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Imperial College Business School

Would transparency have saved Facebook from scandal?

 

Yuting Lin and Professor Andreas B. Eisingerich have found that, when it comes to buying things, consumers are more interested in transparency than social responsibility

 

We live in a cynical age: the public no longer believes businesses when they talk about being “eco-friendly”, we’ve seen too many false claims and we dismiss them as greenwashing. When it was discovered that the information from over 87 million Facebook users might have been used in an attempt to influence voter opinions, there was a public outcry. It emerged the people affected were unaware that for-profit companies were selling their data and politicians were buying their personal information. If Facebook had been open about how it used such data in the first place, could it have salvaged its reputation? Would we be less cynical?

We’ve uncovered some surprising results in our research, which will interest anyone who’s trying to stir the public social conscience.

We’ve discovered that, if a business is transparent and open, it’s more likely consumers will in turn behave ethically and responsibly. By transparent, we don’t just mean, say, publishing a list of ingredients – we mean being up front about any negative company news or poor consumer reviews (for instance) and making that information easily accessible. It means owning up if working conditions or supply chains aren’t what they should be.

Even more surprisingly, we found that, if a company is obviously open and concerned about the future – and how its actions will have an impact on our lives in the years to come – then we’re even more likely to become “better” consumers: more concerned about the future of the planet and generations to come than, say, getting the best price regardless of the human or environmental cost. Google, Tencent, and Elon Musk’s Tesla Motors and SpaceX are prime examples of such future-facing businesses.

To be clear, this work isn’t about selling more goods or doing more business. In our research, we’ve only asked how people might make buying decisions as consumers more generally, not whether they’d buy more goods from a certain company. We haven’t looked at how these issues affect companies’ bottom line, and we haven’t tracked people to see if they practise what they preach – we’ve taken their behaviour at their word.

Interestingly, if a company is seen as low in social responsibility and consumers are not very involved in the consumption of its product (such as when buying a coffee), transparency backfires. Specifically, consumers are less likely to engage in sustainable and responsible consumption.

On the flip side, when consumers are interested in a purchasing decision and care about it (such as when buying a mobile phone), we find that transparency always pays off – regardless of whether a company scores high or low in social responsibility. We find this result intriguing: it shows that transparency is potentially more powerful than we expected.

If you look at companies such as Amazon or Apple, they don’t disguise the fact they don’t have wonderful working conditions for many staff. But they are also perceived as companies that are focused on the future. Could this account for their enduring consumer success? That’s another avenue of research.

With all this in mind, it seems Facebook might have been better off not trying to shirk responsibility for its actions (or lack thereof). Consumers may well have been more accepting if the company had been more transparent about how it used their data.

The full version of this article can be found on IB Knowledge.