What Does Brand Transparency Actually Mean and Why Does it Matter?

An unimaginative way to approach a business is for profit only. Because buyers are louder, and our cultural climate and discourse change consistently, there’s more pressure on brands to be holistic and thoughtful in their process and in establishing a point of view. Customers now ask: What does a business intend to do to change or better the world and how transparent will they be about it?

But what does transparency look like and why does it matter? In commerce, as in life, transparency is linked to openness and honesty. Brand transparency is a broad term with weighty influence. Customers are more discerning; basing purchasing decisions on a personal value system that, if not aligned, will mean taking their money elsewhere. 

Brand transparency is both tangible and not. It is concerned with authenticity: Less Photoshopped models or influencers, for example, and a strong preference for “real” in both marketing and communication. According to a report by Stackla, 86% of customers picked authenticity as a key reason to buy from a brand (or not). 

Brand transparency also manifests through conversations about business practices and histories. Brands that are willing to pull back the curtain to reveal decisions about product development, diversity hiring, and more are far likelier to have increased customer trust. And trust matters: an Edelman survey concluded that 81% of buyers needed to trust a brand in order to buy from them. 

Nearly 86% of Americans say transparency is more important to them than ever before. So how did we get here and what do brands need to understand? Here, we will unpack when and why brand transparency became relevant for both brands and consumers, where it is showing up, and how millennials began the pursuit for clarity but now Gen Z is driving it.

When did brand transparency become relevant? 

It may seem like 2020 was the year brands really showed up and showed out to support social and cultural causes. Black Lives Matter certainly influenced that in the summer. The ongoing global pandemic and the uncertainty it raised for millions of people impacted all of us, too. But the trend toward brand transparency started earlier in the 2010s because millennials became the driving buying force dictating how brands act and adapt. Later, we’ll get to how generational voices shift and impact this conversation but millennials—the first modern generation faced with a recession and job and climate crises—became a lot louder about how businesses function and what their roles in our world end up being. 

Social impact pillars have become the starting point for how millennials buy, and where brands can look to understand the core of this shift in buying. They include: solving for or improving societal problems; prioritizing impact; transparency on all efforts; and inclusion of customers on social media.

These pillars began to take a firmer shape in the market but a survey from 2016 reported on by Inc. more concretely establishes how it manifested. Buyers wanted additional product information: 56% of customers surveyed trusted brands more if they provided more information about what goes into products. Then, considering alignment with a brand had a financial payoff or risk:

A whopping 73% of respondents said they were willing to pay more if they were assured transparency, while 39% would switch to a new brand if they promised more clarity and openness. 

Millennials’ value systems shifted from that of their parents and older generations. They wanted to know more because their investment mattered. They ultimately end up asking: can I trust you? This conversation coincided with technological acceleration and a digitally savvy generation. Soon, social media and digital spaces became a place where buyers could buy their products and converse about the issues that mattered to them directly with the brand. 

How and where brand transparency shows up 

It’s no secret that the internet—and by extension social media—literally changed the commerce game. Access to different cultures, perspectives, ways of buying and selling, all of that impacts why we think the way we do and how we do business. 

But let’s start with social media. It is a bit of a figurative chicken and egg situation: did a brand adapt because of something on social media or did social trends change because of a brand? 

The answer is both. 

Beginning with Instagram, as of today, the app has over 1 billion active users and it is most popular with folks aged 25-34. About 71% of businesses use Instagram, based on a 2018 study, and over half of users follow at least one brand. In short: Instagram is the perfect medium for a lot of brands to posit both professional and social conversations alongside the products they sell. About 81% of people believe a brand needs to do something on social media to address current issues, yet only 15% believe brands are very transparent there. 

Brands have needed to pivot strategies in a short period because of how discourse moves. Today, people crave authentic interactions on social media. That can be credited to movements around body positivity, embracing fat bodies, prioritizing and highlighting folks with disabilities, and many more. The global pandemic accelerated this trend around people’s lived experiences, signaling a massive shift away from aspirational content. Reality sinks in, reminding us, too, that there are some conversations that can’t be avoided. 

Social media has become an entry point for many into difficult conversations. When the Black Lives Matter protests of 2020 erupted all over the world—and even after the conviction of a police officer in 2021—brands had their hands forced to participate in these important, ongoing conversations. There was, of course, the misguided black square attempt that began as a call from the music industry but was widely adopted by the average user on Instagram. 

Remaining status quo, focusing on brand voice only and remaining silent otherwise, is no longer an option. But buyers want their brands to be discerning, informed. Supporting every single cause is a no-go, lest they be viewed by buyers as inauthentic and opportunistic. Tackling what matters most to brand values encourages buyers to respond to it. 

Before any attempt of solidarity, customers demand brands actively take a look at the way they do business. Disclosing struggles and past mistakes asserts control over the narrative, yes, in case customers go digging themselves if transparency isn’t evident. Everlane, for example, went through a very public growing pain, having to reconcile its “radical transparency” with day-to-day realities with employees. A different way that could have been handled is an example from the athleisure brand, Girlfriend Collective. The brand posted on its social channels about diversity at the company, titling it “Full Transparency,” which plainly established where it has to improve its hiring. 

Another key conversation, running alongside diversity and identity, is climate action. Sustainability is one of, if not the most, important topic to take hold of businesses around the world. Yet, Vogue Business posited that transparency might be a dead-end in fashion in particular. 

Sustainable efforts, while looking at Fashion Revolution’s Transparency Index, are tepid. Some brands are deploying manifestos that try to improve transparent communication with buyers on their sustainable practices. Transparency is necessary for holding brands accountable for more ethical practices but it is simply surface level if a brand decides to be selective on what it does or does not disclose, and how. 

Herein lies the quandary for many brands: It hurts the brand to be silent but it also hurts them to be surface-level and it might hurt them to disclose everything. As time goes on, and cultural shifts inevitably occur, customers’ engagement and purchasing power will still likely align with a value system that matches their own, especially as Gen Z continues to reign. 

It’s simply measuring risk: does one include customers on the journey or not? 

Millennials started the trend but Gen Z is driving it 

It seems quaint thinking now about the initial difficulty of marketing and appealing to millennials with picky Gen Z driving a lot of current effort. But millennials, the first most diverse generation of this modern century, began to demand more in the face of important cultural shifts.

It’s crucial to understand that millennials wanted to be understood and seen. Perhaps this is where the trope of the selfish millennial comes from. But theirs is a transaction that does not and cannot exist solely in the form of profit or loss; there is a deeper emotional connection between this buyer and what they purchase. Millennials value experiences, purchases that make them feel good, peer-generated endorsements, and relevancy when it comes to buying. That ethos is the foundation for the generations to come. 

With Gen Z, who make up 32% of the global population and are set to wield $44 billion in purchasing power, they expect brands to do everything millennials spent years asking brands to do: be inclusive, diverse, and socially and environmentally conscious. Brand transparency to them captures all of those elements. A brand cannot truly be transparent without touching these topics. 

Over 60% of Gen Z buyers prefer content with real influencers and people or celebrities. They trust in word-of-mouth and peer-reviewed content over journalism or marketing strategies. About 69% of Gen Z buyers are likely to buy from a company that publicly contributes to social causes. 

This generation intuitively seeks comfort and refuge online; sharing their thoughts and feelings with relative ease. These intangible components are important to understand when it comes to marketing to Gen Z. They don’t want inauthenticity or to be spoken to as novices. This generation is feeling the anxious weight of the world on them with climate change at the center of their problems, and catastrophic news cycle after news cycle isn’t helping. They crave space to connect with brands that have humanity inextricably linked to them, not large, faceless corporations.

As Gen Z grows up, their values may shift, but it seems like this is the foundation of their shopping habits. Industries that aren’t tapped into Gen Z now can at least see the route this group is taking as they ask for change. It is unlikely that impulse will go away as they begin into age into adulthood and beyond. 

Why does brand transparency matter now? 

It is very unlikely that customers are going to stop caring anytime soon about brand practices, the real ins and outs of product development, and how corporate social responsibility is prioritized. Customers are invested top to bottom. Ultimately, this is a good thing, for brand loyalty and retaining buyers, and, hopefully, the world. It takes time and effort to understand why this is important now and to adapt accordingly. 

A brand is not a person. But it is a reflection of the founders, employees, and customers who invest in the product or a brand’s community. Humanizing, or even softening, a brand to amplify the real experiences of those who work for or buy from a brand is more important than ever before. As aspiration gives way to reality with a resurgence in authenticity, brands must adapt. It’s no longer acceptable to simply pivot with the times. It is important to understand and metabolize the cultural atmosphere with which one is doing business. 

Transparency, as it stands, is a crucial way to maintain a relationship with customers.