Today’s Transparency Table Stakes
This post is the first in a series of eight that unpacks the increasing expectation of transparency in business: Why and how to develop authentic, accurate, and thorough communication and reporting on your business purpose, goals, and impact.
In 2018, CEOs of the world’s biggest and most influential public companies got an open letter from BlackRock’s founder and leader, Larry Fink — a letter that changed the business landscape, it seems forever.
Why? Well, BlackRock is the largest money-management firm in the world, overseeing $10 trillion in assets under management. So, Fink tends to lead the entire financial system in the direction of his thinking.
Sure enough, the annual BlackRock letter rocked C-Suites across the world.
By that time, though more and more businesses had already begun to stress “the need for a triple or even quadruple bottom line,” Fink wrote — “creating value for customers, employees, and society in addition to shareholders” — he argued that the business world had not yet moved the needle far enough.
Indeed, Fink spelled out, “Society is demanding that companies, both public and private, serve a social purpose” [italics mine] and “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”
For many companies, that level of “Lead With We” thinking was still a somewhat novel idea at the time. That “Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate” was not necessarily so obvious.
In fact, it flew in the face of a few centuries of traditional practice of capitalism.
Five years on, Fink’s insistence on Stakeholder Capitalism is no longer a new idea. And it’s definitely no longer optional. Increased media scrutiny, stricter government standards, exponentially expanding consumer demands (especially among younger demographics), and major market shifts in investing have all sent business into new and more straightforward, more trustworthy territory. [See my previous series on Trust]
So, business has begun to forge a new narrative originating in meaningful and measurable positive impact supported by a new brand of leadership, accountability, and this key factor: Transparency.
However, we live in a world where we can no longer just announce that we’re responsible, safe, fair, just, and diverse. That’s not transparency. No, we have to back those claims with real data. And though there’s still plenty of room for marketing spin, raw data, as revealed in regular reports, doesn’t lie — at least not as well as traditional communication.
Leaders today are rightly holding themselves and their companies consistently and transparently accountable to various metrics that identify how — and why — they are benefiting all stakeholders through meaningful and measurable results: They Lead With We.
Those that don’t, risk the likelihood they will “lose their social license to operate,” according to Fink’s kickoff to Stakeholder Capitalism.
Now they might also lose their literal license to operate. Take just one measure of transparency, that of environmental impact reporting:
In late March, 2022 the US Securities and Exchange Commission [SEC] voted to propose new and rigorous climate reporting standards that would shift climate reporting from “softer” and often voluntary sustainability reports to more formal 10-Ks, in which companies must disclose key financial information to the public. The proposal is now up for public review.
Not incidentally, Larry Fink cited government failures to prepare for a future full of crises as a principal reason that business had to take the mantle: Seems the public is now finally stepping up to work With business to help save our collective future.
That latest SEC move is in response to the fact that, according to JUST Capital, nearly half of all US public corporations still don’t publicly disclose their Scope 1 and Scope 2 (direct and indirect greenhouse gas emissions, those GGEs deriving from their company operations. And less than a third of companies report on the other 15 categories (e.g. product use, travel, etc.) of GGEs included in Scope 3.
The US proposal follows similar new European requirements to report such data — subject to full auditing — beginning in 2024.
Again, it looks as though the public is no longer content to bury their head in the polluted sand. They expect — they demand — full disclosure from business.
And this movement extends far beyond environmental impact reporting, encompassing areas such as corporate governance, product sourcing, human resource management, and diversity — much of what’s covered under the ESG umbrella. ESG — Environmental, Social, and (Corporate) Governance is a loose framework for assessing and ranking the impact of the sustainability and ethical practices of a company.
In short, companies have gradually evolved from an era of confidentiality, obfuscation, and blatant avarice into a day of reckoning with transparency and its consequences, both negative and positive. Because society is changing — the Earth itself is changing, thanks to centuries of unchecked business-as-usual — companies must change post haste.
This evolution could not have come soon enough. Not only are our interrelated crises — public health, the climate emergency, social injustice, etc. — exponentially expanding and further coalescing, but so, too — and finally — is legitimate and growing community concern.
Americans, like their European and, increasingly, their Asian, counterparts, are calling for greater and greater transparency from business on the ESG and related concerns they care most about, a recent JUST Capital / SSRS / Public Citizen / Ceres survey confirmed.
This eight-part series will explore what such transparency means for business — including the massive economic opportunity it represents; the new alliances between citizens and the public sector to regulate greater corporate disclosures; the many tools available for businesses and industries of all sizes and stripes; and several case studies and object lessons.
Ready to embrace transparency?