Transparency: the New Competitive Advantage

Transparency: the New Competitive Advantage
By guest blogger, Amie Vaccaro reporting from the Spring Investors’ Circle Conference, San Francisco April 20, 2010

The Investors’ Circle closing plenary discussed how and why transparency is becoming more and more important and also a source of competitive advantage.

Moderated by Allison Arieff of GOOD Magazine, Steven Scheuth of First Affirmative Financial Network, Dara O’Rourke of Good Guide, and Anndrew Kassoy of B Lab discussed how they are embracing transparency in their business operations.

O’Rourke pointed out that the most forward thinking companies (Timberland, Patagonia, even Dole) are responding to consumer demand for more information by displaying more and more information about where the product and its component parts came from and how they were made. But consumers are confused and overwhelmed by the proliferation of logos, labels and certifications. At Good Guide, O’Rourke is trying to understand which pieces of information are most important to the consumer and which will actually influence shopping decision making so as to streamline the information.

One problem in transparency is that often the company itself does not have all the answers. Inquiring customers will help change this by demanding accountability for this important information.

At B Lab, Kassoy outlined the 3 ways that he is working to promote radical transparency.
1) Building the B Corporation Community: To date, 300 companies have been B Lab certified. Their results from the B Lab survey tool can be found online. Some companies display their scores with pride. The next step for some B’s is to make the entire B survey available, rather than just the summary (at that point I begin to wonder who would really care, but better to have the information available than not I suppose.)
2) Accelerating the Growth of the Impact Investing Field as an Asset Class: Kassoy described the Global Impact Investing Rating System (GIIRS) which allows investors to understand how their investments stand up in terms of positive impact. If investors can access such information, they can demand it from more and more funds and drive transparency in that manner.
3) Promoting Supportive Public Policies and Incentives for Social Enterprise: B Lab works to drive policy change that will better support entities that drive positive impact and are transparent about their weaknesses. For example, Philadelphia recently gave B Corps a tax break for creating pubic benefit.

Is more information always better? Not always. Scheuth pointed out that the more options available, say for a 401k plan, the less likely individuals are to make a choice. Quality of options is more important than quantity in many cases. And it’s also important to ensure language is intelligible to the average person off the street – too often labels are filled with scientific information that is lost on the average consumer. For consumers to choose one product over the other, it must compete on price and quality. In Scheuth’s world that indicates that the financial performance of a “sustainable” investment must rival the market rate.

My takeaway from the discussion is that, you and I both have the ability to make a difference. Business is undergoing a radical shift towards revealing more information about its practices. Even a lowly consumer like me has the power to influence corporate disclosure of information by asking questions. Its up to every one of us to demand and reinforce the importance of transparent business practices.