The transparency paradox – and what it means for communication management

The debate about striking the right balance between economic progress, lasting prosperity, and social participation has produced a new philosophy for the business world: stakeholder capitalism. The new demands with regard to a company’s performance are creating higher expectations. Today, those expectations are increasingly intensifying and are being voiced not only by customers and interest groups from society at large, but also by exhaustive national and international regulations such as the Corporate Sustainability Reporting Directive (CSRD) and the resulting European Sustainability Reporting Standards (ESRS).

Systematically, more and more companies are consciously introducing transparency promises into their communication – something they expect to have a positive impact on their stakeholders. Julie Becker, chief executive officer of the Luxembourg Stock Exchange, recently took a clear stance on the matter in Germany’s Frankfurter Allgemeine Zeitung: “What it comes down to is a high degree of transparency in order to gain and secure the necessary trust of investors.”

Despite all the efforts aimed at creating maximum transparency, the target audience remains skeptical. In a recently released survey by Deutsches Institut für Vermögensbildung und Alterssicherung (DIVA), a German research institute that looks at asset management and pension planning, more than 41 percent of the respondents believed that sustainable investment was a “passing trend.” By the same measure, 58 percent of those surveyed in Brazil, China, France, Germany, India, the United Kingdom, and the United States as part of the representative Bosch Tech Compass 2023 said that “only a minority of companies truly take sustainability seriously.”

It would seem that increasing transparency, either voluntarily or in line with compulsory regulation, does not automatically have a positive effect on stakeholder acceptance. Through it all, there are a minimum of four interconnected effects that appear paradoxical, at least at first glance.

When coupled with a decline in the reliability of individual sources, the flow of information – which is virtually unlimited today in terms of availability and the range of sources – leads to a constant need for more information in order to clarify or even just further manage expectations and narratives. Rather than reducing it, greater transparency leads to a greater need for information.

What is more, the more transparent companies become, especially with regard to reporting, the louder the calls for a comprehensive corporate social responsibility vision apart from numerical targets that are often difficult for laypeople to fully comprehend. Transparency on facts gives rise to a need for meaning and purpose.

Because our view of reality comes largely from the media, multiplying the supply of information creates a complexity that can overwhelm or underwhelm recipients, depending on the matter at hand and the expectations. That leads us to another communication paradox: transparency can generate mistrust, especially when conveyed through the media.

At the same time, business and political stakeholders have for years found themselves mired in a complex mix of environmental crises coupled with accelerated technological progress and the increasing polarization of interests. In this situation, greater transparency acts as a catalyst of complexity. The outcome is a need for more and more targeted communication management in an increasingly transparent world – one that is also increasingly fragile with regard to social cohesion as a result.

To live up to the expectations that result from these paradoxes, communication management needs to grow and evolve into relationship management. In its latest Communication Insights, the Academic Society for Corporate Management and Communication therefore points to targeted “community management on closed media channels” as a tool for creating relationship capital that goes well beyond mere image.

When it comes to transparent reporting, many are quick to cite management guru Peter Drucker: “You can’t manage what you can’t measure.” In a transparency society, however, more information does not necessarily lead to better decisions and greater trust, as the German-Korean philosopher Byung-Chul Han explains. Creating a bond with stakeholders remains still the core task and most urgent responsibility of communicators.

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