Why the Future Is Transparency Through Tech
By Dan Wellers, Christopher Koch | 6 min read
Until recently, it was unusual for customers to think about whether a product or service was created in a way that aligned with their personal values.
It’s not that customers assumed most things were produced in a manner that they would agree with. For the most part, they simply had no way of knowing whether that was the case, so they rarely had a reason or opportunity to include moral calculations in their buying decisions.
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Today, though, it’s easier for people to consider how business practices fit or conflict with their personal and political beliefs. The broad reach and long memory of the Internet, combined with crowdsourced reviews, ratings organizations, and technologies like sensors and blockchain, is empowering customers to do their own research and make values-based decisions about whether they’re willing to transact with a brand or organization.
This has broad implications for companies beyond the clear need to uncover and address unlawful or unethical behavior in their supply chains. As technology increases digital transparency, companies’ values will be laid bare for all their customers to see.
To navigate this environment of greater visibility, companies will have to understand the broad spectrum of their key customers’ values and find effective ways to align with them.
Open for inspection
Today, someone who uncovers a company’s misbehavior can broadcast it around the world in minutes using social media. However, the information is usually limited to a specific area, such as materials sourcing, labor practices, or environmental impact, and these revelations happen more or less at random. They can still do significant damage to a company’s reputation when they go viral, but they’re the exception rather than the rule.
However, the growth of technologies like sensors, blockchain, and artificial intelligence (AI) is rapidly shifting the conversation from random revelations to total transparency. More data is being created while people are demanding the companies with which they do business prove their authenticity and trustworthiness. Almost every aspect of almost every business, from supply chains to entire industries, is under pressure to expose their true self for customer judgment before someone else does it for them.
The more customers can inform themselves about the issues that matter to them and the impact of their individual choices on those issues, the stronger their desire will be to use that information to make their purchasing decisions a force for advancing their values. They don’t just want products that align with their values; they also want to know that those values are woven into the product’s life cycle, from manufacturing and distribution to use and disposal or recycling.
As a result, a growing number of organizations are using advanced technologies, algorithms, and analytics to increase transparency. Coca-Cola, for example, teamed up with the U.S. State Department to create a secure registry for workers to root out forced labor in their contracts. De Beers, the world’s largest diamond company, has invested in a “traceability platform” for gems to reduce worries about counterfeiting and theft. Walmart looked to blockchain to monitor its leafy greens so that it can track any produce-borne illnesses to the farm, the crop, and even the individual head of lettuce. And monitoring group Good On You tracks the performance of thousands of fashion brands on ethical sourcing, manufacturing, and distribution. Meanwhile, MSCI is making money by helping its investor clients understand the environmental, social, and governance-related business practices of various companies.
These organizations, and many others, will make transparency more deliberate and less random, shrinking the chances that companies will be able to hide anything in the future.
Make transparency strategic
When almost every buying decision includes a moral dimension, greater transparency can be less a liability and more a strategic brand decision. For example, H&M backed up its commitment to sustainability by making supply chain information available for every item of clothing on its Web site, detailing the name, address, and number of workers in every factory involved in production. In-store shoppers could retrieve the same information by using the H&M app to scan product tags. It addressed buyers’ frustrations with the standard “Made in” label, which doesn’t break down the many global, interconnected stages of the fashion industry’s supply chain. The feature also gave customers a next step for taking action, reminding them of the company’s textile recycling program for garments that have reached their end of life.
Of course, customers have many different values and even many definitions of what it means for a company to do good or minimize harm.
For example, in an era of strong opinions about the value of globalization, some customers make a point of seeking out products that are sourced and manufactured locally. That creates an opportunity for companies like WeatherTech, a maker of floor liners, seat protectors, cup holders, and other products for cars and trucks, which proudly advertises its all-American factories, machinery, materials, and employees.
While this attention to customer values may seem like a lot of effort for incremental returns, a growing body of research indicates that companies that prioritize ethical behavior perform better financially. Ethisphere, a consultancy that measures ethical business behavior, says that the large, publicly traded companies that came out on top in its most recent evaluation had stock prices that were 13.5% higher than the overall average for the sector.
Clean up your house before you invite others in
Technology will continue helping customers make more informed decisions. For those decisions to break in your favor, you must make sure your product or service doesn’t violate their values. That means not just proactively admitting to any questionable practices you might be engaging in but also demonstrating what you’re doing to stop them and reverse their impact.
Your organization may be having a “when you know better, you do better” moment, or maybe you just aren’t sure whether your business operations measure up to your customers’ expectations. These four steps will help you understand where you’re doing well and where you have room to create more opportunities for transparency:
- Get a deep understanding of your core customers’ values, principles, and priorities.
- Analyze your value chain for areas not fully aligned with or in conflict with your customers’ values.
- Assess these areas for both opportunity and risk. Prioritize where you want to align your company’s values with those of your core customers.
- Proactively build transparency into your operations, and make sure that value alignment is visible.
By giving your customers the confidence to trust that you really are the organization you represent yourself to be, you show them that business in general can be trustworthy, too. And in the long run, that’s not just what keeps customers coming back. It’s what keeps companies relevant and viable.
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