioritize purchasing from companies that implement ethical sourcing strategies.
When asked if they would be loyal to brands that actively practice responsible sourcing, a majority of consumers responded “yes,” with country-specific statistics as follows:
- Japan – 78%
- United States (U.S.) – 82%
- United Kingdom (UK) – 82%
- Canada – 86%
Boosts employee engagement
Transparency is important for employees as well. Informing and involving them in company decisions, for example, shows you value their opinions. As a result, they’re more likely to engage and be productive in their jobs, nurturing a positive work culture.
As a concrete example, Great Place to Work, a company that helps transform businesses into desirable workplaces, listed Cisco as 2022’s number-one company in terms of employee engagement. The brand earned the top spot due to multiple reasons, a key one being 97% of Great Place to Work’s respondents said Cisco’s “management is honest and ethical in its business practices.”
Transparency also enables company personnel to make informed decisions — and they crave it. Slack’s Future of Work Study found 80% of workers want more insight into how decisions are made in their companies, while 87% want transparency from their future employers.
Given how important that knowledge is for employees, openly sharing data and other relevant information with them contributes to better decision-making for current operations and future strategies and plans.
Risks associated with unethical or illegal practices are also reduced or eliminated when you embrace transparency. Take greenwashing as an example: This occurs when an organization exaggerates or fakes claims about their offering’s environmental benefits.
Blueland, a producer of eco-friendly cleaning products, faced this very issue after marketing “every piece” of their packaging as 100% recyclable. However, specific materials were compostable, rather than recyclable, so the National Advertising Division (NAD) ordered the brand to stop their claim.
Being open about your values, operations, and other business aspects can prevent these types of legal and reputational issues. Further, when people in the organization understand the company’s policies and activities, they can keep each other in check.
Transparency enables all stakeholders to hold you accountable for your actions. For instance, stumbling into gray areas like the previous example highlighted can easily be avoided.
It keeps your business practices in line and ensures your operations and decisions remain ethical and sustainable.
Encourages communication and collaboration
Fostering an environment of openness encourages input and feedback from your stakeholders. It also inspires collaboration, which can lead to unexpected innovation.
Besides creativity, the open communication and collaboration born of transparency pushes continuous business development. With the constant flow of information and feedback about the company’s practices, you can easily identify areas that require improvement and take steps to address them.
13 Ways to increase transparency in business
Now that I’ve covered the advantages of introducing greater clarity into business practices, here are some tips to help you improve your company’s transparency.
1) Put honesty and accountability first
Always be open about your operations and practices, even when the news you’re about to deliver is unpleasant. Take responsibility for your actions and mistakes and express your willingness to make changes. Then, outline the steps you’ll take to address any issues and prevent them from recurring.
Starbucks offers a prime example of a company that bounced back from a PR nightmare by taking responsibility:
In April 2018, two African-American men were arrested at a Philadelphia Starbucks for loitering in the store without making a purchase. The incident was caught on video and shared on social media, sparking outrage centered around racism.
In response, Starbucks CEO Kevin R. Johnson made a public statement denouncing what happened and offered to apologize personally to the victims. To pinpoint what went wrong, Starbucks undertook a review of company policies and procedures. They also closed all U.S. stores for compulsory racial-bias education.
These actions demonstrated Starbucks’ assuming full accountability for the horrible situation and their commitment to addressing people’s concerns.
2) Set clear expectations
Be open about what stakeholders can expect from your company. You can do this by sharing company values and how they guide your decision-making.
Image: Ben & Jerry’s
Ben & Jerry’s, for instance, built a dedicated page to convey their three core values clearly, which are:
- Human rights and dignity
- Social and economic justice
- Environmental protection, restoration, and regeneration
The company upholds these values by openly supporting various movements in partnership with relevant organizations, including:
- Power U Center for Social Change, which is involved in racial justice
- Fairtrade International, which works to secure better deals for farmers and workers
- The International Rescue Committee (IRC), which upholds the rights and dignity of refugees
3) Communicate regularly
Providing all stakeholders with consistent updates is critical for building trust and ensuring they feel valued. Make your communications simple and direct, using clear language; this avoids misunderstandings.
Keep people informed through mediums like newsletters, social media posts, or quarterly or annual reports with performance metrics.
For example, the beverage giant Coca-Cola has many stakeholders besides their customers, employees, and investors, including:
- Bottling partners
- Non-government organizations (NGOs)
To keep them in the know, the company engages with them through conferences, briefings, events, meetings, public engagements, and other communications.
4) Reveal your supply chain practices
If you rely on a complex supply chain, be transparent about the steps you take to ensure your practices are ethical, legal, and sustainable. You can start by asking questions like:
- Do you enact fair labor practices?
- Are your materials sourced responsibly?
- What are you doing to minimize energy consumption, waste, and emissions?
The outdoor apparel brand Patagonia covers these concerns by being completely open about their footprint.
They share information about three key business aspects:
- Materials and environmental programs – These guide the manufacturing of Patagonia’s materials and products. For instance, all of the company’s down is responsibly sourced, and all of their virgin cotton is organically grown.
- Social responsibility programs – The brand’s participation in the Fair Trade program benefits over 75 thousand workers, and more than 2.5 thousand farmers participate in their Regenerative Organic Certified™ Cotton program.
- Where they do business – Patagonia boasts 76% renewable electricity globally as of 2022. They also work to ensure fair labor practices, safe working conditions, and environmental responsibility in factories, farms, and mills.
Patagonia’s efforts have yielded rewards like a boosted bottom line and more revenue, tax cuts, and satisfied employees.
5) Be transparent about your hiring and promotion practices
Outline your hiring process, namely, how candidates are selected and what qualifications are required. This applies to employee promotions as well — openly discuss what it takes to move up in the company and how such decisions are made.
The social media management platform Buffer, for instance, took their transparency to the next level by making their employee salaries public knowledge. They even revealed their salary formula to their staff, then tweaked it to account for raises and promotions.
Within the first 30 days of this move, Buffer received more than double the number of job applications. Additionally, according to Hailley Griffis, Buffer’s current Head of Communications and Content, this “helped boost trust and morale, and productivity in general.”
6) Provide clear performance metrics
Relevant metrics will differ according to your various stakeholders. Supply investors with metrics concerning your business’s performance. Customers, meanwhile, might want to know how your CSR initiatives are measured. For your employees, show them how they’re evaluated and point out what they can do to improve.
7) Embrace transparency in marketing
In your marketing messaging, talk about how your products are made and how your services and business practices are carried out.
For example, walk people through where you source your materials or the wages and benefits you provide your employees. You can also convey your business’s devotion to minimizing its environmental footprint and bringing positive change to the world.
In that regard, sustainable marketing is an effective approach to take. Sierra Nevada, a beer brand based in California, embraces it by revealing the environmental impact of their brewing operations.
Image: Sierra Nevada
The company’s sustainability page goes into how almost all of their solid waste is diverted from landfills, how they recover heat and steam and reuse them for energy, and more.
8) Be consistent
Consistency is key to building trust. Make sure you keep your word, provide dependable customer service, and maintain an established brand image.
PANGAIA, a materials science brand working to accelerate an Earth positive future, is a great example of brand consistency. For one, they continuously develop sustainable materials for their apparel.
They also launch marketing efforts designed around their environmental contributions:
- PANGAIA created Grape Leather as an alternative to vegan leathers made from synthetic materials derived from fossil fuels.
- Their FRUTFIBER™ saves materials considered to be agricultural waste by converting them into fabric.
- The company’s Refer A Friend program encourages participation by planting a tree for every successful referral and purchase.
9) Deliver on your promises
Develop a track record of reliability by repeatedly following through on your promises. Retail giant Walmart, for example, has a simple brand pledge: to help people “save money and live better.” We see this sentiment repeated in their seasonal promotions, ad copy, the deals they offer on the website, and more.
That guarantee serves as the core of the brand’s customer experience. Shoppers can easily access the best deals on the Walmart website, which comprises many categories. Customers enjoy multiple fulfillment options as well, producing a more convenient shopping experience.
10) Respect customer privacy
Highlight how your organization prioritizes privacy and avoid tracking or working in gray areas with your metrics and analytics.
Unilever emphasizes that importance by stating their interactions with consumers follow their Personal Data & Privacy Code Policy, which details how they engage with their stakeholders and their private information.
That document dictates what must and must not be done with customer information, like:
- Employees should only collect data that’s adequate and relevant to the purpose it’s meant to serve.
- Information should never be kept longer than necessary, meaning it can only be stored until the objective or the minimum legal requirements have been met.
- Consumer consent must be obtained before Unilever can collect data.
11) Encourage customer feedback
Solicit feedback from customers on how you can improve, then incorporate it into your open communication. For example, update your customers by saying, “We’ve heard numerous customers request for [complaint/desire]. So, we are [remediating action].”
Listen attentively to their concerns and implement changes when possible. This shows you value their input and are open to positive course correction for your business.
Slack is a prime example of a brand that effectively utilizes customer feedback. In fact, the digital HQ the company provides is fine-tuned through feedback, and that, in turn, has given rise to some of Slack’s best features.
By collecting user feedback in real time and introducing changes based on it, the company is able to refine their platform continuously. With their customer-centric approach, Slack displays their devotion to supporting users as they learn to navigate their product.
12) Listen to your employees and investors
Being open applies to your employees and investors too. Make honest communication and feedback an integral part of your organization. Those efforts convey the importance of your personnel in the company’s activities and express your trust in them as well.
Employees will feel more comfortable knowing they can offer suggestions and share their opinions. It’ll also instill more confidence in your investors.
13) Protect customer data
According to a Ping Identity survey, 63% of consumers say it’s a company’s responsibility to protect user data. A further 81% of respondents said they would stop online engagements with a brand after they experienced a data breach.
So, ensure there are no security breaches or data leaks. You lose reliability and trust whenever passwords you were supposed to safeguard are disclosed to unintended third parties.
Start with the basics, such as:
- Use SSL on your website to ensure a secure connection
- Collect only essential customer information
- Use updated data protection software
- Limit data access for non-essential staff
Wrapping up — Transparency in business is a necessity
Transparency is not simply a trend. Being open and honest with consumers, employees, and investors significantly influences your company’s trajectory, so it’s critical to prioritize it to yield positive results.
Treat transparency less as a selling strategy and more as a mindset to instill in all of your organization’s stakeholders. By making it an integral part of your work culture, you’ll enjoy more loyal customers, engaged workers, and confident shareholders. In the long term, that open policy can also help sustain your company’s growth.