For some companies, stakeholder engagement is no longer just a ‘nice to
do’, but an integral part of their overall business approach. A new
manual sheds some valuable light on what does – and doesn’t – work.
Stakeholder engagement may be familiar to corporate social
responsibility practitioners, but it is still not a widespread business
practice. Companies, of course, have long sought the views of
customers, employees, investors and others to inform business
decisions. But taking the further step of creating a formal management
system that identifies the full range of a company’s stakeholders and
how best to engage with them – and then systematically integrating that
information into decision-making and risk management – is still pretty
rare.
Analysis by the Association of Chartered Certified Accountants of the
84 reports entered for its UK sustainability reporting awards last year
found 55 did not state that engagement had been used in developing the
report, and only 13 defined what the term ‘stakeholder’ meant to them.
Now the foundations are being laid for a change. A draft stakeholder
engagement standard devised by AccountAbility, the non-profit
institute, gives companies a benchmark for assessing stakeholders’
views on their social and environmental performance (see page three).
It is underpinned by a report on stakeholder engagement by the UN
Environment Programme, in partnership with the Stakeholder Research
Associates consultancy and AccountAbility, based on the first-hand
experiences of more than 80 practitioners worldwide. To accompany the
report, a handbook on the subject will appear this month.†
As the first serious stab at a stakeholder engagement manual, the
report addresses the question, ‘Will multi-stakeholder dialogue simply
bring nuisance into my business, or will it bring value to my
business?’, according to Monique Barbut, director of Unep’s division of
technology, industry and economics.
The companion handbook, for which
additional views were sought from Japan, South Africa, the UK, and the
US, lays out how ‘to plan and carry out engagement processes on
material issues in a way that can improve organizational learning and
performance in alignment with core corporate strategies’. It is to be
translated into Japanese, Russian and Spanish.
five stage process
The handbook dissects the stakeholder engagement process into five
stages. Companies should start by considering their business objectives
and how these relate to stakeholders and specific issues. Then they
need to analyse their existing relationships with stakeholders, review
what resources everybody has and decide what kind of relationship to
develop with the various interested parties. The next step is to assess
whether all those involved have the ‘competencies and capacities’ to
engage, and choose the appropriate approach – one-to-one meeting,
cause-related marketing, public meeting, alliance or telephone hotline.
Finally, they should ‘follow up on the outputs of engagement’.
This framework lays bare the mechanics of stakeholder engagement.
But it doesn’t explain what makes some engagements successful and
others not. Of particular value here are the comments of experienced
practitioners (see box). Representatives from industry associations,
whose original request for guidance on ‘how to engage in meaningful
dialogue with stakeholders’ in a 2002 consultation prompted Unep to
begin the project, offer some of the most trenchant observations.
Jean-Marie Chandelle, of the European Cement Association, suggests
companies start by asking ‘What is my worst nightmare?’ Andrew Speers
of the International Water Association says: ‘One of the most important
mistakes that the industry makes is limiting itself to asking what
people think, rather than asking more penetrating questions and
inviting involvement in the decision-making process.’
Several commentators stressed that ‘preconceived ideas of suitable
solutions can limit the innovation and flexibility needed to find
solutions to complex problems’. Above all, employees must not
feel left out: ‘Never convey to your employees the impression that
stakeholders’ involvement is going to replace social dialogue within a
company,’ says Chandelle.
There is also a need to temper expectations. Paul Mitchell of the
International Council on Mining and Metals recalls that initial hopes
of negotiated solutions that satisfy all parties were not borne out.
‘Getting everyone to sit around the table … doesn’t mean you’ll be
able to solve all the problems. Changing course and getting agreement
about contentious issues is very hard.’
In part this is due to the differing agendas of often unlikely
bedfellows. Some non-governmental organizations, trade unions and
industry associations ‘were not interested’ in being interviewed, Unep
notes. This ‘suggests we have some way to go before consensus emerges
on the potential value of effective engagement between businesses and
their stakeholders.’
Engagement fatigue is already setting in: ‘NGOs
are questioning their ability to respond to all the requests to engage,
while corporate players may struggle to justify the expense of
engagement.’ An emerging market in engagement, with professional
stakeholders, poses fresh challenges for companies.
engaged learning
The manual doesn’t attempt to ram home the business case, which is
likely to remain elusive. Instead it stresses the benefits of ‘engaged
learning’ and innovation that can flow from engaging with stakeholders.
For this to happen, stakeholder engagement needs to be ‘both high
quality (the process is fair, transparent, inclusive and responsive)
and outcomes-based (it makes a difference).’
It adds that: ‘Learning
from and with stakeholders … involves a deeper commitment than
dialogue or reporting. It involves a commitment to embrace critical
stakeholders as a strategic asset in shaping and informing the
direction of the company. It also means recognizing the potential for
engagement to be used to influence the behaviour of stakeholders
themselves.’
† The two-volume Stakeholder Engagement Manual will be posted this month at the website address below.
