Saturday, November 24, 2012

A New Approach to Stakeholder Engagement

Below I have summarized my notes taken during a workshop about stakeholder engagement.

I have also included some clarifying and contextual information, based on my academic and practical experience with stakeholder identification and engagement.

(links provided within are not endorsements but, rather, examples for explanatory of contextual purposes)

Who are your stakeholders?

Traditional stakeholder groups include investors, lenders, customers, employees, and suppliers. Businesses have a direct financial relationship with these groups. Profits and regulations, supply and demand, dictate the rules of engagement. These groups are still relevant within new stakeholder engagement strategies; however the scope of engagement with these groups should expand to align with goals related to social responsibility and sustainability initiatives. In addition, new stakeholder groups (e.g., socially responsible investor “SRI” groups, environmental and human rights NGOs, local affected populations) should be considered, as they can both influence corporate reputations and provide valuable information about goal development, best practices, and lessons learned.

Why engage these groups?

Investors and SRI groups have financial benchmarks and analyses that provide guidance related to market and long-term expectations. Sustainability initiatives will likely cause a significant initial investment; however, if properly managed, the initial investment should produce both quantitative and qualitative returns. SRI groups are likely to have a more long-term perspective beyond the quarterly and annual earnings focus of markets and lenders. Expect SRI groups to be more demanding with regards to sustainability initiative results and transparency.

Customers may initially reject cost increases directly resulting from sustainability initiatives. This may be partially remediated through transparency, especially if initiatives can be shown to positively impact customer lives (e.g., reduced packaging or environmentally safe cleaning products). Consumers may reach out with concerns about raw material sourcing, especially when news reports alert them about specific issues (e.g., factory conditions, child labor, conflict minerals). These should be seen as opportunities to establish new sustainability initiatives responsive to customer concerns.

Suppliers may not initially see the benefit of investing in sustainability initiatives (related to supplier codes of conduct and social audits, for example), especially if only one of their customers is pressing for improvements. However, if competitors can form an alliance with similar goals, cost of implementation may be shared in exchange for purchase commitments and transparency obligations to improve ethical reputations of all parties. Not all companies have the purchasing power of Wal-Mart, but this may be an opportunity for competitors to work together when costs and benefits can be shared.

Competitors are useful for forming alliances to tackle large (see my recent chocolate post) and small issues, as well as for comparing successes and failures. This requires trust and relationship-building, not seen often enough in corporate culture. Sustainability and transparency should be viewed as two sides of the same coin. Sustainability concerns may not be shared across an industry. Sharing ideas, information, and responsibility will require a shift in thinking about corporate secrecy.

Local and international NGOs, including those focused on environmental or human rights, are valuable resources. Once seen as rivals, these groups are increasingly taking on partnership and advisory roles for sustainability initiatives and strategic development. NGOs can also be helpful with stakeholder identification and negotiations, especially local groups with ties to affected communities. Based on their experiences, they may also be able to identify companies that have successfully (or unsuccessfully) tackled similar issues and can share best practices (or lessons learned). Information sharing requires a commitment to transparency and two-way dialogue, often out of the comfort zone. (I have more information about human rights-focused initiatives in a separate post)

How to engage with stakeholders?

Create an engagement strategy. Begin by asking questions about the goals of engagement and how it fits with the organizational mission, goals, and sustainability initiatives. The goals of engagement should provide some guidance as to which internal groups and individuals should be involved, as well as which stakeholders should be included, in discussion about each sustainability initiative. The company needs to find a proper balance between engaging a wide variety of stakeholders and avoiding information overload.

Research, evaluate, and prioritize stakeholder groups. Be aware, prior to engagement, there will be conflicts and difficult decisions must be made. Not every group can or will be 100% satisfied with the initiative or the outcome. Evaluating groups ensures those with higher priority have a greater chance of having their needs heard and met.

Plan engagement(s). There are consulting groups that can help coordinate creative, structured, and strategically appropriate stakeholder engagement activities. Although there are obviously costs involved, the benefits of investing in this type of assistance early in the process include ensuring the criteria of engagements are sound and the goals are achieved.

Engage! This is your opportunity to listen, to identify concerns, and to discover new ideas. Again, the benefit of having a trained consultant present is assistance keeping the conversation on track and productive. It is also important to remember that you do not need to act upon 100% of the information gathered in these engagements.

Prioritize and integrate key points gathered during stakeholder engagements in to strategic planning and development. Identify the important lessons learned from the process so they can be worked in to future engagement opportunities.

When to engage?
  • When you want to take a proactive stance related to an emerging or recently discovered issue
  • When you are exploring innovative sustainability initiatives and want input from directly affected groups, experts, and parties that have previously worked on this issue or in the region
  • When the organization has both the power and the will to make positive and sustainable change
  • When the project is still in the planning phase – these types of engagements are not designed to tell stakeholders what will be done but, rather, to gather information needed to make decisions. If the key decisions have been made, if the strategy has been formulated, the type of engagement discussed above is a waste of time and resources. What you want is buy-in

My takeaways from the workshop:
  • Consider using a stakeholder engagement consulting group to plan and engage on first time or complex engagements
  • You do not need to act upon 100% of what you hear
  • Be proactive and transparent
  • Integrate with corporate strategy at all stages of engagement planning and implementation
  • Compare issues important for business success with issues important to society
  • Be prepared to address dynamics and conflicts between stakeholder groups and needs
  • Get stakeholders out of reactive mode by making them a partner in a shared vision of the future
  • Keep in mind the initially established goals and desired benefits – strategic and reputation – while developing relationships with stakeholder groups
  • Follow-through, either through action or transparency
Above all, stakeholder engagement is a learning and organic process, not an event.

As always, if you have any comments or questions related to the above, please let me know.

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