4 reasons why businesses should be more open

Many initiatives in recent years have extolled the virtues of governments becoming more open, but now the focus is turning to whether and how businesses will embrace openness.

Here are four reasons why I think businesses should take openness seriously.

1. Openness enhances stability and lowers risk

In a 2012 report, 70% of business executives said “their companies face extensive risk of corrupt activities when engaging agents/business partners in emerging markets and a significant number (46%) felt there was extensive risk when engaging suppliers”.

In the context of foreign bribery laws, companies need to know who they are doing business with – the real living, breathing individuals behind the companies with which they have relationships. Unfortunately, this kind of information can be far too challenging to establish (indeed, only a single country in the G20 – the United Kingdom – has so far agreed to put this type of information in a public registry) but it helps businesses enter into new markets where they may not already have an existing partner. It helps navigate supply-chain risks, and mitigate legal liability. These examples and more can be found in a recent publication of the Business 20 (the official corporate engagement group of the G20) outlining a set of use cases as to why this level of transparency around ownership and control is required.

2. Openness reassures companies, consumers and citizens

How can citizens know that they are getting the best deal? Let’s take the way governments spend money by contracting the goods and services of companies. Spending this money at the right time, in the right place, for the right purpose is crucial for taxpayers, the people who stand to win or lose the most. So companies who win public contracts must be those with the best bid – not the best contacts book.

Some governments are moving towards more open contracting arrangements, but businesses should see the benefits too. Were the entire procurement process more open and transparent and the relevant stakeholders involved earlier on, there will be less likelihood of a public backlash against inflated or opaque contracts and shady deals (especially as the trend towards privatizing public services continues to rise in many countries).

Recent Transparency International findings show that business executives are perceived to be the second most corrupt group of actors across Africa, after the police. The emergence of the private sector into second place should be of concern, not least since it shows trust between companies and citizens in some places is close to rag thin. Another Transparency International survey published in 2013 found that 54% of people around the world believe their governments are either largely or entirely in thrall to self-interested enterprises. Companies should tackle this head on by ensuring they are more open about their relationships with governments.

3. Openness lowers business costs

A growing number of cases show that when governments publish contracts, the quality and quantity of bids increase. Businesses have a better understanding of what is required; they can also make more targeted bids early on. It’s important to prove that there are no dodgy deals going on behind closed doors, which makes ensuring full transparency around who actually owns and controls the bidding companies crucial.

Using open systems saves time and money, both on the government side and the business side. South Korea’s e-procurement system, KONEPS, was found to have saved the public sector US$1.4 billion in costs and the private sector $6.6 billion, compared with the previous paper-based system. The time it took to process the bids dropped from an average of 30 hours to just two.

4. Openness demonstrates that businesses are part of the solution

Finally, being open to sharing more information and engaging with stakeholders in a more open manner helps demonstrate that companies can be part of the solution. Businesses are often seen, and sometimes deservedly so, as the perpetrators of corruption – but they can also be its victim. Responsible companies have a role to play in calling for higher standards, publishing information beyond the standards required of them, embracing openness and not fighting lawsuits to lock the information up.

So, how to open up?

It may take a while for the business world to see openness as something more than a compliance or administrative burden, but those that do so are sure to gain. Governments should find ways to incentivize companies to publish information such as their ownership and control structures. Maybe fast-tracking access for “open” businesses to investment finance or bidding opportunities within multinational supply chains or for government contracts could be investigated in more detail by both the private and public sector?

In the end, being open allows companies to prove they have nothing to hide. An open environment provides the private sector with a clear vision of what is expected and required of them in fulfilling contracts. It reduces risk, especially when entering into partnerships.

For governments, public spending is made more efficient, public services are improved and trust increases. Citizens, meanwhile, benefit from better and more appropriate services, and more effective checks and balances. It’s a win-win-win situation.