Of all of the big forces coming to bear on companies - things like globalization, technology, and rising commodity prices - one of most powerful and difficult to manage is transparency. How much is too much...or too little? By Andrew Winston

Expectations are rising fast that companies should share everything about their operations, products, and supply chains. The leading companies, like Seventh Generation, are being brutally honest and sharing a tremendous amount of information about social and environmental performance.

Of course, transparency has its limits. As Seventh Generation founder Jeffrey Hollender, writing with Bill Breen, recently blogged, "No company lives entirely in a glass house, meeting the transparency challenge at every level of the organization. Some secrets - Coke's formula, Apple's design process - will most likely always remain unrevealed."

Companies face real challenges on how to handle this transparency beast. Some key questions:

• Who do you tell? Employees, customers, NGOs, partners, and so on, all have different needs. Which audiences matter for which information?
• What do you tell (that is, how much)? The answer might be different depending on your audience. But more isn't always better.
• How do you tell? In what venues and through what channels?
• When do you tell? Is now the best time? Once you open up, you can't go back - you have to show progress.

There are no clear answers to these questions - but it's important to ask them and think about it. Let's look at some examples in the marketplace and learn what we can about how companies are approaching this issue. Transparency is clearly trending toward a full value chain perspective, but let's break it down by value chain stages - within your operations, for your products, upstream (supply chain issues specifically), and even downstream.

Your Own Operations: How Much Do You Tell?

Transparency about your own footprint and impacts within your "four walls" is the cleanest in some sense. After all, you have control over your operations and can get the data (with some digging). Or course there's plenty of action on this front, mainly in the form of CSR reporting which we covered in a previous issue. Even the most eco-skeptical or beleaguered of companies, such as Exxon and Ford, are feeling the pressure to tell stakeholders more and "silence critics." But even companies with the best intentions on owning up to their impacts, can stumble on some nasty surprises. Eco-friendly outdoor gear company REI learned that its valued travel business was the biggest part of its carbon footprint. The company decided that travel to far-flung places was good for raising awareness about environmental issues and worth it (I feel for them on this one, as my travel footprint has skyrocketed since I started telling the Green to Gold story worldwide). But REI struggled with this conclusion publicly, staying transparent.

Talking About Your Products...on Your Products

Taking a cue from nutrition labels, a few companies are sharing information about environmental impacts on product packaging. Since we have no government guidelines for eco-labeling (yet), companies are taking varied approaches. Timberland kicked off the trend a couple of years ago with a "nutrition label" that includes triple-bottom-line information on energy use and "community impacts." Walker's chips in the U.K. went with just carbon data in a simple format. And HP felt the time was right to launch a new eco-label on printers and other electronics products sharing data on energy use and recycling (full disclosure: I advised HP on this project). Much of this is self-driven, but some openness is in response to new pressures from retailers like Tesco, which has set a goal of putting carbon information on 70,000 products - but has realized recently how hard that is and started with just 20. Other companies, like French supermarket Casino, are following Tesco's lead.

Going Outside Your "Four Walls": Supply Chain Info

Perhaps the hottest trend in transparency is to open up the black box of your supply chain and deal with whatever is in there. The voluntary vs. forced transparency line is heavily blurred when it comes to upstream data. The big leap forward here came when companies like Chiquita, and then Gap a number of years later, listed all their suppliers abroad with frank ratings on their performance - scary stuff for execs and lawyers in these companies. Patagonia has recently evolved this openness to tell the story of a handful of products, following them from raw materials to finished product, even launching a microsite to share the information online. Smart companies use openness and data as a leverage to change performance. Nike has shared data on its suppliers but also set up a publicly discussed program to slash energy use in the supply chain (click here (PDF) for some published results).

Your Customers: Should You "Name Names"?

A new source of transparency stories relates to customers (downstream in the value chain). This is a new one, but I'm talking about openness concerning who your customers are, how they use your products, and the total customer footprint of all your customers during the use phase of the product. It's really the flip side of supply chain. When HP released a list of its suppliers [find the final tally here (PDF)], that was upstream transparency for HP...but downstream transparency for the companies on that list. In a more direct way, IKEA is breaking some new ground with a new website to constantly survey customers on their environmental attitudes. This is probably just the beginning of downstream transparency. I envision companies sharing the total life cycle footprint of their products through all use, or end-of-life data on the amount of recycling or reuse (which some industries, like aluminum, have at the systematic level, but not by company or product). As they say, watch this space.

The Bottom Line

Keep in mind that once you open up, you can't really go back, and you have to show progress. You'll get a lot of credit for sharing info on say, your suppliers, but if you don't take action on anything wrong that you find upstream, you'll get called out on the mat for it. So tread carefully and be ready for more openness than ever before.

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Andrew Winston is founder of Winston Eco-Strategies and co-author of the best-selling Green to Gold. Read his "Eco-Advantage" blog here.

Note: This article has been adapted from Eco-Advantage Strategies, Andrew Winston's regular newsletter on how to build value and competitive advantage by innovating for sustainability.