Transparency Validation & Certification
This post is the final 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.
The transparency train has left the station and continues to gain speed. How can companies rise to the occasion and not get left in the dust?
We must ask ourselves, how transparent and accountable are our practices regarding accounting, community involvement, environmental/social sustainability? Are we willing to show our progress internally and externally, warts and all?
Are we as bold as Mexico City-based Orbia, a $9 billion global group of companies in industries as diverse as precision agriculture, infrastructure, and data? Instead of creating a purpose-focused tagline, it created what it calls an ImpactMark, which “puts our long-term commitment to people, planet and profit front and center.”
Radically committed to the power of transparency, Orbia’s insignia is constantly — literally — in flux. “We want to highlight the organization we want to be and mark our progress towards this aspiration.” So, Orbia’s ImpactMark is updated every year, reflecting its performance in key areas.
Initially, Orbia’s logo looks odd, right? It’s literally moving. There’s so much integrity, humility, and awesome aspiration in that transparent mess. Its ragged three loops indicate its three most recent years. And as the company does better in the future, the lines will progress outward, smoothing into stable shapes. “We’re constantly striving, trying to make a perfect circle, knowing we’ll never achieve perfection.”
Assuming we’re not quite so transparent as to show in our logo our imperfect progress in bettering our future, one invaluable tool is certification around issues of concern to our stakeholders.
The chemical industry coalition Responsible Care, highlighted in Part 4 of this series [link], like many industry coalitions, offers certification when members meet its standards. Certification can provide standards toward which to strive, and then validation, reputational boost, and entrée into new markets.
In fact, multiple organizations have crafted viable, sensible, trackable metrics, indices, and inventories of the highest-rated companies that Lead With We. We can study them for ideas about how to interpret and apply them practically at home — then communicate our goals, impact, and shortcomings appropriately in their context.
When we’re ready, we can work on various kinds of validations and certifications we can publish, demonstrating our having been vetted on some lines.
Across industries, the Benefit (“B”) Corporation status, obtainable in 37 US states, and/or issued by the private organization B Labs (which has certified to date nearly 5,000 companies in 78 countries), is a good general goal, requiring extensive overall vetting.
The legal B Corporation designation signifies that a public company meets stringent standards of verified social and environmental impact, legal accountability, and, critically, public transparency. They balance profit and purpose and they can demonstrate that.
“The B Corp movement is one of the most important of our lifetime, built on the simple fact that business impacts and serves more than just shareholders,” writes Rose Marcario, former CEO of Patagonia.
So, benefit corporations — both the legal and the privately certified B Lab varieties — are tools to create a solid foundation for long term mission alignment and value creation. A B Corp Certification protects purpose through capital raises and leadership changes, creates more flexibility when evaluating potential sale and liquidity options, and prepares businesses to lead a purpose-driven life post-IPO.
“B Corp is to business what USDA Organic certification is to milk,” goes the B Lab mantra. Companies like Cabot, Hootsuite, and Natura see the B Corp Certification as necessary to protect their missions, reduce liability, increase accountability, attract talent, and access capital. And make no mistake, it’s an effective marketing tool, too.
Meanwhile, there are plenty of rating systems that assess key performance indicators ranging from employee diversity to avoidance of corporate scandals, from energy footprint to healthful interactions in communities. And linking all these is transparency: How well does your company communicate its progress in these areas to all its constituencies?
We’re spoiled for choice here. ESG standards provide a great place to start. “Propelled by the planetary emergency and the drive for transparency, global sustainability reporting standards and ESG disclosure regulations are coming,” says Deloitte. “Boards and C-suites should prepare now, and could find new opportunities to create value.”
We can start by simply picking an ESG rating system that works for us and our industry, business, purpose, goals, and resources. We can employ Sustainalytics; Bloomberg ESG Data; the Global Reporting Initiative (GRI); or CDP Worldwide, the charity that runs a global disclosure system for investors, companies, cities, states, and regions to manage their environmental impacts.
CSRHub offers consensus ESG ratings to benchmark performance, analyze supply chains, improve reporting, and build portfolios.
And the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB) announced last year their merger to form the Value Reporting Foundation (VRF). VRF provides a much more integrated and coherent reporting framework for transparent communications to key stakeholders regarding ESG data than has existed before.
In terms of the individual E, S, and G, we can seek other benchmarking and validating tools. For example, if we’re in the right industry, could our business qualify as “sustainable” or “green” by meeting certain standards? Consumers and investors alike strongly prefer corporate stewards of the environment. “But be on the level, because they’ll also blacklist ‘greenwashers’ who make false claims about their impact on the environment,” warns Oracle.
For example, Leadership in Energy and Environmental Design (LEED) is the most widely recognized green building rating system in the world, the gold standard for building customer awareness and delivering real cost and environmental benefits. With LEED certification, the public will know our building project is, for one thing, part of a movement to divert more than 80 million tons of waste from landfills.
In most every industry, we could participate in a transparent public tool such as SourceMap: This tool is representative of several that provide “collaborative transparency” of companies like Certified B Corp Stonyfield Organic, among many others, which have been an early adopter of SourceMap, provided in partnership with MIT’s Media Lab: It’s an interactive supply chain map.
When such apps — several recently developed in-house at companies — work optimally, one can click on the cow here, the peach there, etc., and get a 100 percent transparent, highly-accurate “social network of supply chain” data for every ingredient.
Beautycounter (a 10-year-old California-based “clean” cosmetics company, which banned nearly 2,000 ingredients from its supply chain in pursuit of safe sourcing for its heath- and ethics-conscious consumers) partnered with SourceMap experts to get to the bottom of the often miserable business of mica-mining in India.
Naturally shimmering mica is used in cosmetics coloration. But “all that glitters is not gold,” according to GreenBiz. As with coffee and cocoa supply chains from Mexico to West Africa (where the SourceMap keeps tabs on half a million+ smallholder farms), mica mining is rife, according to a Thomson-Reuters report, with child labor, hunger, poverty, disease, and multifarious corruption, including the covering up of numerous deaths.
In this process, the partners traveled to India, and also consulted with the Responsible Mica Initiative (RMI) a 60-member-company organization (think cosmetics and personal care brands such as Burt’s Bees, Chanel, L’Oréal, Sephora, and The Body Shop; as well as pigment and chemical companies, automakers, and pharmaceuticals).
Two key functions of the enormous amount of time, energy, and money the small company expended in this pursuit: The first is the sourcing itself, ensuring no harm in the ingredient’s procurement, neither for the suppliers and their communities, nor the customer who will sell the product. But the second is equally important to Beautycounter and likeminded companies such as Ferrero, Hershey’s, Mars, Williams Sonoma, Timberland, and Vans — thorough ingredient tracing transparency for the ultimate consumers.
A few summary suggestions on business transparency:
- Be clear, concise, and as thorough as practicable in all communications — internal and external — including about company ownership, purpose, product sourcing, pricing, income streams, employment practices, compensation, environmental impact, goals, etc.
- Seek guidance and assistance from established and trustworthy industry-specific and general business organizations that educate, benchmark, measure, validate and/or provide certification based on ambitious but achievable standards.
- Own up candidly to failings, lessons learned, and motivations going forward. If you find yourself in the midst of a scandal, confront it directly and respond authentically from a human — not corporate — angle first.
- Embed your transparency, ethics, and policies across your entire culture. Share and expand it to include your whole supply chain and the rest of your partners.
- Publish your transparency standards with your customers and the public, updating and reporting regularly on progress and changing goals.