Transparency on the Rise

There’s an old saying that Warren Buffett likes: “Only when the tide goes out do you discover who’s been swimming naked.”¹¹ In a world demanding openness about everything, the tide is always going out. If you have a good handle on the problems in your (or your partners’) operations—and you’re working toward solutions in a genuine, consistent way—then you are in great shape, and transparency isn’t threatening. But if something is out of line with your stated values and goals, such as human rights violations in the supply chain, the tide going out will be embarrassing.

Trust and transparency are the grease of a multistakeholder model. If you’re hunkered down in a boardroom, viewing NGOs as the enemy and all businesses as competitors, you stay quiet. You don’t risk getting penalized, or losing any advantage you have, by sharing too much. CEOs have generally worried about being too open—their legal, PR, or communications departments have scared them with tales of declining reputations or legal liability (a bigger fear in the United States). That’s an excuse. Being secretive is not a good strategy. It makes it harder to build trust. It also misses out on the opportunities for connection and learning that come from openly sharing your challenges.

Transparency will find you anyway. Employees, customers, communities, and investors are challenging companies, asking tough questions about what they stand for and who they serve. Two-thirds of shareholder resolutions are now tied to environmental, social, and governance (ESG) issues.¹² ESG performance is getting more transparent: in 2021, S&P Global released its ESG scores on 9,200 companies—the scores it uses to select companies for the Dow Jones Sustainability Indices (DJSI).¹³ Investing giant BlackRock has also said that it expects companies to disclose carbon emissions and greenhouse gas (GHG) reduction targets.¹⁴

In the food and consumer products sectors, questions fall under the banner of the “clean label” movement. Consumers want to know much more about what they’re buying, and its ingredients—nothing artificial or unnecessary, no long chemical names. This is part of what’s driving the rapid growth of organic foods. But a “clean label” philosophy can go beyond food, especially for younger workers and consumers (millennials and Gen Zers). They want more information on everything they buy or use. The younger clients of private wealth bankers, for example, are now effectively asking for “clean” portfolios that have a positive impact on the world.

Transparency is enhanced by a leapfrog in technology—camera phones in everyone’s hands, and new tools, such as block chain, that track everything. All bad actions can go viral. When a Starbucks store manager called the police on two people of color for loitering—which half of us do in Starbucks—a video of the incident was viewed eight million times in a few days. Everyone with a mobile phone is an auditor.

Trust, backed by transparency, is a powerful combination. They are enablers of net positive work, and they create goodwill and intangible value. Forty years ago, more than 80 percent of the value of companies in the S&P 500 was wrapped up in tangible, hard assets—factories, buildings, inventories, and so on. Today, it’s the reverse: intangible assets make up more than 90 percent of the total.¹⁵

Intangibles have been hard to measure, but business is getting better at it, including putting numbers on the value of the brand, customer loyalty, employee engagement, and trust. Companies, especially ones on the net positive path, should constantly communicate this value to financial markets, and clearly link intangibles to the company’s value creation model.

Share Your Plans, Your Successes, and Your Failures

The Unilever Sustainable Living Plan (USLP) was a blueprint for reviving Unilever and putting it on a path to net positivity. But it was also a powerful transparency tool. From the first day, the detailed plan—with its three big goals, seven subcategories (later nine), and more than fifty individual targets—was open to public critique, warts and all. Going public with specific numbers creates accountability, which is critical. It puts a fire under the organization; once a target is out there, it’s not voluntary anymore.

One of the most challenging goals was Unilever’s commitment to 100 percent sustainable sourcing of agricultural inputs by 2020. With hundreds of ingredients across thousands of products, that’s a tall order. Most inputs had no accepted definition for what “sustainable” meant. Putting the target out there allowed Unilever to ask for help and gave it credibility in the pursuit of answers.

Jan Kees Vis, Unilever’s global director of sustainable sourcing development, has worked for years to build standards and codes for sustainable agriculture. He has needed the trust of peers, communities, and NGOs on thorny issues. The company’s commitments, he says, helped hold everyone’s feet to the fire. “I could point to the USLP,” Vis says, “and tell suppliers and partners, ‘This isn’t just me talking … it’s one of my goals, and my policy calls for fair treatment of workers and better land management practices … if you doubt we’re serious, I’ll bring in my CEO to say the same thing.’”¹⁶ By developing standards openly, you hold yourself (and partners) accountable for better performance, before NGOs do it for you.

The scale of the goals also built relationships. When you say, “We want one billion people to improve their hygiene habits,” you’re clearly thinking big and can’t possibly do it on your own. You’re saying, “We don’t have all the answers,” which gives you credibility. This combination of hubris and humility draws NGOs, entrepreneurs with new technologies, and willing governmental leaders to work with you. Pier Luigi Sigismondi, the former chief supply chain officer for Unilever, says, “When you go public and say you need help, you start getting a lot of emails and requests to join the movement.”

To keep the transparency and trust going, Unilever released USLP progress reports audited by PwC. The report gave every target a green, yellow, or red mark, along with explanations about what was not working. The hardest goals to hit, for example, have consistently been reducing the carbon footprint of products during consumer use. The energy needed for hot water for soaps and shampoos makes up roughly two-thirds of the company’s value chain carbon footprint. Even with product innovation, Unilever has never solved this human behavioral problem (things like long showers). It’s important to be positive. Be honest, but offer hope and optimism. The best way forward is to talk openly about such challenges and share the knowledge about what’s worked.

USLP-level transparency is more normal now, but it was not a decade ago. Outside of the early leaders, such as Interface, IKEA, and Marks & Spencer, almost no companies had published concrete and aggressive targets—most hadn’t even estimated their footprint yet. This level of openness is still uncomfortable for many leaders. A strong current of old-school thinking remains, an interior voice that says, “Don’t tell the market too much because you’ll be held accountable or they’ll come after you.”

And yet the opposite is true. Being open often turns those who are standing on the side throwing darts at you into partners.

Tell People What They Want to Know (and Don’t Hold Back)

It’s not up to you what your customers or communities want to know about your business or products. It’s a safe bet that their demands will keep rising. So, embracing transparency is a process of letting go. Net positive companies adopt a mindset that the company doesn’t actually belong to them, but to all stakeholders.

Unilever has worked to be proactive and share things that others do not. It was early in posting its tax principles online (based on a belief in supporting society through fair taxation), for example, and in publishing operational data that normally stays private. Unilever publicly shared its list of the 1,800 palm oil mills in its supply chain—latitude, longitude, and the name of the business. When Jeff Seabright was the chief sustainability officer, that transparency created a memorable moment.

He was meeting with an indigenous peoples group when a woman from Colombia spoke up, saying a palm oil company was destroying her community. Seabright pulled up a list of mill locations. The woman’s jaw dropped and she said, “There. Near Cartagena. That’s my community, and that company is the one poisoning and killing my people.” The company could now look into what was happening with that specific supplier. Seabright says, “It was poignant and human, and it showed the power of transparency.” It also identified a supplier the company needed to help change or distance itself from.

Operational transparency is just one kind of openness. Think about what your major stakeholders want to know, or will want to know soon. Prospective and current employees may want information about how fair the pay is, for example. They can search Glassdoor for salary data, which then makes it harder for a company to maintain a gender or racial salary gap.

For their part, investors are increasingly asking for ESG metrics and disclosure of material sustainability risks. Larry Fink, CEO of the world’s largest asset owner, BlackRock, has asked all companies “to report in alignment with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB), which covers a broader set of material sustainability factors.”¹⁷ He pointed out in 2021 that they had seen a 363 percent increase in SASB disclosures in one year.

Consumers are also demanding more, and they want to know what’s in everything. Unilever broke new ground on sharing information on what’s listed on product labels as “fragrance,” which is not a single thing—it can contain dozens of chemicals. The subingredients have always been hidden from consumers. Unilever looked at more than one thousand of its products and posted online every chemical that makes up more than one hundred parts per million of a fragrance (with an explanation of what that ingredient does). Consumers can find the details online, or use a phone app, SmartLabel, to scan a bar code and get the full list while shopping.¹⁸

The Environmental Working Group, an NGO that advocates aggressively for protecting human health and reducing exposure to chemicals, publicly praised Unilever. Founder Ken Cook applauded the company for raising the bar on transparency and “breaking open the black box of fragrance chemicals.”¹⁹ At first, the major fragrance suppliers—longtime partners such as IFF, Givaudan, Firmenich, and Symrise—were wary. They have significant intellectual property wrapped up in their flavors and fragrances. But Unilever’s former chief R&D officer, David Blanchard, says that they did understand where consumers were headed on transparency, and that it was smart to be proactive. The train was leaving, and once you start giving consumers information, Blanchard says, “transparency becomes almost unstoppable.”

One of the fastest-growing food chains, Panera Bread, has made openness core to its brand. The company’s “food promises” focus on the words “transparent,” “raised responsibly,” and “clean.” Panera defines the latter as “no artificial preservatives, sweeteners, or flavors and colors.” The company publishes a unique “No No List” of ingredients it says “will never be in our pantry.” Panera says that its commitments are “all about trust.”²⁰ Similarly, in 2020, Unilever announced a new goal to “communicate the carbon footprint of every product we sell” on the packaging, a nontrivial task when you sell seventy thousand products.²¹

Business customers are also demanding more information about their supply chain footprint, and it can be a competitive advantage to give it to them. Singapore-based agricultural supplier Olam launched a data product, AtSource, which gives customers information on ninety sustainability indicators—carbon footprint, waste, number of farmers, diversity, and so on—for all the raw materials and ingredients it sells. With AtSource, Olam is helping food companies develop a data-based, honest story they can tell their consumers.

If you can’t give customers the data, they may go around you. To track deforestation, Global Forest Watch collects reams of satellite images of forests and palm oil plantations. Unilever brought in a small firm with expertise in AI, Descartes Labs, to get better at using satellite images to identify problem areas.²² The company is moving toward a real-time picture of deforestation in its supply chain, with or without palm suppliers’ help.

Data-driven transparency is revolutionizing business. Along with better information, having independent parties assess a company’s operations enables trusted labels, which assure customers that the story is true. For many years, Unilever sold tea that was certified by the respected NGO, the Rainforest Alliance. Certifications are not perfect, but they give consumers a backstory, and a somewhat transparent look at how a product is made. People can buy a product with more confidence that it’s good.

Put the Needs of Communities ahead of Your Own

A license to operate is not a literal piece of paper, but it can feel real. If communities don’t trust you, doing business there will be difficult, if you’re allowed in at all. Being a good steward means showing people your commitment to their well-being. Helping communities in moments of crisis, such as hurricanes and pandemics, is important for letting them know you’re there for them. But it’s the longer-term work that builds lasting trust.

By pursuing profits through purpose, companies and brands can approach communities and help them thrive as a normal part of doing business. It starts with the question, “How can we best help you with our products and skills?” and not by asking, “How can we make money off these people?” Communities can tell the difference when there’s a genuine desire to invest in the country and build long-term relationships and a lasting business.

Across the world, many of Unilever’s brands have run programs to help communities develop and thrive. Lysoform and Klinex hygiene brands in Europe provide cleaning products to schools, along with educational materials on staying safe and healthy. In Greece and Italy, they hit a target of reaching ten million people in a couple of years. Unilever Indonesia also runs hygiene programs reaching millions of kids every year, and the Ethiopian division’s hand-washing program is fighting deadly diarrhea and the scourge of trachoma, a disease that comes from rubbing dirty hands on your eyes and can lead to blindness. Unilever brands work on a range of challenges: Sunlight detergent runs a program to build water stations in Nigerian villages, and multiple brands work on rural programs that help smallholder farmers thrive. Net positive companies, wherever they operate, lift up communities.

These initiatives all contribute to the overarching USLP goal of improving the lives of one billion people. But communities know that it’s also good for Unilever’s business—more focus on hygiene and nutrition, for example, brings higher sales of Pepsodent toothpaste and Knorr’s flavor mixes. These programs are almost always branded, using Unilever cleaning or water purification products. It’s important to be authentic. As one executive working in Vietnam says, “They see the sincerity of what we try to do.” You build trust by being genuine in your desire to help and being honest about the benefits to your business.

Those benefits are most definitely real. As part of the USLP’s growth goals, the Living Hygiene platform had aggressive targets to take one sleepy cleaning brand and double its size globally. Doina Cocoveanu, who led that work, said they did more than double sales, but it wasn’t from any one thing. New markets and innovations (some purpose-driven, but not all) unlocked growth.²³ By not relying on the purpose programs as the single driver, they freed up the business to serve the community honestly. Being net positive does not require only focusing on mission-driven initiatives—they’re an important part of the normal mix of business, but not the whole thing.

Years of working with governments, investing in countries, and helping people improve health and hygiene (among other goals) has built trust. It’s a philosophy of doing business, not a series of one-off programs.

Be Transparent with Trustworthy Critics

Find knowledgeable critics and invite them in. It builds trust that will grow in value, and it’s the best way to learn what you need to improve. The leading companies do this systematically. VBDO, a Dutch association working to make capital markets more sustainable, benchmarks pension funds on their performance as responsible investors. When asked what makes the leaders better, VBDO executive director, Angélique Laskewitz, says they open up. The ones they rank the highest invite in critical stakeholders, including VBDO and unions, and ask openly, “What do you think of our sustainable investments policy?”²⁴

It can be painful, but companies should invite productive critics in to discuss the hardest issues, including the human rights travesties of modern slavery and child labor. In 2011, Unilever asked the international NGO Oxfam to review labor conditions in its operations and supply chain, giving it free reign to explore. The company was an open book. Oxfam chose Vietnam as a good case study to assess four major issues: freedom of association and collective bargaining, living wages, working hours, and contract labor.

Unilever lawyers worried about exposing the company to legal liability, and the board was uncomfortable about giving outsiders ammunition for attacks. But Unilever leadership felt it was worth the risk. Being up front and more open makes NGOs less likely to pull you down; they need you to keep setting the pace if you’re doing good things. Transparency is not about being right about everything, but being willing to be open and make the journey toward improvement.

Oxfam concluded that Unilever had adequate policies, in theory, but significant problems in reality, such as paying wages that were higher than the minimum, but still below a living wage. The report helped NGOs understand the situation better—if Unilever had challenges in dealing with the complexity of subcontractors, most likely everyone did. It also made it safer for other companies to open up.

Since that time, Unilever set a goal that none of its 169,000 direct employees would be paid below a living wage by 2020. After effectively meeting that target, Unilever made a supply chain commitment in 2021. The company will require any organization “that provides us goods or services” to pay a living wage by 2030.²⁵ These efforts were kick-started by the original transparency work years earlier.

The Vietnam report came out in 2013, the same year as one of the biggest tragedies in the history of business, the collapse of the Rana Plaza garment factory in Bangladesh. The shocking deaths of 1,100 workers woke up the world to the outrageous working conditions for the people making our clothes and electronics. Companies started looking more closely at the issue, and Unilever increased its focus on the social side of the USLP.

With the Oxfam report as the basis of its thinking, Unilever issued a company-wide human rights report in 2015, the first of its kind. The company was transparent about its operations in 190 countries, all with different norms, laws, and views on human rights. It was honest, which it needed to be. As Sharan Burrow, the general secretary of the International Trade Union Confederation, told us, a company is for real when it’s truthful about these issues. “We’ve seen human rights reports that tell you it’s all good news,” Burrow says, “which tells you they’re lying.” The ones who get it “know they’re not perfect, do their due diligence on human rights and labor issues, and then, instead of covering it up, ask the rest of us to help them resolve it.”²⁶

Marcela Manubens, Unilever’s global VP of integrated social sustainability, has led Unilever’s social sustainability and human rights agenda since 2013. She believes that the first report was critical to make any progress. She says, “Transparency was the key element and it’s an enabler … it allows me to talk.” It gives her and Unilever credibility to work with NGOs and communities on tough issues. If the company hadn’t done the hard work, with help from the author of the highly respected Ruggie principles on human rights, John Ruggie, how seriously would they have been taken?

The report also increased the comfort talking about the issues inside Unilever. Manubens didn’t want the report to speak only to a few experts in human rights—she wanted everyone in the company (or any stakeholder) to read it, get it, and ask, “What’s my role in this?” As the organization got more familiar with the issues, it took action, such as improving working conditions, strengthening the right to association, and refining the complaint procedure to better capture abuses. In most places, the workers did not have an easy mechanism to communicate, such as an anonymous complaint line or regular interviews with auditors. Unilever also urged the Consumer Goods Forum to look closely at labor and human rights in the palm oil supply chain and in the shrimp industry. It trained more than one thousand companies in the extended supply chain on how to eradicate forced labor.

Multinationals have a big target on their back, and companies touting their good works get even more attention. When the criticism comes, it’s important to figure out who you’re dealing with (see the box “Know Your Critics”). You want helpful organizations, even if they’re unhappy with you, but not pure cynics who won’t work in good faith. Some people want to solve problems; others just come to knock you down. Find the right partners, build trust with them, and work on big things together.

When in Doubt, Do the Right Thing

During the pandemic, some companies made bad choices. Supermarkets in the United Kingdom, including Sainsbury’s, Tesco, and Walmart’s Asda, came under fire for taking pandemic tax relief while paying out nice dividends to shareholders (they’re all paying back the taxes).²⁷ Governments offered loans to businesses to help keep them afloat. A program in the United States intended for small businesses was oversubscribed. Dozens of large, publicly held companies, many with lots of cash on hand, grabbed millions from the pot.²⁸ In a number of companies, executives paid themselves big bonuses while furloughing thousands of workers.

Now, compare those actions to how IKEA handled things. Some governments offered funding to cover 80 percent or more of salaries for furloughed workers. When IKEA’s business recovered faster than it expected, it announced it would repay the United States and eight governments in Europe.²⁹ It was the right thing to do. Thankfully, IKEA was not alone during the crisis, and most companies tried to contribute to the greater good.

French luxury giant LVMH produced hand sanitizer and Apple made face masks. Ford, GE, and 3M made ventilators. To help those companies manufacture something they never had before, health-care and biomedical company Medtronic released the design specs and software code for one of its portable ventilators.³⁰ For its part, in addition to shifting production to medical equipment, Unilever converted buildings at Kenyan and Tanzanian tea plantations from schools into temporary hospitals. These companies made moral choices, putting the immediate needs of people ahead of business objectives for the moment, and showing communities who they are.

Companies are increasingly asked to make choices about how they operate in the world and what they stand for. Stakeholders are watching, and opportunities for companies to do the right—or the wrong—thing are increasingly common. As protests about racial equality and police brutality raged in the United States in mid-2020, IBM’s CEO Arvind Krishna called on governments to combat systemic racism. The company stopped selling facial recognition software—which has inherent racial bias and misidentifies people of color much more often—to police or other security agencies.³¹ Microsoft and Amazon quickly joined IBM. These tech giants gave up what were likely lucrative customers in favor of supporting racial equity. Again, the right thing to do.

The more companies do what’s right, the higher expectations become. With a plan as public as the USLP, stakeholders often expect Unilever to solve every environmental or social problem that touches their business in any way, including the darker corners of the supply chain that need attention. That’s a high bar, but at the same time, it’s not hard to at least identify the problems. Many NGOs and unions know what’s going on.

Even before Unilever’s human rights report unearthed issues, stakeholders were clearly telling them about problems in the supply chain. Ron Oswald is the general secretary of the IUF, a federation of unions representing ten million workers in agriculture and hospitality. In the late 2000s, IUF ran a campaign against Unilever over a tea factory in Pakistan with eight hundred employees, yet only twenty-two full-time jobs. The rest were contingent labor, daily contractors with low wages and no job security. IUF called the campaign, cleverly, Casual-T.

As part of a larger effort to reduce contingent labor across the business, Paul worked with Oswald in Pakistan to craft a solution. The plan was to create a few hundred permanent jobs, with benefits. Before launching it, however, they went to the community and asked people what they wanted—fewer, but better jobs, or more contract positions. The workers chose the stability. On the first day, the newly hired workers brought their families with them to celebrate.

As it does so often, it turned out that this net positive solution was better for Unilever. When you put people on the payroll, you have better economics. You don’t have to constantly hire contract workers. Employees also are more engaged; they feel like part of the company. Unilever also saved money by not needing high-priced employees in London to manage labor cases against the company—money that could go to hiring more workers at the factory.

Because of years of working in good faith, and the trust that built, unions now help Unilever identify problems and fix them before they implode. Oswald raised awareness about a problem in logistics. Large trucking fleets in western Europe are often registered in eastern European countries such as Lithuania, Bulgaria, and Poland, where there are poor working standards and lower wages. The drivers live in more expensive western countries, but make $300 to $400 a month for excessively long shifts. When stories like these pop up, executives should probe, ponder their own humanity, and think, “What if I had gone down a different path and this was my life?”

But empathy is only a start. In this case, there is no easy solution. They can’t just fire the bad actors since, Oswald says, the problem is rampant across the continent. He has seen a lot in his work, but says, “I never thought I’d deal with systematic human rights issues in western Europe.” Unilever and IUF are building a coalition with beverage and CPG companies to make these truckers’ lives better. It’s a work in progress, but a good example of addressing a situation companies have long ignored. It’s hard to maintain trust with society if you don’t do the right thing when buried problems come to light.

And they always will.