Posted in: news
12th April 2019
By Jameela Raymond, Cause Strategist, Governance & Transparency
We live in a world where information is power—and information is also key to money. To keep power and money clean, recent years have seen a swell in calls for clarity over the ways that business and government work together, including what information they share. Despite widespread expectations that our political leaders will act in the public interest, and that companies will follow their own codes of conduct and commitments to values, the reality can be quite different. All it takes is a few ill-intentioned companies or corrupt public officials to bring about distrust across communities, citizens and consumers.
At The B Team, we’ve long supported effective and sustainable action towards meaningful corporate transparency, and we’ll keep doing our part to put an end to anonymous company ownership and to open up public procurement processes. But we understand that sharing information isn’t always easy. Governments and companies alike have ranging, legitimate concerns about the risks of disclosure and how they weigh up against the proposed benefits. Those who are resistant to publishing beneficial ownership information raise risks to individual privacy. Contracting stakeholders flag the importance of protecting commercially sensitive information. These challenges are valid and often daunting, but can also be overcome.
That’s why we’ve been working with partners to confront those concerns head-on to bring more businesses and governments on board with the transparency agenda. We’ve joined a Working Group on Commercial Transparency in Public Contracts, set up by the Center for Global Development (CGD), to help find middle ground between the realities of commercial sensitivity and the increasing demands for transparency. And together with OpenOwnership and The Engine Room, we’ve completed recent research that considers whether the public interest for beneficial ownership information outweighs the right to privacy.
In a world where companies are not just accountable to their current shareholders, employees, communities and society-at-large, but to the next generation of stakeholders, these two resources present significant opportunities for progress and acceleration toward transparent markets.
Transparency in Public Procurement
Public procurement, by which government and business work together to deliver critical services and infrastructure to society, is known to face huge corruption risk. Large contracts involving significant financial flows are vulnerable to bribery and money laundering, but even with smaller contracts governments and the public may not know what they are buying, who they are buying it from and whether they are getting the best price. Without transparency in public procurement, the health of communities, and their citizens, are under threat. Not to mention, opacity can deny commercial opportunities from companies providing essential expertise, while increasing the cost of business and reducing the space for innovation.
By opening up, governments can ensure that their public procurement systems provide a level playing field for competition, save the tax-payer money, increase efficiency for all and prevent corruption.
Transparency and accessibility over data at all stages of the procurement process is important to ensure the whole structure can be scrutinised. However, the issue of publishing the contract itself raises a specific question: whether, and what, information can be exempted or redacted from publication for reasons of commercial sensitivity. How we measure whether the public interest to publish outweighs the commercial interest to redact remains inconsistent, though.
The Principles on Commercial Confidentiality in Public Contracts seek to set a common benchmark for information that should be redacted from a contract on the grounds of commercial confidentiality and how the redaction process should work. They were developed with direct business input and cover:
- Transparency by design. Disclosure should be the default position for all government contracts.
- Exceptions in the public interest. Redactions on the basis of commercial sensitivity are justified if the public interest in withholding information is greater than the public interest in publishing.
- The need for a clear and robust process. Governments should support suppliers with guidance systems to facilitate publication, ensure that redaction is time-limited and develop oversight mechanisms to compensate for information withheld from publication.
The Principles have huge value for both companies and governments. They offer a common sense, reflected solution to a thorny issue within contract transparency, produced in a multi-stakeholder process. And as with any attempt at bringing criteria for decision-making to a complex environment, the true effects can only be seen once the approach is widely adopted—which we’ll help foster alongside CGD, Open Contracting Partnership, The International Association for Contract & Commercial Management (IACCM) and others.
Transparency in Company Ownership
For those who oppose company ownership transparency, privacy has also become a cornerstone argument. Yet where contract information involves data on commercial activity, company ownership information involves data on individual people. The privacy concern here, with regard to company ownership, is that publishing this data may interfere with that individual’s data protection and right to privacy.
It would be reckless to dismiss a person’s right to privacy simply because they own a company, but it would also be naive to believe that everyone is doing business with good intentions. There are well-documented examples of anonymous company ownership enabling vast sums of money to be laundered internationally, as opaque corporate vehicles are used to steal money from one jurisdiction and hide it in another. With the World Bank and the United Nations Office on Drugs and Crime (UNODC) research indicating that over a 30-year period, 70 percent of the biggest corruption cases involved anonymous companies, it’s easy enough to argue that the public has a legitimate interest in identifying which companies are not playing by the rules.
Privacy or Public Interest: Making the Case for Public Information on Company Ownership takes on the legal aspects of the privacy argument, dissecting the meaning of ‘privacy’ and the principles of data protection and interrogating the need for beneficial ownership transparency through that lens. The results of this analysis show that transparency over beneficial ownership information would not interfere with individual privacy rights if the disclosure is legal, legitimate and proportionate. A longer, technical paper with the full research and findings will be launched in mid-May 2019.
There are no doubt many more obstacles to come on the road to transparency, but efforts and assessments like these are invaluable to help us identify challenges and work across all stakeholders to seek solutions. Both resources should be drawn upon as experience- and evidence-based foundations for how and why transparency should—and can—be the new normal.
We’ve seen B Team Leaders already leading the charge on transparency from pledging support for the open contracting agenda to proactively disclosing their beneficial ownership information, but we know this is not enough. They’re also working to support other companies to do the same—helping meet the evolving expectations of today’s, and tomorrow’s, stakeholders. With these resources at hand, we look forward to bringing even more of them with us on this journey.