Transparency as a foundation for responsible business
According to the United Nations, transparency refers to ‘a process by which reliable, timely information about existing conditions, decisions and actions relating to the activities of the organisation is made accessible, visible and understandable’. In 2025, we will start to see the effect of both voluntary and mandatory sustainability disclosure requirements on corporates, as the heightened demand for transparency drives greater accessibility, visibility and explanation of business impacts for consumers.
One example is the EU Corporate Sustainability Due Diligence Directive (CS3D) which came into force on 25th July 2024. It will impose an extensive corporate governance duty on many companies based within the EU and beyond. Unlike most other sustainability obligations in force, this will not be a ‘complain-explain’ but a ‘comply or be liable’ obligation. In effect, the Directive mandates the longstanding approach of the OECD Multinational Guidelines for Responsible Business Conduct. CS3D aims to foster responsible corporate behaviour and increased transparency by establishing risk-based environmental and human rights due diligence. This includes identifying, managing, prioritising, preventing, mitigating, and eliminating adverse impacts of chains of activities on human rights and the environment by company’s operations, their subsidiaries and business partners. As CS3D requirements are cascaded across the value chain, it will illuminate for consumers both social capital and natural capital for the first time, with its dual focus on addressing adverse harm to the environment and human rights.
We also have the Taskforce for Inequality and Social-related Financial Disclosures (TISFD), launched in September 2024, which is the third taskforce related to sustainability-related financial disclosures, alongside the TCFD and TNFD. The TISFD recommendations will include a global disclosure framework, an organising framework for understanding key social and inequality-related concepts, and a body of evidence on impact and risk channels. It will also likely include guidance on metrics and targets, and on identifying and assessing material inequity and social-related impacts, dependencies risks and opportunities. Both will be helpful for CS3D implementation and reinforce the continued push for transparency, as well as fostering stronger and fairer societies and economies.
The widening ripple effect of transparency
Accessibility and visibility of information relating to the activities of corporates appears to be broadening as well as deepening in nature. The UK Duty to Prevent Sexual Harassment at Work, introduced in October 2024, is a clarion call for transparency and commitment to doing the right thing in business. The Act introduces a new duty on employers to take reasonable steps to prevent sexual harassment of their employees – referred to as ‘the preventative duty’. According to the updated EHRC technical guidance, the preventative duty is an anticipatory duty designed to transform workplace cultures by requiring employers to take positive and proactive steps to prevent harassment of their employees. This is not a tick box exercise and the question ‘how much is enough?’ must be continually addressed by leadership. The key will be to engage the business in a cultural movement whereby dignity, trust and transparency of behaviour in the workplace are viewed as intrinsic ethical principles and supported by all.
It is important to note that further reform is on the horizon with the duty to prevent sexual harassment being extended to taking ‘all reasonable steps" and third party protection due to come in across the board (not just in relation to sexual harassment) under the Employment Rights Bill (draft published October 2024).
For more insights also see our Global Consumer Trends 2025 article 'What steps should retailers be taking to stop sexual harassment of their employees?'
And let’s not forget the world of financial crime. Introduced as part of the Economic Crime and Corporate Transparency Act (ECCTA) 2023, the Failure to Prevent Fraud Offence is the third piece of legislation under which corporates can be found criminally liable, following the failure to prevent offences for bribery and facilitation of tax evasion which were introduced under the Bribery Act 2010 and Criminal Finances Act 2017 respectively. Similar to the offences for bribery and tax evasion, the Offence puts the onus on organisations to implement ‘reasonable procedures’ to prevent fraud. The key question for leadership is again, how much is enough?, when it comes to reasonable procedures.
Organisations will need to adopt a top-down, bottom-up change management approach that will nurture an open culture, a high level of psychological safety and a degree of vigilance through which fraud can be prevented. Key corporate values such as integrity, transparency and fairness will need to be integrated and consistently promoted to deliver desired behaviours and the right business outcomes.
The ever-widening scope of transparency
There are associated risks to bear in mind when striving for transparency. For example, there is a growing trend of class actions across the EU with claimant groups becoming more and more active and aggressive, with the broader transparency giving them far more data upon which to base their claims. Recently, the Competition and Markets Authority (CMA) has become more focused on advertising claims made by companies and individuals, with investigations into influencers relating to transparency of their commercial arrangements, and also on green and sustainability claims. And the ruling on the recent car finance mis-selling case in October 2024 stated that consumers needed to know all the material facts that could affect their borrowing decisions, including the total commission to car dealers and how it was calculated, in order to be able to consent to the loan. The judgment on ‘secret’ commission payments could have far-reaching implications for lenders, beyond those covered by a continuing investigation by the FCA.
What does transparency mean for Consumers in 2025?
Transparency and the implications for business are not going to go away. Consumers are expecting more information and transparency from brands. The shift towards increased visibility, understanding and accessibility of information will continue to move at pace, with consumers being more conscious of, and conscientious about, the environmental impact, ethical work practices and societal contributions of business. This will push consumers to balancing sustainability with the continuing economic pressures they are facing. This requires a breadth and depth of transparency from corporates that spans and permeates business models and is multi-disciplinary by nature, whether relating to financial information, data, workplace behaviours and conditions, environmental and climate impacts, advertising and/or supply chain dynamics.
If you have any questions or would like to discuss any of these topics and what they mean for you and your business, please get in touch with our Consumer sector and ESG Advisory experts.
