Engaging with those who matter – Why you need Stakeholder Engagement?


Stakeholder Engagement and its Implications

Each person in a family is a stakeholder in the life of the man who is running his business called life. Any decision – professional or personal, will have implications on the people or the stakeholders. So, engaging them and regularly communicating with them will bring a result that is good for all – in this case his family.  We do this naturally in life, but when it comes to business – many feel it’s just not worth it.

Actually, the worth of stakeholder engagement doesn’t drive home until a company goes through some tough times.

Shell’s serious stakeholder engagement process with Greenpeace and others, began only after the Brent Spar incident in the mid 90’s.

Nike’s exposure of child labor in its contractor’s factory in Pakistan spurred the company to actively engage with its stakeholders to the point that it has opened its doors to the factories in the shanty towns of Asian countries where its products are made.

Walmart, one of the most attacked firms in its employee practices developed its sustainability score card after speaking with more than 100 stakeholders into its supply chain. 

Also read about other Green Companies

Companies do not operate in isolation. Its stakeholders – employees, community, shareholders, environment, NGO’s, business partners, suppliers and society at large – all have stake in how a company runs its operations, and thus it becomes a business imperative that companies actively engage in stakeholder dialogue on regular basis.

Lot of forward looking companies like Shell, BP, Ford, Gap, Starbucks and many others use stakeholder engagement as a tool to get feedback from customers, governments, and investors.

Doing this also raises awareness among such groups about company’s business. Simply put, an active and meaningful engagement means demonstrating respect for the need of others – it says loud and clear – We care! And it becomes an ethical value at the core of sustainability. But many companies just don’t get it.

Know Who are your Stakeholders

Knowing and identifying who the stakeholders are – the people and the groups that are affected by the business operations, is the first step.

For example, Gap’s supply chain is deep and complex, but as Dan Henkel, in a talk at Stanford stated,

 complexity is not an excuse for inaction

Gap has a team that looks into the communities from where they are sourcing their product – not just looking inside the factory but also looking at what’s happening outside the factory. One of the places is Lusutu in Africa, where 1 in every 3 garment workers is HIV positive – a concerned company can’t simply walk away from addressing this issue.

Know Why you want to communicate – The Upside 

There can be both positive and negative implications of engaging stakeholders in the strategic decisions of the company. The business case is:

  • It sets up a business geared for accountability
  • It also sets in motion a regular monitoring and self-correcting mechanism benefiting the business as well as the stakeholders.
  • Reflecting stakeholders views in strategic objectives and communication means enjoying good reputation, trust and support of its key partners.
  • Innovation can result in the valuable insights gained through interaction with different stakeholders.
  • Relevant information disclosure to the concerned groups proactively engages the challenges before hand

 The Downside

  • There is the ‘engagement risk dilemma’ that can call for ‘early criticism’ if process becomes bumpy with some of the stakeholders turning hostile (Blackburn, 2007).
  • Many companies also dislike the uncertainty it creates that can lead to delayed decisions and actions.
  • Also many companies feel that it is government’s job to keep the engagement with stakeholders ongoing.

How to Engage?

Once the stakeholders are identified and the solid business case for engagement is also understood by the top management – the question is then how do you engage that makes not only business sense but also makes a socially responsible sense? To what level does the engagement must be viewed as optimum?

Different industries have different objectives to warrant a stakeholder dialogue.

Fair trade and proper labor conditions might be one of the top priorities for a garment manufacturer like Gap, but eliminating formaldehyde and using water based solvents might be the top strategy for a furniture manufacturer like Steelcase or shoe maker like Timberland or reducing packaging material or switching to renewable energy might be the top agenda for yet another industry sector.

With sustainability taking firm roots in today’s business environment, stakeholder engagement becomes a competitive edge for companies actively pursuing it.

What is needed is forging strong partnerships with business partners, civil society, supply chains, environmental groups and community outreach programs to reach a level of ‘Creating Shared Value’ as Michael Porter points out in his recent article in HBR-‘Re-thinking Capitalism’ .

The point is that you don’t have to wait until crisis hits – the process can start early and can evolve over time.

What do you think? Please share your thoughts below.

(Stakeholder image from http://www.suite101.com/view_image_articles.cfm/637729)

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