Transparency as a Strategic Directive – The Journey from Dark to Light
January 20, 2014 | by Kathryn Klaber
Calls for transparency come from all camps. The media often drives it. Consumers thrive on it. Government inspectors demand it. In some cases, we seek much more – from the National Security Agency, or in the case of parents and their teenagers. And in other cases, it could be dialed back, as some users of social media have found. In other words, we don’t always need to see sausage being made. Corporations continuously seek the right balance; not so much as to divulge confidential information or sacrifice competitive advantage, but enough to earn the trust of stakeholders.
As companies have embarked on the development of abundant new shale energy resources, the appetite for information on the topic is ravenous, creating benefits of transparency such as:
- Increased confidence that corporations are complying with the regulations and that regulators are enforcing the rules;
- More common ground among diverse parties based on data instead of pre-determined positions;
- Acceleration of learning about the opportunities at hand, with the concurrent increase in flow of investment capital.
But what is the right amount of transparency from each party involved?
For companies in the natural gas business, especially in the highly populated northeastern United States, transparency has been a critical part of the successful development of the Marcellus Shale. Perhaps the best example relates to the outcry for disclosure of chemicals used in the hydraulic fracturing process, representing the broader need to better understand the process to extract fuel from shale. Even though this information has been available in many forms for years, companies supported new channels for the information including a new tool to make more data more readily accessible to anyone with an internet connection (see www.FracFocus.org.)
When Act 15 of 2010 was proposed in Pennsylvania to begin twice annual reporting of well production data, some in the state capital were under the false impression that industry would fight the change, preferring instead to keep the information private for five years as existing law dictated. Instead, exploration and production companies backed this additional transparency, and the young shale industry grew up faster with the benefit of more public data about where competitors had succeeded and failed. This has allowed agencies such as the U.S. Energy Information Administration to more accurately analyze the nation’s progress toward energy security and provide more timely information to policy makers and the many others who are dependent on this data to make their business decisions. The trend to more frequent reporting will likely continue as monthly production reporting is proposed in Pennsylvania.
Corporations certainly have additional work to do along their transparency journey, especially in the areas of data accuracy, media relations, and overall brand management. For example, as regulators are posting company information on-line, often upon submittal and without fact-checking, it becomes even more imperative to ‘get it right the first time.’ A simple error in units, such as reporting quantities in gallons instead of the required barrels, in pounds instead of the required tons, or with a decimal misplaced, can cause a company to come into the spotlight unnecessarily, eroding trust in the company, its industry, and even the regulators. With respect to media relations, proactive engagement is always a better strategy than reactive response. A media plan, even a very simple one, should be part of any company’s public action. If the news is unfavorable, sitting on it is rarely better than managing its release. In fact, given the tremendous spotlight on the natural gas industry and the lightspeed communications presented by social media, media engagement can be one of the most effective ways to build a brand and turn yesterday’s challenges into tomorrow’s opportunities.
Governments have certainly also found themselves embedded in the attention around shale and have therefore taken great leaps to post a myriad of information on-line. However, it can be difficult for governments to transform as rapidly as the circumstances dictate given the historic lack of private sector-level investment in data management systems and the personnel required to stay current with technology. There are still major gaps in the shale-related data available from governments, such as in the locations of threatened and endangered species. Also, some municipalities have not indicated how new impact fee funds from the natural gas industry are being spent.
Non-governmental organizations are not immune to the call for transparency and perhaps have the most work ahead. The best source of information for these types of entities is their IRS-required Form 990 disclosures. Yet these forms, as well as lobbying disclosures, often omit an accurate view of the nature of influence, especially for universities, charitable institutions and foundations.
As Ralph Waldo Emerson observed, “Life is a Journey, not a Destination,” and so goes our civic institutions’ trek toward transparency. It takes some fortitude to step into the light, and more often than not, we are all better off as a result.
About Kathryn Klaber
Ms. Klaber most recently served as the Marcellus Shale Coalition's CEO, where she worked on behalf of the organization's 300 member companies with elected leaders, regulators and the civic community to advance responsible shale development, and the enhancement of the region's economy and environment. Under her leadership, the MSC grew from a brand new entity aiming to help secure its members' license to operate, to the leading industry group across Appalachia which is now producing 18% of the nation's natural gas.
Prior to joining the MSC, Ms. Klaber served as Executive Vice President for Competitiveness at the Allegheny Conference on Community Development and as the Executive Director of the Pennsylvania Economy League – roles that focused on sustainable prosperity for Pennsylvania. During the first decade of her career, Ms. Klaber worked for the international environmental, health and safety consulting firm Environmental Resources Management, first at the company's headquarters in Philadelphia, then in her native Pittsburgh.
A lifelong Pennsylvanian, she earned her undergraduate degree in environmental science from Bucknell University and her MBA from Carnegie Mellon University, where she received the Enterprise Award for Entrepreneurship.