Prepare Your Members for Radical Transparency
By: Kristin Clarke, CAE
Someday soon, consumers will be able to make purchasing decisions based on environmental impact with information they receive at the click of a button. You can help your members prepare now for what "radical transparency" will mean to them.Always demanding, consumers have now gotten downright nosy. What chemicals are in my green Jell-O? Did a child make my purse? Did you have to wreck a rainforest to make my favorite rocking chair?
Soothing language in marketing materials no longer cuts it. Details, people. We want details about our stuff and your stuff. And now we can get those details—just hand us our laptops or mobile phones.
This consumer expectation is way beyond buying "green" or Fair-Trade certified. This is "radical transparency," as Daniel Goleman, author of Emotional Intelligence, calls it—a powerful tool of a larger business and cultural concept he terms "ecological intelligence."
|Wal-Mart's Sustainability Index Aims for Radical Transparency|
Dan Goleman predicts that his concept of ecological intelligence will mature as a powerful business opportunity in 10 to 20 years, but he may be off by at least a decade. Only a week after his Associations Now interview in mid-July 2009, Wal-Mart—whose buying power ($406 billion in revenue last year) makes it one of the most influential entities on Earth—announced that it is surveying its 60,000 suppliers worldwide to create a new "sustainability index" that could lead to a "universal standard" applicable to "all retailers, all suppliers" everywhere, according to Chairman and CEO Mike Duke. The 15 survey questions focus on natural resource usage, energy and climate, "material efficiency," and "people and community."
And Wal-Mart plans to share it all with you—just not tomorrow. A corporate insider noted that index numbers or "sustainability ratings" for specific products won't be available to shoppers for "several years," sometime after the survey results are processed, and a coalition of universities, suppliers, retailers, and government entities co-creates the "parameters" of an index Wal-Mart will use in its procurement process.
In the final part of its three-phase initiative, Wal-Mart will share the resulting index ratings with customers to encourage the consideration of sustainability in their buying choices.
The company is also establishing new partnerships with nonprofits to provide resources that will help suppliers self-evaluate and improve their practices to become more socially responsible. Among those partners is the Carbon Disclosure Project, which has been helping Wal-Mart determine how best to obtain climate change data from vendors.
"Wal-Mart is providing the initial funding for this, but we do want other companies to participate," Duke said in a July 16 interview with the Associated Press. "Our goal is not to create our own index, but to spur development of a common database ... that all of us can rely upon."
Radical anything seems off the path for Goleman, a Pulitzer Prize-nominated, former New York Times journalist, Ph.D., and psychologist who has spent most of the last dozen years expanding the field of knowledge around so-called "emotional intelligence."
Emotional intelligence is the ability to control "one's impulses, self-motivation, empathy, and social competence in interpersonal relationships." Though it isn't measured by standard IQ tests, it has been shown as strongly influential in determining an individual's professional and personal success.
Now Goleman is exploring another "EI" term in his latest book, Ecological Intelligence: How Knowing the Hidden Impacts of What We Buy Can Change Everything. He defines ecological intelligence as "a collective ability to know in a fine-grain way the impact of human systems on natural systems and to take responsibility for making better choices and improving rather than degrading those systems." He also says it's a "business opportunity" that associations are uniquely able to leverage to help their members compete and survive long-term.
When Goleman wrote his 1995 book, Vital Lies, Simple Truths: The Psychology of Self-Deception, he says, "the quandary that I faced … was that as far as I was concerned, the biggest collective self-deception was that we are decrying acid rain and the destruction of the Amazon rainforest, yet we make no connection between that and our aggregate decisions as consumers that are driving those very problems. I couldn't see any way to close the circuit of information between our choices as consumers and the impacts on people and the environment."
But since then a technology revolution, the rise of globalization, and a fundamental shift in consumer right-to-know expectations have changed everything. "For the first time," says Goleman, "there is a disruptive technology information system that can allow us to be far more effective at values-based buying than ever before, because the data have been so loosely tracked up until now, and new precision has been brought by … industrial ecologists who can tell us [about] the entire lifecycle of a product."
Goleman's concept of radical transparency is the flip side of a term most business professionals are much more familiar with: the "value chain," the monetary value added at each step of a product's life. In an era of radical transparency, Goleman says, "now we can know the de-value chain—the negative impacts over the whole course of a product's life—and can use our values to reward products that have better outcomes and to punish those that don't."
An organization must clarify the business case for integrated social responsibility, he explains. "If enough shoppers show that market share is shifting in a meaningful away because of the way companies are impacting nature, people, and so on, then the margin changes, then companies see that in order to stay competitive, they need to make significant changes, to innovate, to reinvent systems, to rethink what they do … If we make it pay, then companies will see that it's a quadruple bottom line, not just the traditional three legs of SR [social, economic, and environmental] but also profitability."
The bottom line issue is indeed that financial bottom line. Radical transparency gets companies to divulge lifecycle assessment data and then shares it with shoppers, so they can "make wise choices to fulfill their value agendas. Radical transparency just means all the data are open to everybody at every step."
Knowing Everything About Every Thing
And where are these data? Goleman has a suggestion: "Now, if an organization or association were to put teeth in its social responsibility initiative, I could foresee an association getting its members en masse to use Goodguide.com, which is an information system online for consumers that aggregates 200 databases and summarizes a specific item's value on a 10-point scale, with 10 being the best, 1 the worst."
This free site, launched less than six months ago, already has ratings for 70,000 products from baby food to perfume. The aggregated ratings include lifecycle-assessment data from nongovernmental organizations, governments, corporations, and elsewhere. The site also allows consumers or organizations to inform a manufacturer why they are no longer buying a product.
"You can drill down in the database, and the neat thing about it is you can tailor that database to what matters to you the most, so you can weight what goes into it according to your values and what changes you're trying to create," Goleman says. "If you can get thousands or hundreds of thousands of association members to do that … you can have an enormous impact in furthering your own agenda, because you're now showing businesses that it's going to be profitable to make the change for the better."
Product ratings sites are not new. In the eco-community, the best known are probably U.S. Environmental Protection Agency's Energy Star ratings for energy efficiency and Green Seal, a 20-year-old nonprofit that rates the environmental sustainability of everything from dishwashing soap to hotels. The Marine Conservation
Society ranks commercial- fish-stock sustainability at www.fishonline.org, so consumers can ensure their seafood purchases are not depleting threatened species. And the prestigious organic symbol from the Soil Association is now found on more than 80 percent of the United Kingdom's organic products, a £2.1 billion industry in that nation alone. As the technology, science, and public demand for behind-the-label information intersect more frequently, Goleman expects these types of single-focus sites to proliferate.
But new sites such as Goodguide.com and Earthster.org (still in development at press time) are what Goleman sees as game changers, because they drop to zero "the cost of information"—the time, energy, and knowledge needed to find data.
"Consumer surveys have for years shown that 10 percent of shoppers care passionately about ecological impacts and will go out of their way to get a better product," Goleman says. "Another 25 percent say they don't care, but the big action is the two thirds of shoppers in the middle who say, ‘I would make a better choice if it were easy for me.'
"Looking ahead, that choice is going to become easier and easier—Goodguide.com is already a free app on the iPhone. We don't know how many of those two thirds of shoppers will use [these sites], but even if just another 10 percent do, that's a sizable shift in market share and certainly worth paying attention to," he says.
"As retailers see that to offer this kind of information to customers enhances the shopping experience in terms of creating a positive feeling about the retailers themselves and … cementing brand loyalty, they will find ways to use the ratings systems with products on their shelves."
He adds that the founders of Goodguide.com have been approached already by major retailers wanting to post the ratings next to product price tags for customer convenience. Some corporations have said they want to use Goodguide.com's analyses when they choose which products to even stock in their stores. And Earthster.org appeals to many companies and trade organizations because they can download free software that lets them benchmark products and services against industry competitors and partners.
"In other words, some of the world's largest companies turn out to be among the most progressive in terms of trying to seize the business opportunities around radical transparency," Goleman says.
Not So Radical?
Not everyone agrees with Goleman's predictions. A different perspective comes from Jay Whitehead, who publishes CRO magazine as part of a for-profit professional membership organization of corporate responsibility officers. He founded a side company to create the Sustainable Productivity Seal of Approval (SUPR Seal). The seal, released in 2008, was (according to a press release) "the first comprehensive sustainability rating for 505 top non-healthcare companies in the 14 largest business-to-business industries." IW Financial, a sustainability rankings firm, helped create its four-area, 80-criteria parameters.
The target audience was B2B buyers, whom Whitehead cited as spending 10 times more money than online consumers. Despite a million-dollar investment, the seal is now defunct.
"As a standard for some sort of designation, a rating is very expensive to launch," Whitehead says. "We committed a million dollars, and it just didn't get off the ground. It's very tough. Also, we started at a time in the teeth of the greatest recession in years, so nobody cared about green. … The idea that sustainable companies will do business with other sustainable companies … was a naïve, ill-conceived concept."
Does he agree ecological intelligence will affect his members and their businesses as substantively as Goleman claims? "Some of these books are a little soft-headed when it comes to proving the business case," Whitehead states, listing numerous other green business and sustainability books as well. "I may sound cynical, but having been around this space now for six or seven years, I realize the real sustainability business models that take a bottom-line orientation to this and do the hard work to draw bottom-line correlation with sustainability criteria. … Well, it's hard."
Associations Get Radical
That said, a number of associations have already spotted the changing consumer expectations toward product lifecycle transparency, especially when they intersect with emerging technologies that deliver data to shoppers' mobile phones. The International Association of Outsourcing Professionals identified social responsibility as its "top outsourcing trend" in 2008 and has an active CSR subcommittee within its advocacy and outreach committee.
On the same day that Wal-Mart announced the creation of a global sustainability index for every product it sells (see sidebar), IAOP reported in a press release that it had just launched a survey of 100,000 members and nonmember outsourcing professionals to "determine the importance of corporate social responsibility in outsourcing" among customers, vendors, and other stakeholders. Results are expected this fall.
"Outsourcing can be used as a powerful tool for advancing critical social, economic, and environmental issues on a global basis," says IAOP Chairman Michael Corbett. "Many companies involved in outsourcing today are adhering to the highest ethical standards, contributing to their communities, bettering the environment, and expanding career opportunities and training for their employees."
Another ecological intelligence trend-spotter is the Sustainable Furniture Council (SFC), a two-year-old trade organization whose founding member, ABC Carpet & Home, is a high-end retailer in New York. ABC Carpet & Home sees itself as a sustainability example for other retailers and has about 30 percent of its products certified for ecological values. Recently, the company sent a letter to its suppliers saying that it wanted to boost this percentage by raising standards, and that it would work with each one of them to become more socially responsible, so their business relationship could continue. Most of the suppliers agreed, although the company did lose a few, according to Coleman. ABC Carpet & Home also partnered with the nonprofit Rainforest Alliance to obtain guidance for suppliers regarding criteria and sources for responsibly managed wood.
SFC, meanwhile, has been urging all members to use lifecycle assessments "as the best method for analyzing the environmental impact of their products, and a verifiable chain of custody as the only acceptable method for tracking wood flow." Part of its mission involves creating a "symbol of assurance" for consumers; SFC also provides third-party verification as a "Trust Provider" for the WorldofGood.com site on eBay.
Goleman isn't surprised that some associations are already embracing radical transparency. The future he foresees includes corporations relying on their industry associations for help in deciphering the entrepreneurial opportunities and risk elements of ecological intelligence and radical transparency. "Association members would be quite smart to turn to shared expertise in the association to understand how this development will impact their business, their operations, and how they can then take advantage of this," he says.
Whether the term "ecological intelligence" becomes as much a part of any business lexicon as "emotional intelligence" remains to be seen, but Goleman is convinced: "Everyone who sells a product or service is going to be impacted eventually by radical transparency. ... This is going to level the playing field [and] require a new way of thinking among business leaders. Leaders who understand the advantage of opportunities presented by disruptive technology will be the first to take chances and to reinvent how they do things. They are going to be the winners in the decades ahead."
Formerly deputy editor of Associations Now, Kristin Clarke is a writer and researcher for ASAE & The Center's Social Responsibility Initiative and other knowledge initiatives. She can be reached at firstname.lastname@example.org, where she is likely snacking on Annie's Chocolate Bunny Grahams, which mercifully rated a 7.0 out of 10 on Goodguide.com.
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