What is Brand Transparency, and Why Is It Important In 2022?

Many businesses know the term “brand transparency,” but not all of them understand just how essential it is in building trust with consumers and maintaining the health of your brand.

In this article, we’ll explore the definition of brand transparency and how it can affect your brand’s performance.

You’d be forgiven for overlooking this aspect of your brand. Even tech giant Facebook seems to forget the importance of putting transparency on top of their corporate branding list.

Indeed, the company has experienced a sharp decline in user trust due to data breach, failure to explain how it handles personal data, and the Cambridge Analytica scandal. This crisis of trust finally began to bite at the beginning of 2022 when, for the first time, Facebook’s total user base declined rather than grew.

Details on how your business operates — both externally and internally — can be easily disseminated to reach consumers nowadays, which means they are more informed than ever before. This has put more pressure on brands to embrace transparency.

This is especially true in the fashion industry. According to Fashion Revolution’s Fashion Transparency Index 2020, while 40% of brands published a list of their first-tier manufacturers, just 7% disclosed their raw material suppliers' details. Some brands even canceled orders and changed payment terms at the last-minute hour without noticing customers.

But pressure is starting to lead to change, as brands realize that transparency has begun to mean more to consumers and could, ultimately, be a deciding factor in whether someone makes a purchase or not.

So, what exactly do companies have to do to meet brand transparency criteria? And why is it so vital in modern business? Find the answers here.

What is Brand Transparency?

Brand transparency indicates how a brand shows itself to be open, genuine, and accessible to internal and external stakeholders. When a brand is transparent, it reveals information about its goals, values, prices, operations, financial statements, and even data that could be considered sensitive, like business impact on the environment.

According to The Consumer Good Forum, there are three elements of a transparent brand:

1. Corporate practice: The brand communicates its policies and performance clearly to experts (Or its answer to the question, “How is this company progressing?”)

2. Product proof: The brand communicates proof to customers (Or its answer to the question, “What’s the impact of what I’m actually buying?”)

3. Brand purpose: The brand communicates values and beliefs to customers (Or its answer to the question, “Does this brand align with my values?)

It is worth noting that brand transparency can mean different things to different brands, and it also varies depending on industries. But the main principle should remain consistent: being honest and transparent to the general public.

Why Does Brand Transparency Matter in 2022?

Consumers increasingly want to know more than what’s in your products. They want detailed information about your material sources, manufacturing process, corporate social responsibility, and so on.

If your brand refuses to provide those details, consumers will hunt for this information elsewhere and the chances are they’ll eventually get the answers their looking for. If your brand is a responsible one with nothing to hide, the details of your supply chain, ingredients, and work practices could now become valuable assets that help give your products or services the edge over the competition.

If your brand has secrets that you’d really not share with consumers, remember that a scandal could do huge harm to your brand — it’s probably better in the long term to be open and honest rather than misleading. Commit to making positive changes even if your current situation isn’t ideal and you’ll likely win over consumers who have misgivings about your brand.

Brand transparency can result in a range of different benefits depending on the type of brand. Read on to find out what you can get from practicing brand transparency.

1. Gain consumer trust

In this hyper-connected and-complicated world where fake news, data breaches, and privacy concerns are hot topics, whichever brand gains consumers’ trust will win the game. The way they can create this kind of trust is by showing transparency.

The latest survey from Sprout Social reveals interesting insights about transparency and trust:

• 89% of people say a brand can regain their trust if it admits to a mistake and is transparent about its steps to resolve the issue.

• When brands are honest and develop a history of transparency, nearly nine in 10 people will be willing to give them second chances after bad experiences. 85% are more likely to stick with them during crises.

• Brands that prioritize transparency in their social media marketing strategies earn great rewards—gains in consumer trust, increased sales, and a bolstered brand reputation.

• Consumer’s transparency expectations grow daily, and long-term relationships inspire long-term trust.

2. Increase brand loyalty

Transparency makes trust possible, and trust is an essential foundation for any long-lasting relationship. When a brand builds good customer relationships, it can build loyalty with their customers.

A study from Label Insights shows that 94% of respondents will stay loyal to a transparent brand. Approximately 75% of these same customers will be happy to pay more for products or services from a brand they believe to be genuine. But if the brand isn’t transparent, they have no tolerance for any mistake the brand has made and quickly switch to another.

When you’re honest about what you’re doing, you show your loyal customers that you value them, and you understand and appreciate the role they play in growing your business.

3. Grow the business

Strong customer trust and loyalty gives you competitive advantages, meaning you can charge a higher price or easily launch new products.

Polls found that at least two-thirds of customers will be willing to spend more from a transparent company. They’re more likely to spread the words about the brand, share positive experiences with friends, or leave good reviews. This leads to an increase in brand perception, helping drive further growth and success.

Transparency also helps a business thrive through fostering employee engagement and happiness. More than one study even emphasizes that company transparency was the number-one factor in determining workplace happiness. And when employees feel happier to work, they’re up to 20% more productive than unhappy employees. For salespeople, happiness has an even greater impact, raising sales by 37%.

4. Drive integrity

People often define integrity as doing the right thing even when no one else is around. It’s the ability to act with honesty and be consistent in whatever you’re doing based on the particular moral value or belief compass you have.

A company can’t achieve integrity without being transparent first. When it’s transparent, it establishes its own ground rules, values, processes, and policies and demonstrates that it has nothing to hide. But it’s not just about doing the talk—a brand shows a full commitment to delivering its values and promises to really prove its authenticity.

Examples of Brand Transparency

Here are three well-known instances where brands achieved transparency:

1. Lush

The cosmetic brand Lush sells natural and handmade beauty products. It’s one of the most successful digital beauty brands, mainly driven via social media, often in the form of ever-coveted organic, user-generated content. Lush aims to place authenticity in its products (“fresh, handmade cosmetics” and “the best, safest, and most beautiful ingredients”). Its products are also cruelty-free, meaning never tested on animals.

How Lush has built its transparency:

• Display policies and values on the company website, including ethical buying, tax avoidance, animal testing, modern slavery statements, and the Lush ethos.

• Disclose ingredients list, clearly differing between natural ingredients and “safe synthetics.”

• Show appreciation to the name and a drawing of the person who makes stickers the brand uses for product packaging. Lush limits the number of packaging types and designs products to be sold unpackaged, reducing materials use.

• Contract regular third-party audits of its animal testing policy, its ethical and environmental practices, as well as regular business audits.

2. Buffer

Buffer is a social media management platform offering solutions to help businesses manage their social media accounts. The company started its path to full transparency several years ago because they think it’s the right thing to do, as Buffer co-founder explains:

“There’s no benefit, we don’t do it to get press. We don’t do it to get people to join our company, to sign up for Buffer. We don’t do it for anything. We just think the best possible way we can develop ourselves as people is by making the company as transparent as possible.”

How Buffer has built its transparency:

• Share transparently at the individual level.

• Reveal each employee's pay rate by name, from co-founder to content writers, and the formula it uses to come up with employee salaries.

• Be transparent internally by organizing quarterly, monthly, or weekly all-hands meetings and making all email transparent and accessible to the full team.

• Establish the motto “Default to transparency,” meaning everything the brand does, its first instinct is to make it public and transparent.

3. Patagonia

The apparel Patagonia is a leader and an innovator in brand transparency. It has implemented the Footprint Chronicles project to tell customers how it sources raw materials, where the cotton is grown, and how products are stocked at its warehouse.

“They can see slideshows, videos, and interviews of the people behind the product. But more importantly, these slides, videos, and interviews discuss what is good about the product and what sucks. It’s the good and the bad. It’s total transparency,” Rick Ridgeway, VP for Environmental initiatives at Patagonia, explains.

How Patagonia has built its transparency:

• Use videos to showcase everything related to products, from sourcing materials to manufacturing, on its website.

• Invite feedback from customers on how it can improve the manufacturing process.

• Share information about its Action Works to find solutions for environmental crises, clearly define its mission, give back to communities, and more.

How Brand Tracking Can Help With Brand Transparency in 2022

Ultimately, whenever you make changes to your branding strategy or brand identity, you need to rely on brand tracking in order to see how consumers are responding to your efforts.

As you make changes to your brand in order to make it more transparent, you’ll want to know how these changes are being perceived by different types of consumers — and most importantly — your target audience. Brand tracking can allow you to measure your brand awareness, understanding, consideration, and preference over time, giving you a clear picture of your progress.

On top of this, if your brand is well known enough you can also gain insights into brand associations, to see whether consumers think of your brand in a way that aligns with your core values.

Time to get real!

Building true transparency for your business isn’t a one-off activity— it’s a continuous effort and takes (a lot of) time. You must practice it regularly and consistently to make it “default” in all aspects of your business operations and brand identity.

But once you have brand transparency in place, customers will trust you and show their loyalty to your business. They’ll probably stick with you forever and support you even when you make mistakes. That’s the key to your long-term growth that you’ll never want to ignore.

Updated by: Ash Lightfoot on 29.08.22