27 February 2014
Sustainability exponent and systems thinker Peter Senge regards collaboration as “the human face of systems thinking”. Further, Senge asserts that the “core challenges of the Big Three global systems — energy and transportation, food and water, and material waste and toxicity — cannot be solved in isolation”. Sustainability then, in zoomed out context, requires collaboration among many people and many organizations.
Collaboration, especially across organizational boundaries, requires a high degree of transparency on the parts of all involved. Private industry, however, exists in a global economy fueled by competition. Survival and prosperity in a competitive world requires competitive advantage — that is, knowledge that must be protected. Clearly, balancing transparency with confidentially is a substantial challenge.
A post to this blog from a year ago looks at transparency and the technology that increasing leaves little alternative to embracing transparency. It’s worth another look:
Transparency – The Triumph of Technology over Privacy
From: 7 March 2013
An earlier post to this blog  suggested that surviving and prospering in this part of the 21st century is strongly influenced by a convergence of four seismic – scale phenomena:
>> Chronic Global Financial Instability
While it is convenient to discuss these four as separate phenomena, the truth is closer to the parable of the four blind fakirs who each describe an elephant, each in terms of his limited experience with some part of the elephant. For our purposes here, the elephant, of course, is today’s context doing for business.
Of these four phenomena, Transparency is the least familiar to most of us. Transparency refers to openness with all stakeholders in the conduct of one’s business — an antithesis of privacy. The Business Dictionary  defines Transparency as: “Lack of hidden agendas and conditions, accompanied by the availability of full information required for collaboration, cooperation and collective decision making”. While most of us would agree that this appropriate for publicly traded companies and public sector organizations, there may be hesitation in the case of privately held firms. But like it or not, Transparency is an increasing business reality. This post explains why you need to care.
A World of Ubiquitous Information
Transparency, voluntary or otherwise, has resulted from the triumph of technology over privacy. Transparency is a fact because we live in a world of ubiquitous information and access to that information. Consider the internet, corporate ERM systems, cell phones, miniature cameras, e-mail, on-line business transactions, social media (especially Facebook, Twitter and LinkedIn), as well as “Big Data” databases. Google your firm, or Google your competitors. The volume of information that comes back is really astonishing.
With Transparency, there are two primary points of view to consider: the view from within the firm, looking outward; and the view from outside the firm, looking inward. Both points of view focus on systematic risk assessment and risk management. Happily, this includes constructive risks (potential opportunities) along with constraining risks (potential limitations).
The View from the Inside, Looking Outward
When looking outward, ubiquitous information is worth consideration in at least these three areas:
>> Gathering information on industry news, technical developments, regulatory affairs, competitive activities, and other events which may present risks or opportunities to your firm.
>> Customer and marketing communications
>> Assessing Externalities
The first two of these, gathering information and marketing communications, are familiar enough. They don’t need discussion here. The third, Externalities, is less familiar to most. Externalities are also the key concept in relating Transparency and Sustainability.
The term “Externalities” refers to “a loss or gain in the welfare of one party resulting from an activity of another party, without there being compensation to the disadvantaged party” . For present purposes, one of the parties mentioned above is your firm. The other party may be another firm, an individual or group, Mother Nature, humanity or a large number of other possibilities. Regarding Sustainability, a manufacturer’s impacts on the natural world (including permitted discharges) and on humanity (especially nebulous  health effects) are often Externalities.
The View from the Outside, Looking Inward
Those outside the firm also have access to today’s avalanche of information. Further, the same channels that are used to discover information can be used to distribute information. Consider: mandatory disclosures to regulatory agencies, scorecard.org, bloggers, whistle blowers, YouTube, advocacy groups and the media’s 24/7 thirst for something to talk about. There is no place to hide the laundry, dirty or otherwise. Wiki Leaks demonstrates that nobody is immune.
Internalizing Externalities 
The best thing to do with the laundry may be to hang it in the sun. This means developing and diligently pursuing a zoomed out  risk assessment and management program that identifies externalities and acts to internalize them. To internalize is to accept responsibility and to take pre-emptive actions. “When the costs of externalities become sufficiently clear — and onerous — they manage to get internalized one way or another” . It isn’t just costs — your commercial reputation may also be at risk. On the other hand, internalized externalities may prove to be of significant benefit. Consider, for example, reducing greenhouse gas emissions (GHGs) — a nebulous health risk — by improving energy utilization efficiency (and cutting your power bill).
In short, the scope of your firm’s responsibilities will only increase. Your choice is to anticipate and manage risks, or to react after the bus runs over you.
Thoughtful comments and experience reports are always appreciated.
… Chuck Harrington (Chuck@JeraSustainableDevelopment.com)
P.S: Contact me when your organization is serious about pursuing Sustainability … CH
This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published on Wednesday evenings.
 Senge, et al, op. cit. page 221.
 See The Vision Thing, this blog, http://blog.jerasustainabledevelopment.com/2013/01/02/the-vision-thing.aspx
 From The Business Dictionary, http://www.businessdictionary.com/definition/transparency.html
 From The Business Dictionary, http://www.businessdictionary.com/definition/externalities.html
 The term “nebulous” is used here for its formal meaning of “not clear, distinct or definite”. It refers to the form or extent of the effect, not to the reality of its existence.
 Adam Werbach devotes an entire chapter of his Strategy for Sustainability to the use of Transparency, especially internalizing externalities, as a means of executing a strategy for Sustainability. See Werbach, Adam, Strategy for Sustainability, Harvard Business Press, Boston (2009), Chapter 4
 For more on zooming in and out, see Green and the Zoom Lens Mind, this blog,
 See Meyer, Christopher and Julia Kirby, The Big Idea: Leadership in the Age of Transparency, Harvard Business Review, April 2010. Available for download at: http://hbr.org/2010/04/the-big-idea-leadership-in-the-age-of-transparency/. This is a particularly useful article for understanding Transparency.