The publication of gender pay gaps and sustainability reporting are part of a new era of regulatory disclosures for Australian businesses. How can a commitment to transparency in business go beyond compliance to become both a driver of trust and engagement?

In the early 2000s, global retailer Patagonia learned it had unknowingly contradicted its environmentally-friendly ethos by using toxic chemicals in its water-repellent jackets. These per- and polyfluorinated chemicals (PFCs) were known for polluting rivers and increasing cancer risks. 

How did this information come to light? Not through a sleuthing journalist or a disgruntled ex-employee looking to blow the lid off company secrets. Quite simply, Patagonia owned up. 

In 2006, it began researching sustainable alternatives and openly kept its customers and the broader public abreast of its learnings and progress. On its blog, the company wrote that becoming PFC-free without compromising performance was “harder than imagined and provided important, humbling lessons”. 

The article included a detailed timeline and key milestones, from kicking off its R&D trials for PFC-free jackets in 2011 to realising its alternative chemical (known as C6) was “just as damaging” as PFC in 2017, setting its efforts back by some years.

“What makes transparency effective and trustworthy is when organisations are very explicit about the steps they’re taking to address issues,” says Carol T. Kulik, Bradley Distinguished Professor, University of South Australia.

It also helps when timelines are realistic, as change of this nature tends to take much longer than people expect, she says.

“Any major culture change takes at least 10 years. If you’re trying to change the message, if you’re trying to get the organisation to be sustainable, if you’re trying to be gender-inclusive, it’s a 10-year effort to get people on board.”

She refers to the Workplace Gender Equality Agency’s (WGEA) 2024 publication of private sector pay gaps as an example.

“Back in February [2024], when WGEA first released the pay gap data, I thought the media focused too much on the low end – ‘Here are the employers with these really big pay gaps.’ But it’s important to celebrate the organisations with small gender pay gaps because it means they’ve been doing something right for a decade. Transparency really is only the first step.”

What this article covers:

• The changing ecology of business
• Radical transparency versus meaningful transparency
• Proactive versus reactive transparency

Need to read this in a hurry? Skim the ‘idea in short’ sections to get the gist quickly.

The changing ecology of business

Idea in short: For listed companies, transparency has been a focus since the rise of corporate governance and investor activism in the 1980s, but today’s business landscape prioritises not just what companies do, but what they stand for. While radical transparency can erode trust, meaningful transparency – providing relevant information to support informed decisions – can be a powerful enabler of trust and corporate integrity.

Corporate transparency is nothing new. Financial transparency, for example, is non-negotiable, especially for listed companies. In ESG terms, we’ve been talking about the need for transparent dealings since the corporate governance and investor activism movements in the 1980s, when activist investors would purchase stocks to agitate for ESG changes.

Ethical and activist investors are still active today, but the landscape is different now.

“The ecology of organisational life has changed in the past 15 to 20 years from what it was for the past 100 or so years,” says Dr Simon Longstaff AO, Executive Director of The Ethics Centre.

“Businesses used to be defined by what they did. If you developed a new product or service, and were first to market, you would secure an advantage in the marketplace,” he says. 

“Those days have ended – a competitor can replicate what you’ve done in a heartbeat. The new ecology is where people distinguish themselves not by what they do, but by what they stand for.” 

Where employers used to benchmark their organisations in comparison to others, now the more important metric is: how much are we like what we claim to be? But being transparent for the sake of it is unlikely to reap benefits. In fact, it can be damaging. That’s why it’s important to distinguish between radical transparency and meaningful transparency, he says.

“Radical transparency is where everything is visible. Paradoxically, it can destroy trust, which is one of the most important things businesses need.”

For example, US-based investment firm Bridgewater Associates has faced criticism for its cut-throat approach to transparency, including displaying a list of the company’s ‘worst managers’ during a company offsite. 

Meaningful transparency, on the other hand, can be an enabler of trust.

“It recognises where people have a need for information in order to make informed decisions,” says Longstaff.

Proactive vs reactive transparency

Idea in short: Businesses gain greater credibility when they embrace transparency voluntarily rather than as a regulatory obligation, yet many fail to capitalise on this. Businesses looking for a reputational uplift from their transparent dealings should consider enhancing their communication to internal and external stakeholders to make their ongoing efforts clear.

The sheen of being a responsible corporate citizen can fade when transparency is forced on a business versus when it does it of its own volition, says Vanessa Paterson, CEO and Principal Consultant at Checksfield Consulting, and consultant with Diversity Partners.

“To avoid being accused of ‘pink’ or ‘greenwashing’, it’s important you’re doing it not just because you have to.”

This is important to consider in the face of new regulatory changes. 

For example, as of January, new laws have been phased in requiring large organisations which meet two out of three criteria ($500+ million in consolidated revenue for the fiscal year; $1 billion in consolidated gross assets by EOFY; and 500+ FTE employees) to provide information on their organisation’s climate-related risks and opportunities.

See HRM’s visual explainer of mandatory reporting standards here.

As of earlier this week, WGEA expanded the publication of gender pay gaps to include CEO remuneration, average gaps as well as median, individual rather than aggregated gaps for a group’s relevant employers, and public sector pay gaps.

But businesses expecting more ESG kudos to flow from the new rules may be disappointed, says Kulik.

“Whenever an organisation takes action, there are two attributions stakeholders can make: either the organisation is doing it because it ‘wants to’ or because it ‘has to’. Organisations get more credit when they get the attribution ‘because they want to’.”

Kulik’s research on trickle-down effects in gender and leadership provides an enlightening example. 

“When an organisation has a higher-than-expected number of women in senior leadership roles, everybody thinks, ‘That’s a place where women can succeed. I’ll send in my application.’ Employers get a lot of credit for that,” she says.

But that credit started to dwindle as soon as the ASX required organisations to report gender composition in senior leadership.

“Even the organisations that are sincerely motivated to do this don’t get the credit anymore because the public thinks, ‘You had to do that.’”

Organisations that were making strides in the gender pay equity space prior to WGEA publishing gender pay gaps may experience something similar, she says.

As transparency becomes increasingly mandated, businesses looking for a reputational lift from a more proactive transparency stance may need to dial up their communications outside mandatory reporting periods. This is especially important when things aren’t going right.

“The new ecology is where people distinguish themselves not by what they do, but by what they stand for.”  – Dr Simon Longstaff AO, Executive Director of The Ethics Centre

It’s important to go above and beyond in communicating your organisation’s approach to solving issues, especially in instances where a company’s actions may be perceived to be, or in fact are, in direct conflict with its professed values. 

Failing to do so means stakeholders don’t see the full picture. Paterson uses the example of employer statements that go alongside each organisation’s gender pay gaps on WGEA’s website to provide further context and information about the reasons for their gap.

“These are voluntary. But if when the numbers are published you don’t provide an accompanying statement, that vacuum of information will get filled with everybody else’s assumptions and misunderstandings.”

Focusing on a subset of national data, Kulik found that less than 20 per cent of South Australian employers included a statement with their 2024 pay gap data.

“One of HR’s responsibilities should be about transparent communication. If you’re worried you’re not getting enough credit for the good things, remind people – ‘We’ve been working on this for 10 years. Look at the progress we’ve made,’” she says. “You’d think employers would be very proactive on this front, but I don’t think they are.”

Learn how to navigate stakeholder resistance when dealing with sensitive topics such as transparency in business with AHRI’s short course.

Everyday transparency

Idea in short: Radical transparency may not suit most organisations, but ‘everyday transparency’ – clear communication about processes, decisions, and long-term strategies – can build trust and drive meaningful change. By auditing existing practices, addressing discrepancies and proactively sharing the rationale behind key decisions, businesses can foster employee confidence and demonstrate genuine commitment to progress.

Most examples of radical transparency, like US-based social media management platform Buffer, which publishes its employees’ salaries externally, won’t suit the average organisation.

“Employees might be happy to just know what the salary ranges are,” says Kulik.

Indeed, it’s that ‘everyday transparency’ that’s likely to drive change in the majority of organisations. Oftentimes, employees just want to know how and why certain decisions are made, even for seemingly mundane things, like how promotion pathways are determined, how budgets are allocated, or why a company might choose to stay quiet on a controversial social issue.

To determine where you might introduce everyday transparency, Kulik suggests an internal audit to understand where you’re starting from and the narrative you have to tell. This could, for example, explore the reasons for your less-than-ideal gender pay gap or exit interview data, to learn more about high turnover rates.

“You want to know where the discrepancies are so you can explain them before an employee comes knocking on your door with questions.”

Next, she suggests looking for small ways to provide transparency around processes.

“In general, I would say transparency is about the process, procedures and criteria – those things are much more important to employees,” she says.

It’s also worth letting stakeholders in on your specific plans to address issues in your business. Paterson uses the example of an organisation in a male-dominated industry that had a lot more women in the lowest paid quartile than its competitors.

“On the surface, it looked like it was getting more women to work in admin roles, but what it was actually doing was much more strategic than that.

“There were few women in the marketplace for some of the more highly-paid specialised roles, so its strategy was to recruit women at entry-level and develop them through the organisation. As those women’s careers progressed, they were able to step into higher-paid roles. It was a deliberate strategy to get more women into the leadership pipeline.”

Embrace the opportunity

While leadership transparency can be a highly effective method of cultivating trust, it can also have a downside.

Back in the 1980s, corporate culture expected “moral muteness” from managers, who avoided discussing moral issues at work, says Longstaff.

“What they found was that managers were making ethical decisions, but pretending they weren’t. They’d dress up their decision in terms of the bottom line or strategy because they were embarrassed to use the language of values and principles. They thought people would contest it, or that they’d be thought of as ‘soft’.”

That meant employees often came up with their own (incorrect) reasons that a leader had made a certain decision.

“Nowadays, it’s incredibly important that leaders say: ‘Here’s how we thought about it. These are our reasons, attached to our core values and principles. Now you can see the coherence with which we’re doing things,’” he says.

Transparency can be seen as a threat, but it is actually an opportunity. It’s an opportunity to gain trust, to leverage the gains to come off the back of humility and authenticity, and to differentiate yourself in a competitive market no longer solely defined by what you do, but how you do it. 

A longer version of this article was first published in the Feb/March 2025 edition of HRM Magazine.