A Crystal Clear Opportunity: Transparency Improves Business and Sets Your Firm Apart

By Lindsay Paturalski and Jessica McManus Warnell

It’s clear by now that ESG (environmental, social, and governance) factors are part of the 21st century business landscape. You can’t stroll through business or investing sites without coming across the term, but a simple commitment to ESG is not going to be enough for companies to justify their social license to operate. Consumers, especially Gen Z who have considerable market power, have gotten savvy to ‘greenwashing’ and ‘social washing’ by major companies and are demanding more transparency. At the same time, the U.S. regulatory landscape is set for a sea change as the SEC finalizes its rules on greenhouse gas emissions (GHG) and climate-risk reporting and assurance. And AI-powered search engines are giving consumers, government regulators, and other stakeholders more insight into how a company operates and the difference between their stated claims and their real-world actions.

Earth in Green Crystal Ball in a Green Forest with Sunlight

All of these forces have created a tremendous opportunity for ethical managers and responsible firms to lead transparently, aligning their actions with their words.  


We spoke with academics and business leaders to get their perspective on today’s business landscape and their message was the same: a real commitment to ESG and reporting transparency are vital to long-term growth and strong financial performance regardless of the industry. Changes are coming, and visionary leaders must be poised to take advantage of these changes to create businesses prepared not just to meet, but to solve, some of today’s greatest challenges.

The Costs of Forgoing Transparency

Research by our own Notre Dame Deloitte Center for Ethical Leadership Faculty Fellow, Sandra Vera-Muñoz, bears out the assertion that transparency in business has tangible economic benefits.

Mendoza College of Business Professor Sandra Vera-Muñoz
Professor Sandra Vera-Muñoz

Professor Vera-Muñoz, Associate Professor of Accountancy in the Mendoza College of Business at the University of Notre Dame, has had a successful career of practice and academic research. Trained as an accountant with a Ph.D. from the University of Texas at Austin and an MBA from The Pennsylvania State University, Professor Vera-Muñoz’s work has long been on the cutting edge of her discipline. She first began researching ESG after a “proverbial lightbulb” went off in her head during a keynote talk at the Annual Meeting of the American Accounting Association. The speaker, Mindy Lubber, President and CEO of Ceres, emphasized the important role accountants had in sustainability because, as Prof. Vera-Muñoz stated,

“We (accountants) have the skillset to account for, measure, report, and provide independent assurance on financial accounting information, and these skills can be readily transferred to the ESG/sustainability space.”

After that conference, Prof. Vera-Muñoz pivoted her research and her teaching toward ESG and sustainability accounting and reporting.

It was not an easy pivot. She recalls, “The learning curve was very steep, and at the time, except for one, most of the top-tier accounting journals were unconvinced that ESG-related research questions are also accounting questions.” Today, Prof. Vera-Muñoz and like-minded colleagues have proven the value of bringing these disciplines together to research ESG topics and her work has important implications for business.

Take for instance, Prof. Vera-Muñoz’s 2014 article with co-authors Ella Mae Matsumura and Rachna Prakash. The researchers explored the impact, on firm value, of voluntarily disclosing GHG emissions versus choosing not to disclose. Their research found a negative firm-value impact on firms that failed to disclose their GHG emissions relative to disclosing firms. This impact can range into billions of lost firm value for non-disclosing firms.

In other words, while there is a negative firm-value impact for admitting to emitting GHG, the detrimental impact to firm value is even higher for companies that choose to hide their GHG emissions. In contrast, companies fairly disclosing their emissions benefit from their transparency.

In today’s market, transparency pays. 


But financial output is not the only reason to move your company toward transparency.

Industry Experts: Valuing Intangibles Such as ESG Factors

For insights from the field, we sat down with two leaders from Ocean Tomo, an intellectual property merchant bank that provides financial products and services such as research, risk management, and valuation. They discussed the wider topic of intangible assets and how this has influenced their perspectives on ESG. 

James E. Malackowski is the Co-founder and Senior Managing Director of Ocean Tomo, a part of J.S. Held. We asked him a series of questions about ESG and today’s business climate. He had the following to say:


Important ESG Factors for Business Today



Sustainability in Business at all Career Levels



How Understanding Business Value Has Changed Over Time




Noor Al-Banna is the Director of Management Consulting and Valuation at Ocean Tomo. He had this to say about ESG and intangible assets:

Understanding the Value of Intangible Assets



Intangible Assets and Their Connection to ESG Factors



ESG Factors and Financial Success




To summarize their contribution, ESG is at an inflection point. Consumer preferences and government action are placing added pressure on companies to create workable plans that address the negative impact of their businesses and to follow through with those plans. The opportunity here is to recognize that finding solutions to the issues of the day creates tangible assets for companies.

Rather than seeing ESG as a burden, companies need to see the opportunity—in market value, asset creation, and social impact—in establishing and following through on ESG goals.


This brings us to the latest work by Prof. Vera-Muñoz and her associates. Their 2022 article discusses climate-risk materiality and how current SEC disclosure rules impact investors as they assess firm risk. Due to lax enforcement, it can be hard for investors to adequately decipher whether climate risk is financially material for a company. Within this landscape, Prof. Vera-Muñoz and her colleagues showed that markets view firms that do not disclose material climate risk in Form 10-K as riskier than those that disclose their climate risk. Again, there is a tangible economic benefit to transparency under key conditions.

Transparency as a Firm Asset

Transparency is a way for ethical companies and leaders to set themselves and their firms apart and take up key leadership roles in their industries. But important conditions apply.

One, for transparency to be an asset, the company has to be working on goals that society values, like lowering GHG emissions and understanding the full environmental and social impact of their company’s operations. Two, greenwashing and social washing hinder transparency and often negatively impact firm value. This is only likely to increase as government regulators, asset owners/managers, and other stakeholders have more tools to research firms and more regulation and reporting standards to hold them accountable.

Society wants transparency. We see it everywhere, from the calls for accountability when things go wrong, to the proposed SEC rules on climate-change disclosures, to how consumers make purchasing decisions.

Firms that lack transparency pay costs–tangible costs such as loss of revenue and intangible costs like loss of consumer confidence, reputation, and goodwill. But ethical leaders should see the calls for transparency as a valuable opportunity.

By being at the forefront of transparency efforts, ethical leaders and firms have an opportunity to shape their industries, grow their tangible and intangible assets, and show that business can provide important solutions to today’s problems. Transparent, ethical leaders proactively manage risk, set the stage for innovation, and capitalize on emerging opportunities as we adapt to a changing environment. Leading with transparency, they engage stakeholders, from employees to consumers and investors, for the long term.

Transparency offers a clear reason to celebrate.

For further reading:

Also watch for our upcoming NDDCEL Resources for Early Career Professionals, where we'll feature actionable suggestions for young professionals to cultivate ethical leadership at work. Professor Vera-Muñoz will offer her thoughts on integrating skills for sustainable business as we develop our paths to career success.

Selected faculty publications: 

E.M. Matsumura, R. Prakash, and S.C. Vera-Muñoz, “Firm-value effects of carbon emissions and carbon disclosures,” The Accounting Review (89/2) March, 2014, 695-724.

E.M. Matsumura, R. Prakash, and S.C. Vera-Muñoz, “Climate-risk materiality and firm risk,” Review of Accounting Studies (September 2022), published online.

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