The Real Opportunity in Radical Transparency: B2B

The Real Opportunity in Radical Transparency: B2B

The GreenBiz debate about radical transparency has focused primarily on one question: Can business-to-consumer (B2C) transparency influence consumers' behavior?

At my organization, GreenBlue, we are interested in a different question: Can business-to-business transparency influence companies' behavior?

GreenBlue is a strong advocate for business-to-business information transparency as a framework for sustainability, and I hope that our perspective can be a valuable contribution to this conversation. For those who do not know our work, we seek to provide business decision-makers with science-based guidance for understanding the environmental impacts of their actions. We have demonstrated that this is possible, and we have also demonstrated that business decision-makers (perhaps unlike the average consumer) are able and willing to assimilate complex information to inform important (and far-reaching) decisions.

In the context of the recent GreenBiz debate about radical transparency, I believe the following three points are critical:
1.    Business-to-business (B2B) transparency is a powerful engine for sustainability.
2.    Real-life examples of B2B transparency as an engine for sustainability already exist.
3.    Contrary to comments on GreenBiz that the consumer website GoodGuide is a model of transparency, by our standard GoodGuide is a well-intentioned but not transparent endeavor, and it is counterproductive to hold it up as such a model.

B2B Transparency as an Engine for Sustainability

The types of decisions available to consumers are fundamentally different than the types of decisions available to producers, meaning that the challenges and opportunities in achieving radical transparency are different. We have focused on B2B transparency because we believe it represents a more significant opportunity to drive positive change for two reasons.

First, the bar is lower: Consumers demand simplicity in decision-making, while businesses expect complexity. Companies are already engaging in thorough decision-making processes as they select suppliers, source materials and invest in new markets, and, unlike the average consumer, they have the obligation and motivation to spend significant time researching these decisions. While it is easy for a consumer to give up trying to decipher the data about the toxicological risks of a single bottle of sunscreen, a company will not survive for long if it does not invest in thorough decision-making for a multimillion dollar product line.

Second, the potential benefit is much greater at the B2B level. Single consumer purchasing decisions have the ability to gradually change the marketplace over time. When a decision is made in the production phase, however, it will likely result in the industrial reproduction of thousands or even millions of units. So a single decision has a huge multiplier downstream, in terms of volume of product and scale of potential systemic impact.

As a result, we believe greater sustainability benefits are possible from transparency efforts that result in increased information sharing along business supply chains, especially efforts that utilize government or NGOs to independently audit information. Improved B2B information sharing will result in more transparency overall, including for consumers, but the demand for information will happen in a more detailed and rigorous manner.

A vast amount of useful environmental data already exists, but it is currently hidden from public view, concealed behind walls of confidentiality as proprietary business information. The companies controlling this data have legitimate concerns that its publication could compromise their business interests. As a result, much data collected by the private sector is not widely available to support and inform intelligent decision-making.

Many public and private sector organizations have discovered, however, that companies are actually willing to share this information in a controlled B2B context. At GreenBlue, we have been demonstrating that it is possible to design systems for data sharing that will "democratize" data without compromising business interests, and we believe that the democratization of data will promote an accelerated marketplace of innovation.

Successful Examples of B2B Transparency Already Exist

While there have been mixed results in B2C transparency efforts, B2B transparency is already happening in many innovative and successful platforms.

In some cases, these examples are driven by a single company, with Walmart as perhaps the best-known example. The company's sustainability initiative has required that all Walmart suppliers report detailed environmental information about their products and sourcing in a range of categories. For example, in 2006, Walmart launched the Chemical Assessment Review Program (CARP), which requires all suppliers of chemical, pesticide or aerosol products to submit full information about the chemistry of their products for assessment against Walmart's environmental and human health requirements.

In other cases, B2B transparency is driven by well-designed, multi-stakeholder certification programs.

For instance, in the forestry products sector, the Forest Stewardship Council and other forestry certification programs have successfully insisted on "chain of custody" tracking of fiber from forest to mill to product, and this B2B information sharing provides a platform for progress toward truly renewable management of our forest resources for future generations.

In consumer products, Green Seal, EcoLogo and other certification programs have created transparent frameworks for information sharing to allow assessment of products against clearly defined criteria, thereby also providing a mechanism for "simplified' communication to consumers.

In our own work, GreenBlue's CleanGredients project encourages green chemistry innovation, based on the democratization of toxicological data. Through CleanGredients, we have created an information reporting system that allows chemical suppliers to share toxicological information about chemicals used in cleaning products without compromising proprietary business information.

For example, rather than reporting the exact concentration at which each chemical becomes toxic to aquatic organisms, we allow a company to report whether it becomes toxic at less than 1mg/L, 1 to 10mg/L, 10 to 100mg/L or greater than 100mg/L, a level of resolution that is sufficient to differentiate chemicals and promote innovation. This level of resolution is also sufficient to allow chemical product formulators to make safer, greener choices when creating new cleaning products, and it rewards chemical suppliers who develop innovative products by giving them a place to market those products.

GoodGuide Is Not an Example of Transparency

While both Joel Makower and Daniel Goleman point to the consumer website GoodGuide as an encouraging example of radical transparency, I believe that GoodGuide actually reflects a remarkable lack of transparency, particularly compared to the genuine transparency already occurring in B2B contexts.

GoodGuide clearly recognizes that consumers expect simplicity in making decisions. But to achieve this simplicity, the website sacrifices transparency and pretends to a level of precision it does not achieve. GoodGuide purports to be able to compute "rankings" of products to a 1 percent resolution (from 0.1 to 10.0) based on a completely opaque (not transparent) series of algorithms and equations, many of which are based, apparently, not on product-specific information, but on company-level information. This is not transparency.

Transparency would be full disclosure of the algorithms used to compute the numbers. Transparency would be full disclosure of the underlying data. Transparency would be full disclosure of the level of uncertainty embedded in these calculations. Transparency would be a clear definition of the meaning of GoodGuide's claim to being a "for benefit" company (i.e., its difference, if any, in governance structure, decision-making, revenue model, and mission from a "for-profit" company).

Why is this so problematic? First, a consumer using GoodGuide could visit the site to purchase baby food, shampoo or a board game mistakenly assuming that there was exact scientific data about the performance of that individual product, when in actuality, the product was scored on the performance of the company as a whole on the basis of self-reported, unaudited information. This is misleading to consumers. Second, what would motivate companies to actually make relevant data available to consumers if they are already gaining business from GoodGuide without submitting to any rigorous assessment of their operations?

GoodGuide deserves praise for its ambitious goal to empower consumers with information in an easy-to-use format, and good people are behind the effort working to make the site more rigorous over time. But until significant improvements are made to the site's methodology and there is clarity and honesty about the accuracy of the ratings, it should not be held up as a model of transparency.

I share the commitment of many in the public and private sectors to use radical information transparency as an engine for sustainability innovation. It is vitally important, however, not to confuse weak (data-poor) transparency with strong (data-rich) transparency. We may discover that a focus on strong B2B transparency is a more powerful long-term incentive for radical transparency than a focus on weak B2C transparency. Looking forward, I am optimistic that our collective efforts will continue to increase transparency along entire supply chains, so that businesses and consumers all have access to the credible data they need to make better decisions.

Jason Pearson is president and CEO of the research and design institute GreenBlue.

Gregory A. Norris, the founder and director of international lifecycle assessment institute Sylvatica, also contributed to the dialogue on radical transparency. His comments are available here.

Image by vierdrie.