Full transparency

7 December 2018

Consumer engagement through apps and social media has become a primary tool for cosmetic brands to spread their message; however, it also gives customers more power to research the history and provenance of their purchases. Neil Thompson explores how businesses are discovering new opportunities to boost efficiency, safety and trust in their leading labels.

According to the 2017 Edelman Trust Barometer study, only about half of the general population trusts business, government, media and non-governmental organisations to do the right thing. The poll reported that belief in business fell to 52%, and CEO credibility also dropped globally. Transparency has, therefore, become a major issue for the world’s leading retailers and suppliers, which understand that with today’s shrinking planet, credibility is increasingly a business’s most important currency in an online, linked-up world.

“As consumers, we want guarantees for the products we buy, whether it’s food, beverages, beauty or hygiene,” noted Ignacio Gavilan, director of environmental sustainability at the CGF, in a blog post. “We are increasingly calling for transparency and effective responses in the event of any health-related problems, environmental negative impacts or labour issues. It’s vital that businesses establish efficient frameworks for transparency, traceability and information flow for management of their supply chain networks.”

Yet, public concerns about a product’s ingredients, effect on the environment and – more recently – the behaviour of companies involved in a good’s production further down the supply chain, have given rise to the ‘conscious consumer’ of the information age. Meanwhile, as corporations increasingly track vast amounts of data – which they are doing for brand protection, supply chain enhancement or to establish provenance – transparency is becoming a normality across large parts of the global economy.

In a recent post on Sustainable Brands’ website, Kelly Semrau, senior vice-president of global corporate affairs, communication and sustainability at SC Johnson, said, “In short, no one knows who to trust. For a business, this translates to mums and dads not knowing what brands they can trust to bring into their home. That’s why, at SC Johnson, we believe we must be transparent about our ingredients, our environmental initiatives and our supply chain. Transparency is a critical way for us to earn trust.

“We strongly believe it’s the right thing to do, and we hope other companies share this core belief.”

Consumers have low trust in companies – along with other institutions.
– Sarah Holloway, Futerra

Changing times

Companies are embracing transparency through self-defence, in order to protect themselves from unknown liabilities that might emerge in the future and cast the practices of the recent past in a bad light. In the UK, scandals involving creative corporate tax payments, zero-hour contracts and the misuse of consumers’ personal data have dominated headlines.

Meanwhile, memories of leading clothing brands being repeatedly caught using dubious sweatshops, or retailers’ food products becoming contaminated with horse meat, have made public attitudes towards overseas supply chains considerably less trusting. Talk of cheap goods has been replaced by fears of fraud and malpractice.

However, consumers are no longer passive recipients of goods, who unquestioningly get what they need once a week from the local shop around the corner. Businesses are now changing their practices because their relationship with customers is evolving in response, thanks to the rising power of shoppers to conduct their own online research into a product’s reputation, impact or safety.

This shift in power is driving positive change, with many businesses now disclosing standardised, comparable results and using new technologies such as blockchain to support their progress in bringing transparency to their extended supply chain. This also has the benefit of securing them against fraud or counterfeit goods, including the crime networks that operate beneath the radar. Unfortunately, consumer engagement in brand honesty is often very different to corporate transparency initiatives that are meant to reassure them.

“Consumers have low trust in companies – along with other institutions,” stated Sarah Holloway, UK strategy director at marketing consultancy Futerra, for a Consumer Goods Forum. “But they are looking for reasons to build that trust.

“They often have low knowledge of supply chains, and high expectations of our ability to see and influence where products come from and how they’re made. They want simple, clear answers to the issues that concern them – which are not always the same issues that interest companies – and they want that information to be available on the product in their hand.”

Where next?

When it comes to issues such as labour rights, sustainability or public health, governments and other actors increasingly expect corporations of all sizes to ensure full transparency throughout their supply chains, especially for suppliers and the sourcing of commodities associated with crime, corruption and violence. This is even the case when the companies involved are in a different industry to their end users, and the goods produced are seen as necessary and wholesome.

Expectations are also rising because the same technological changes that are altering relations between consumers and businesses are shaking things up between businesses and their supplier. Transparency in various industries is being transformed by the impact of rapid developments: from satellite imagery used by companies and investors to track the provenance of rare woods, and manage forest-related sustainability initiatives; to artificial intelligence (AI) that is already helping to integrate the virtual and physical worlds in so-called ‘cyberphysical’ systems; and big data – the misuse of which led to Facebook carelessly supplying information to private companies like Cambridge Analytica, fuelling huge political scandals. Businesses that don’t change to reflect these developments inevitably get penalised for it.

Working together and tackling wasted opportunities

While transparency remains high on the agenda, activists and insiders are increasingly arguing that more collective action between stakeholders is a better way forward than confrontation. “Emerging technologies like blockchain have the potential to bring greater trust and transparency to business transactions and operations, helping to root out suppliers with poor sustainability credentials,” explained Gavilan. “As blockchain works through a distributed ledger system, where all activity is visible to every stakeholder, there is an opportunity for products to be tracked throughout the supply chain.”

Since multiple entities, including businesses, governments and civil society organisations, all have an interest in the sustainability and ethicality of the commodities they consume, buy or sell, it makes sense that representatives from each sector are brought together via the joined-up mechanisms provided by new technologies like AI or blockchain. This collaboration will help to make supply chains more transparent and secure, rather than wastefully duplicating each other’s efforts out of mistrust.

However, industry forums also stress that companies need to find ways to collaborate with rivals when it comes to precompetitive areas throughout the supply chain, using data that is currently wasted.

The internet, IT and software are used daily to give businesses insight into their supply chains, but few think of combining their actions with their competition.

“Poor data handling, packaging waste and outmoded technologies can lead to spiralling costs and inefficiencies that span entire supply chains,” expressed Ruediger Hagedorn, the CGF’s end-to-end value chain director. “Ultimately, this impacts not just business performance, but also consumer trust.” Meanwhile, supply chains built for shipping bulk – often at predictable intervals with the lowest back-end cost – are increasingly unfit for purpose in a world where customers are willing to pay more for ethical goods, and that demand companies actively root out suppliers with poor environmental or human rights credentials.

Poor data handling, packaging waste and outmoded technologies can lead to spiralling costs and inefficiencies.
– Ruediger Hagedorn, CGF

With big data and AI causing a retail revolution by creating demand-led supply networks, bulk buying is also less efficient than targeted orders to suppliers. Moreover, such indiscriminate methods make it easier for goods of dubious provenance, or ones produced cheaply through unethical labour practices, to slip unnoticed into mass orders that effectively make it impossible to know where an individual material, part or finished product comes from.

As technology renders old forms of organisation or business practices obsolete, transparency no longer has to be a company’s enemy. Instead, it can be a way of building better connections, improving sales, minimising costs, and guarding against the kind of liabilities that can ruin an excellent brand reputation.

Spotting trends and customer insights

Amazon’s Carletta Ooton, vice-president for health and safety, sustainability, security and compliance, recently spoke about transparency in retail for the Consumer Goods Forum’s GFSI.

“Because customers have an existing relationship with our brands, they feel at ease contacting us. Amazon uses customer reviews as a valuable source of feedback. Customers love to share their honest thoughts and opinions in product reviews. This makes them a rich and abundant source of insights. Reviews are very useful to customers looking to make a buying decision. But they’re also invaluable to us for making informed business decisions.”

For Ooton, understanding customers is the key to acting quickly and preventing further problems. The company uses technology to check information from various sources to help investigations and identify potential product issues.

“We don’t just have to rely on customers calling a service number, or returning the item to the store in person. We may be able to uncover a potential problem long before it is discovered in another channel,” she stated, also alluding to how this maintains safety standards and best practices. According to Ooton, progress will come with thinking hard about technology and data.

Source: GFSI

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