You would expect that a social enterprise with a mission to achieve effective corporate transparency would have a corporate transparency FAQ, so here it is. This FAQ provides guidance on corporate transparency, offering insights into how businesses can enhance their transparency practices and align with best standards.
Corporate transparency describes the extent to which a corporation's actions are observable by outsiders. This is a consequence of regulation, local norms, and the set of information, privacy, and business policies concerning corporate decision-making and operations openness to employees, stakeholders, shareholders and the general public. From the perspective of outsiders, transparency can be defined simply as the perceived quality of intentionally shared information from the corporation.
Source: https://en.wikipedia.org/wiki/Corporate_transparency
Radical transparency is a phrase used across fields of governance, politics, software design and business to describe actions and approaches that radically increase the openness of organizational process and data. Its usage was originally understood as an approach or act that uses abundant networked information to access previously confidential organizational process or outcome data.
Source: https://en.wikipedia.org/wiki/Corporate_transparency
Supply chain transparency refers to the level of visibility that organisations have into the various processes and activities that are involved in the production and distribution of goods and services. This includes the ability to trace the origins of materials and components, as well as the various stages of production, distribution, and delivery. Supply chain transparency is important because it allows organisations to ensure that the goods and services they are providing are of high quality, are produced in an ethical and sustainable manner, and are delivered in a timely and efficient way. Additionally, supply chain transparency can help organisations identify and address any potential issues or challenges that may arise in the production and distribution process, which can help improve overall supply chain efficiency and effectiveness.
And in case you needed it, here's supply chain transparency in a haiku:
Supply chain traced
Materials sourced and produced
Transparency wins!
Corporate transparency refers to the level of openness and honesty that companies have in their business operations and activities. This includes providing accurate and transparent information about their finances, operations, and decision-making processes. Corporate transparency is important because it helps to build trust and credibility with customers, employees, investors, and other stakeholders. It also allows for greater accountability and responsibility, which can help prevent unethical or illegal behavior within the company. Additionally, corporate transparency can help companies to identify potential risks and opportunities, and to make more informed decisions. This can ultimately lead to improved financial performance and a positive reputation for the company.
No. GDPR relates to personal data rather than corporate data. Additionally, personal data about directors is exempted as explained below.
Director Identities on Companies House
Here is a helpful explanation from Digital Content Manager of Companies House, Jonathan Moyle:
"Under section 163 of the Companies Act 2006, a director must register their date of birth (plus other details) when they're appointed. The company must then send this information to Companies House under section 167.
We have a duty to register this information and make it available to the public. For directors appointed after 10 October 2015, only the month and year from their date of birth will be publicly available.
The GDPR allows an exemption under Schedule 2, Part 1 (5) of the Data Protection Act 2018. This exemption applies to Companies House because we must make information about registered companies available to the public under the Companies Act 2006."
Source: https://companieshouse.blog.gov.uk/2019/06/11/how-were-reforming-the-co…
ESG stands for environmental, social, and governance. ESG data refers to information about a company's performance in these three areas. Environmental performance includes a company's impact on the natural environment, such as its greenhouse gas emissions and waste management practices. Social performance refers to a company's impact on its employees, customers, and the communities in which it operates, such as its labor practices and diversity and inclusion policies. Governance performance refers to a company's leadership and management practices, such as its board composition and executive compensation.
ESG data allows investors and other stakeholders to assess a company's overall sustainability and responsibility, and can be used to make investment decisions or to engage with the company on these issues.
ESG data has come under extreme scrutiny in terms of whether or not it is fit for purpose in assessing an organisation's sustainability and ethical practices. Many use financial measures or annually produced reports but this is insufficient for all but skin-deep assessments. TISCreport TISCreport connects silos of data across the world with an open data infrastructure based on our unique Internet of Connected Entities (buyers, suppliers, regulators, director connections, stakeholders, funders etc). With it our users can better judge an organisation’s actual ESG actions against those reported in the context of its interactions with those connected entities.
On the investment side, some define contextual ESG as the integration of environmental, social, and governance (ESG) factors into the analysis and decision-making processes of an investment, taking into account the specific context and needs of the company or industry in question. This approach recognizes that different industries and companies may have unique ESG challenges and opportunities, and that a one-size-fits-all approach may not be appropriate.
MSCI: https://www.msci.com/esg/contextual-esg
Sustainalytics: https://www.sustainalytics.com/insights/blog/contextual-esg-investing-a-new-paradigm/
Mornigstar: https://www.morningstar.com/articles/995615/contextual-esg-investing-where-we-are-now-and-where-we-are-going
BMO Global Asset Management: https://www.bmo.com/global/sustainable-investing/contextual-esg-investing/
Non-financial risk refers to the potential for loss or negative consequences that are not directly related to financial matters. Non-financial risks can include a wide range of issues, such as operational risks, regulatory risks, legal risks, reputational risks, and environmental risks.
Operational risks refer to the risks associated with the day-to-day operations of a business, such as the risk of equipment failure, supply chain disruptions, or natural disasters.
Regulatory risks refer to the risk of non-compliance with laws, regulations, and other legal requirements, which can result in fines, legal action, and reputational damage.
Legal risks refer to the risk of being sued or facing other legal action, which can result in financial losses and damage to a company's reputation.
Reputational risks refer to the risk of damage to a company's reputation, which can result in a loss of customers and revenue.
Environmental risks refer to the risk of negative impacts on the environment, such as pollution or climate change, which can result in regulatory action, reputational damage, and financial losses.
Overall, non-financial risks can have significant consequences for a business, and it is important for companies to assess and manage these risks in order to protect their operations and reputation.
There are several ways in which corporate transparency can reduce non-financial risk for a company:
Reduces reputational risk: By being transparent, a company can avoid damaging its reputation by hiding information or engaging in questionable practices. This can lead to increased customer trust and loyalty.
Reduces regulatory risk: By disclosing information about its operations and decision-making processes, a company can demonstrate compliance with regulations and reduce the risk of regulatory action.
Reduces litigation risk: By being transparent, a company can reduce the risk of legal action by avoiding activities that could be seen as deceptive or fraudulent.
Reduces supply chain risk: By disclosing information about its supply chain, a company can demonstrate its commitment to ethical sourcing and reduce the risk of supply chain disruptions or negative impacts on stakeholders.
Overall, corporate transparency helps to build trust and confidence in a company, which can reduce non-financial risks such as reputational damage, regulatory action, litigation, and supply chain disruptions.
Financial risk refers to risks that are directly related to a company's financial performance and can include risks such as credit risk, market risk, and liquidity risk.
Non-financial risk can affect a company's financial performance in a number of ways. For example, operational risks can disrupt a company's production processes and lead to lost sales or reduced profitability. Regulatory risks can increase costs for a company, such as fines or legal fees, and reputational risks can damage a company's reputation and lead to lost customers or reduced demand for its products or services.
Overall, non-financial risks can have a significant impact on a company's financial performance and should be carefully managed to minimize their impact.
Insurers use non-financial risk data to assess the likelihood of an insured event occurring and to determine the appropriate premiums to charge for insurance coverage. Non-financial risk data may include information about the insured's location, occupation, driving record, health history, and other factors that can impact the risk of a claim being made. By analyzing this data, insurers can better understand the risks associated with insuring a particular individual or group and can tailor their coverage and premiums accordingly. Non-financial risk data is also used to identify trends and patterns that may be indicative of higher or lower risk, which can help insurers develop more effective risk management strategies.
There are several characteristics that define an ethical company:
Integrity: An ethical company does not engage in deceptive or fraudulent activities, and is open and upfront with its customers, stakeholders, and employees.
Responsibility: An ethical company takes responsibility for its actions and their impact on stakeholders, including employees, customers, suppliers, and the environment. It is accountable for its decisions and endeavors to minimize negative consequences.
Fairness: An ethical company treats all stakeholders fairly and equally, regardless of their position or status. It does not discriminate based on race, religion, gender, or any other characteristic.
Respect: An ethical company respects the rights and dignity of all stakeholders, including employees, customers, and suppliers. It fosters a culture of respect and inclusivity, and encourages open communication and dialogue.
Sustainability: An ethical company is committed to sustainability and environmental responsibility. It recognizes the long-term impact of its actions on the environment, and seeks to minimize negative environmental impacts.
Transparency: An ethical company is open and transparent in its business practices, and provides accurate and timely information to stakeholders. It is willing to be held accountable for its actions and is open to feedback and criticism.
Corporate transparency can combat greenwash by allowing consumers and clients to access accurate and comprehensive information about a company's environmental practices. When a company is transparent about its environmental impacts, consumers/buyers can make more informed decisions about their purchases and support businesses that are truly committed to sustainability. Additionally, corporate transparency can help to hold companies accountable for their environmental claims and actions, as it allows stakeholders to track the company's progress towards sustainability goals and identify any discrepancies or inconsistencies in their environmental messaging. By promoting transparency and honesty, companies can demonstrate their genuine commitment to sustainability and reduce the likelihood of being accused of greenwashing.
There are several ways companies can combat greenwash:
There is a significant body of research on the relationship between corporate transparency and corruption in companies.
Generally, it is believed that greater transparency can help to reduce corruption within a company, as it makes it more difficult for individuals to engage in corrupt activities without being detected. This is because transparency involves making information about a company's operations, financial performance, and governance practices available to the public, which can help to deter corrupt behavior by increasing accountability and oversight.
There is also evidence to suggest that companies that are more transparent are less likely to be involved in corrupt practices, as they are more likely to have strong internal controls and robust governance systems in place.
There are various ways in which a company can increase its transparency, including:
Disclosing financial information: Companies can increase transparency by disclosing accurate and comprehensive financial information, including financial statements, annual reports, and other relevant data.
Providing information about governance practices: Companies can also increase transparency by providing information about their governance practices, including the composition of their board of directors and executive management team, as well as details about any conflicts of interest.
Engaging with stakeholders: Companies can engage with stakeholders, such as shareholders, customers, and employees, to provide information about their operations and address any concerns that may arise.
Implementing internal controls: Companies can implement internal controls and procedures to help prevent and detect corrupt behavior within the organization.
Overall, it is clear that transparency can play a significant role in reducing corruption within a company and promoting good governance practices.
Here are a few links to research on the relationship between corporate transparency and corruption in companies:
"Corporate Transparency and Corruption: A Cross-Country Analysis" by Federica Saliola and Roberta Capello https://www.jstor.org/stable/44846061
"The Relationship between Corporate Transparency and Corruption: Evidence from the UK" by Bingjing Li and Daniele Santino https://www.emeraldinsight.com/doi/abs/10.1108/S0742-332220150000014009
"Corporate Transparency and the Fight against Corruption" by Transparency International https://www.transparency.org/whatwedo/issue/corporate_transparency
"The Impact of Corporate Transparency on Corruption: A Review of the Literature" by Katarina Kralova and Jan F. Chytil https://www.tandfonline.com/doi/abs/10.1080/09697250.2016.1247509
AI-powered analytics platforms are being used to analyze large amounts of data and identify patterns that might indicate unethical or fraudulent activity within an organization. Some examples of companies doing this include:
Palantir Technologies: https://www.palantir.com/
IBM Watson: https://www.ibm.com/watson/
Dataminr: https://www.dataminr.com/
AI-powered chatbots are being used to provide employees with a way to anonymously report ethical concerns or violations within their organization. Some examples of companies doing this include:
Whispli: https://www.whispli.com/
Ethi: https://www.ethi.io/
Honesty: https://www.honesty.com/
AI-powered platforms are being used to automate and streamline the process of reporting and disclosing financial and operational information to regulatory bodies and stakeholders. Some examples of companies doing this include:
XBRL: https://xbrl.org/
Intrinio: https://www.intrinio.com/
Nasdaq: https://www.nasdaq.com/
Overall, the use of AI in corporate transparency initiatives is helping to improve the accuracy and speed of reporting, as well as reduce the potential for human error or bias.
While financial transparency has been a focus for many years, non-financial transparency provides a more comprehensive view of a company's operations, including its environmental, social, and governance (ESG) practices. This broader perspective helps stakeholders understand the company's true impact and ethical stance, beyond just its financial results.