minding your stakeholders business

8/9/2019 Minding Your Stakeholders Business

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Minding your stakeholders business:the key to sustainability

A strategic approach to stakeholder engagement

Do you talk to your stakeholders? I you are like a lot o

companies, you may talk to some, but not all. And whenyou do, how ar do you involve them in your decision

making process? Most companies tend to communicate

rather than really engage with stakeholders about their

strategic and operational issues. However, as more

companies add sustainable development and corporate

responsibility to their business agenda, it becomes

increasingly important or decision makers to enter into

a constructive dialogue with their various stakeholders

whose concerns might uel uture claims, crises, as well

as strategic opportunities.

You wont be aloneRecent trends and practices as detailed below prove

that engaging stakeholders is becoming a common

occurrence:

Sectorleadersknownfortheircorporateresponsibility

leadership are engaging with their stakeholders as

part o their business operations1

Standardsandreferencesareurgingcompaniesto

ollow this path2

Stakeholdersandshareholdersarebecoming

increasingly active with respect to environmental

and social issues. As illustrated in Box 1, mereregulatory compliance does not guarantee social

acceptance and license to operate o a companys

projects or activities

The risks o not engagingThe risks o not engaging stakeholders can be

substantial. Researchers have attempted to estimate

and integrate the impacts on a companys public

image into the calculation o Return on Investment

(ROI)3.Stakeholdersnegativeperceptionsofbusiness

practices leads to so-called social risks (Box 1) which

can jeopardize business value through boycotts,demonstrations and work blockages and pressure on

political leaders to stop, delay or change a project. All

these actions increase a projects costs and may prevent

a company rom attaining its business objectives. To

prevent and mitigate local and large scale actions,

companies are investing in people and programs that

engage with stakeholders beore negative perceptions

turn into negative actions.

Box 1: Example o social risks

Risk can be described as the potential or loss and harm or the d iminished

opportunity or gain, that can adversely aect the achievement o an

organizations objectives4. Can poor quality relationships with stakeholders be

considered as a risk or a company? Consider this:

InNovember2008,inaclaimthatstartedin1993,thesupremecourtof

Canadaorderedaleadingcementmanufacturertopay$15to$20million

to a group o neighbours as reparation or the nuisance caused by dust

emissions rom their acility, despite the act that the site had been complied

with legal thresholds5.

ClaimsfromcommunitiesnearaQuebecwindfarmaboutthevisualimpacto the windmills, caused delays in the project. These diculties, as well

as additional nancial issues, caused the abandonment o the project in

December20086.

In2008Greenpeacetargetedalargegrocerychainbecausetheyclaimed

the company was selling endangered sh. In response, the company

undertook a communications campaign to inorm customers about their

practicesandtolaunchproductsbearingtheMarineStewardshipcouncil

(MSC)certication7.


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2 Minding your stakeholders business: the key to sustainability

This is particularly instrumental or companies in the

ollowing sectors:

Energy and resources (including oil andgas, metal, mining, cement), orestry and

manuacturing: Access to energy and land is key or

business operations. For such companies, the cost o

potential delays or ailure in obtaining legal and social

license to operate could jeopardize the companys

competitiveness, access to unding or ability to

operate in the long term.

Consumer business and retail: Reputation and

brand are signicant intangible assets to be protected

rom risks linked to direct or indirect (supply chain)

environmental, social and ethical threats; companies

most vulnerable, such as those operating in theconsumer business and retail sector, would be wise

to address stakeholders concerns and expectations

beyond minimum compliance.

How to engageConsidering how harmul negative perceptions and

social risks can be to a business, companies need to take

the initiative to engage and understand the interests and

needs8 o their stakeholders upront in order to build a

constructive and meaningul relationship.

But engaging with stakeholders can be very challenging.A quick glance at your companys stakeholder

map will tell you a lot about the diversity o your

stakeholders interwoven and potentially conficting

interests and concerns. Indeed, stakeholders concerns

and expectations cover a wide range o issues

(environmental, social, health and saety, well-being o

the community, etc.) that may be contradictory or evenconficting in specic situations.

Bear in mind that stakeholder interests evolve

over time as new inormation becomes public or

as scientifc knowledge grows, especially in the

areas o health and saety and the environment.

The relationships between a company and its

stakeholders can take dierent orms; rom partnership

and close cooperation to open confict and blockage,

depending on how willing the two parties are to

communicate openly, as shown in Figure 2.

Stakeholderengagementisnotonlyaboutglossy

presentations, good public relations or crisis

management. Lack o stakeholder engagement,

poor stakeholder engagement or mere crisis-based

communication can actually be detrimental to the

business or to the company image.

Thereore, in order to achieve corporate responsibility

and sustainability in a complex and evolving

environment driven by multi stakeholders interests,

companies will have to become learning organizations10that will be aware o and process a much wider range o

inormation.

Conflict Threat Claim Request

Information Consultation Involvement PartnershipCompanies engagement

towards stakeholders

Stakeholders engagement

towards companies

Source: Deloitte9

Figure 2: Dierent modes o engagement between

companies and stakeholders


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Using a risk management approachInarecentsurveycarriedoutbyDeloittewith120

leading European companies, when asked about their

stakeholder engagement practices, most companiesprovided a list o ad hoc practices that included

inormation meetings, surveys, consumer hotlines and

sometimes stakeholder panels. Few considered

stakeholder engagement as an actual risk management

process.

Although it may look like a sot skill, stakeholder

engagement can be approached as a business process

requiring a structured approach like any other risk

management process, especially or companies

operating in sectors where social risk is signicant.

Companies will have to identiy their stakeholders and

decide which ones to engage with, in what priority, on

which topics and how. This requires designing and

implementing a proper risk management approach to

address these issues, dening responsibilities, planning

and implementing methods and tools, providing

proper training and setting up internal controls

(see Figure 3).

Step 1: Plan and analyzeYour rst step will be to dene the business case or

change or all stakeholders involved, both inside andoutside the organization. For more impact, engage

other organizations within the industry but be aware

o the challenges. This orm o collaboration demands

industry standards and shared collaborative tools that

allow action11, along with organizations willing to learn.

Approach

Identiy your stakeholders

As shown in Figure 4, take the time to identiy your

stakeholders and their interests and map them out into

groups. Make sure to include the ollowing:

Anyorganizationsthatyouarelegally,nanciallyor operationally responsible to (i.e., investors,

customers, etc.)

Stakeholderswhoareaffectedbyyourorganizations

operations. (i.e., community, employees,

associations, etc.)

Includethosewhoarelikelytoinuenceyour

organizations perormance (i.e., authorities,

competitors, media, etc.)

Figure 3: Stakeholder engagement risk management approach

Design

Key success factors

Plan and analyze Build andimplementMonitorand report

ValueDefine the business case for change in a collaborative mode for all

stakeholders involved

Business strategyDevelop a shared vision of the desired state with the input of all

stakeholders involved, inside and outside the organization

Process & ITIntegrate dialogue and engagement into business processes. Adopt

innovative collaboration tools and techniques for engaging stakeholders

PeopleInform and train employees through leaders who walk the talk and

engage the organization in a learning curve

Project & programBuild solid project management practices. Experiment with pilot projects.

Track and measure results

Source: Deloitte

Companys

interests

12

3

Access tofinancing

Compliance

Image andreputation

7Cost

management

8Competitiveness

4Social

acceptance5Market

position

6Innovation,

differentiation

1Shareholders/lenders Return on investment Responsible investment

2Public authorities General interest Regulatory compliance

3NGO and media Transparency Information Environmentally-friendly

4Communities Transparency

Publics health and safety Local development

5Clients / consumers Quality and safety of

products

Environmentally-friendlyand ethics

6Competitors Market position

Differentiation

7Suppliers /sub-contractors

Profitability

Management &anticipation

8Employees

Need for meaning,achievement Health and safety

Source: Deloitte

Figure 4: Example o stakeholder groups and their main interests

Minding your stakeholders business: the key to sustainability


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4

Get to know them

Once you identiy your stakeholders, you need to

analyze them based on the ollowing actors:

Theirlevelofinuenceandthewaytheyareaected by the company, their willingness to

engage, their representatives

Theirneedsandexpectations,theirengagement

issues

Prioritize issues and expectations

You then need to identiy material issues to be

addressed by your company by prioritizing potential

risks, opportunities associated with stakeholder

expectations based on:

Compliancewithexistingstandardsand

uture regulation Directnancialimpact

Alignmentwithcompanyscommitments

Potentialimpactsonimage

Put it all together

Make sure your business case or change is in line

with your corporate responsibility strategy and the

expectations and concerns o your stakeholders.

Step 2: DesignStep2involvesdevelopingasharedvisionof

your companys desired state with the input o allstakeholders involved. Based on the stakeholder

map and analysis, determine the level o stakeholder

involvement you are willing to integrate into your

business strategy and operations or each stakeholder

group on line with your companys sustainable

development or corporate responsibility vision.

Approach

Setcurrentandto-beengagementobjectiveswith

each selected group o stakeholders

Analyzethegaps

Designastakeholderengagementstrategydetailingthe groups o stakeholders you need to engage

with, the pursued objectives and the level o

required involvement rom stakeholders

Determinerolesandresponsibilitieswhoisgoing

to engage with which groups o stakeholders and at

what level?

Figure 5: Maturity levels o stakeholder engagement

in line with Corporate strategy

Follower Mature Leader Innovator

Attitudes towards stakeholders engagement

Levels of stakeholders involvement

Exploratory: Ad hocengagement withstakeholders wheneverissues or challengesarise

Developing: Existingbut unsystematic,engagement practices,with unclear impacts onoperational decisionmaking

Embedded:Engagement processesfed into decision makingfrom early stage andreflected in coremanagement processes

Strategic: Stakeholderengagement embeddedin governance processesto foster systemicchange

Reaction / resistance Interest Proactivity Transformation

Mainly informativethrough meeting and

documentation toexplain positions

Consultation throughstakeholders surveys

and panels to obtainfeedback and comments

Involvement ofstakeholders through

collective inquiry, totake into accountstakeholders input

Empowerment ofstakeholders through

partnerships andother consensus-basedforms ofcollaboration

Adapted from UNEP12 , Senge13 and Deloitte

Box 2: Rio Tinto case study

Rio Tinto (RT) has developed a comprehensive process and ramework to

address stakeholder engagement which they believe is essential to their goal

o being the developer o choice by governments and local communities.

Here are a ew examples o that process:

Everyprojectconductsastakeholdermappinganalysisandasocialrisk

assessment included in the risk register o the site, ocusing on potential

issues related to local governments and communities, access to resources

and operational impacts

Eachsitealsohastodevelopamulti-yearcommunitydevelopmentplan

with social perormance indicators jointly agreed upon, monitored and

evaluated with communities and stakeholders

AllsitesreporttotheExecutiveCommitteeonayearlybasisthroughan

internalreportingmechanism.Aninformationsystem,linkedtotheHSE

management systems, provides database and supporting documents topeople in charge o community relations and external audits

Acommunityrelationspersonisassignedtoeverynewprojectteam

to ensure that community relation and stakeholder engagement is ully

embedded into the implementation o the project

Thecommunityrelationsprocessisassociatedwithaninternalassurance

program whereby each site carries out a diagnosis o its overall approach

to community relations every three years through a sel-evaluation,

internally audited by managers at the corporate level and peers14



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Step 3: Build and implementAs you integrate communications and engagement

into your business processes, it is important to adopt

innovative collaboration tools and techniques toengage your stakeholders (see Box 3). Take the time to

experiment with dierent approaches through closely-

managed pilots.

Also, keep in mind that internal organizational change

starts rom the top. A survey conducted by Duke

Universityin200815 ound that skills associated with

inspirational and especially ethical leadership develop

employees sense o responsibility or the entire

organization and lead to increased organizational

perormance.

Approach

Identifyandapplyeffectiveengagementtoolsand

methods or each stakeholder group: ocus groups,

community panels, surveys, multi-stakeholder

forums,partnerships(withNGOs,institutesand

other business partners)

Developandapplysupportingtechnologytools

or your engagement strategy (e.g. knowledge

management sotware)

Reviewandanalyzeanyimpactsonotherprocesses,

roles and responsibilities, organization structure and

tools Identifycommunicationandtrainingneeds.Develop

managers sot skills to deal with diversity, dilemmas

and to master dialogue, acilitation and collective

inquiry techniques.

Ensureavisibleandcommittedleadershipandmake

sure to implement the action plan in line with the

engagement strategy

Step 4: Monitor and reportIncorporating stakeholder input is an ongoing process

that requires you to provide ongoing support and

adjustments to the stakeholder engagement processesas required, and that you track and measure results. It

is also important to maintain leadership visibility and

commitment.

Approach

Incorporatethereviewofspecicaspectsofthe

stakeholder engagement process in the internal

audit program in order to ensure that social and

environmental risks are exhaustively covered.

Manageandmeasurethebenetsofthe

engagement process; share and oster the spread o

best practices internally to achieve critical mass Providefeedbackonprogresstostakeholdersin

specic meetings and in the annual or corporate

responsibility report

Seekassuranceonyourstakeholderengagement

process to enhance credibility

Seekstakeholderfeedbackonyourcompanys

commitments and reporting

Box 3: Collaborative tools and techniques

Dierent acilitation techniques are available to engage with your

stakeholders. Depending on the diversity o people involved and the

complexity o the topic, consider partnering with a acilitator to oster

participation and creativity. Beyond traditional inormation meetings, such

collaborative and participatory techniques will help building consensus taking

into account the interests and needs o the parties involved16. Here are some

examples:

Open space technology oers a method to run meetings o groups o any

size where participants construct the agenda and discuss in groups. It has

beenusedbypublicandprivateorganizationsformorethan20years17.

Appreciative inquiry is the art and practice o asking positive questions

that strengthen a systems capacity to collaborate and innovate throughout

the change management process. It invites groups oten involving hundreds

or sometimes thousands o people to build a constructive and desired

organization18.

Social analysis system is a collection o participatory techniques and

sotware tools that show how to integrate social and cultural analysis and

continuous planning, in project activities19.



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ConclusionOvercoming the challenges o stakeholder

engagement

Developing a culture o open communications andengagement with internal and external stakeholders

can be challenging. It requires organizations to change

their own mental model, i.e. organizational codes and

belies, especially i the organization is starting with a

culture o secrecy and hierarchy. In that case, managers

may have trouble dealing with stakeholder-related issues

and a commitment to engage with stakeholders will

have to come rom the top level o the organization20.

Also, organizational transormation o any kind typically

results rom the combination o an external constraint

andtheinternalwillforchangeadoptingamoreopen business approach is no dierent. Companies

committed to stakeholder engagement as part o their

corporate responsibility strategy or general business

strategy have to be prepared or their established

corporate belies and assumptions to be challenged as a

result o stakeholder input.

Nevertheless,includingthecontributionsofinternal

and external stakeholders will allow companies to

exercise a new economic and social leadership, to

develop a collective intelligence, to become learning

organizations21 and to better perorm. In the currentcontext o nancial uncertainty, acknowledging

the interdependent links between a company and

its stakeholders as a path to value creation will be

instrumental to long-term success.

Engaging with stakeholders implies that the

company is ready to promote a new business strategy

that requires systems thinking to ensure maximum

positive net impact from our operating presence

around the world. Mutually beneficial projects are

essential for long-term business sustainability.

ClaudePerras,Director,CommunityRelations,RioTinto



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About Deloittes Corporate Responsibility and Sustainability practice

DeloittesCorporateResponsibilityandSustainabilityteamisdedicatedtoassisting

businesses and public organizations in the identication and mitigation o their

business risk and the implementation o a strategy related to corporate responsibilityand climate change issues, in particular:

Corporateresponsibilitystrategyandimplementation

Climatechangestrategyandriskassessment

Environment,Health&Safety(EHS)excellence

Corporateresponsibilityinternalauditandexternalassurance

For more inormation on how Deloitte can help you engage with your stakeholders

on corporate responsibility and sustainability issues, please contact:

Regional contacts

Vancouver

HenryStoch

SeniorManager

604-640-3393

[email protected]

Calgary

Jamie Ross

SeniorManager

403-298-5970

[email protected]

Winnipeg

Aileen Madden

SeniorManager

204-926-7658

[email protected]

Toronto

JoeSolly

SeniorManager

905-315-6722

[email protected]

KristineMacPhee

SeniorManager

416-874-3143

[email protected]

Ottawa

DavidGreenall

SeniorManager

613-751-5402

[email protected]

Montreal

SylvieNuriaNoguer

SeniorManager

514-212-8176

[email protected]

Thibaut Millet

SeniorManager

514-393-5532

[email protected]

About the authors

Sylvie Nuria Noguer

Deloitte Canada

[email protected]

SylvieNuriaisaSeniorManagerinDeloittes

CorporateResponsibilityandSustainabilityservices.

Shehas18yearsofprofessionalexperiencein

project management, advisory and audit services

in the eld o environment and sustainable

development.SherstjoinedDeloittein2003

inParis,whereshedevelopedandledateamof

15 consultants dedicated to providing advisory,

training and audit services in environment and

sustainability management to private companiesindifferentsectors(oil&gas,energyandutilities,

mining, tourism and air transportation, automotive,

retail, consumer business), as well as to public

organizations.Sylviehasanengineeringdegree

in general mechanics with a specialization in

psycho-sociologyoforganizations.Shehasa

masters degree in business administration and

in environmental engineering and management.

SheisamediatoraccreditedbytheQuebec

Institute or Mediation and Arbitrage and has been

trained in non-violent communication, open space

technology and social analysis system.

Sandra Houillier

Deloitte Canada

514-393-6589

[email protected]

SandraHouillierisaManagerforDeloittes

Consultingpractice.Shehas10yearsofexperience

in management consulting with a ocus on

organizational development and transormation,

process review, change management, training,e-Learning, communication and project

management or the public and private sectors.

Sheisacertiedhumanresourcesprofessional

(CHRPandholdsaMasterofSciencesin

Management(M.Sc)fromthecoledesHautes

tudesCommercialesdeMontralandaBachelor

ofAdministrationandPoliticalSciencesfrom

lInstitutdtudesPolitiquesdeParisinFrance.

ValrieChort

PartnerDeloitte Canada

416-601-6147

[email protected]

JohanneGelinas

PartnerDeloitte Canada

514-393-5408

[email protected]



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Reerences1 DJSIsectorleaders:http://www.sustainability-index.com/07_htmle/indexes/djsiworld_supersectorleaders_08.htmlandGoldmannSachsSUSTAIN

focuslist2007:http://www.unglobalcompact.org/docs/summit2007/gs_esg_embargoed_until030707pdf.pdf

2 http://www.accountability21.net/aa1000series

3 TamaraBeke,HarvardUniversityandMarcJ.Epstein,RiceUniversityIntegratingSocialandPoliticalriskintoManagementDecisionMaking,SocietyofManagementofCanada,2007

4 DeloittePuttingRiskinthecomfortzoneNineprinciplesforbuildingtheRiskIntelligentEnterprise,2008

5 http://www.holcim.com/CA/ENC/id/1610648164/mod/6_1/page/news.html

6 http://www.restonsmaitrescheznous.qc.ca/rev_pre/Revue%20de%20presses/Revue%20de%20presse_280608.pdf

7

http://www.msc.org/8 DeloitteFirstoverviewofcompaniesandstakeholdersdialogueamongstthemainFrenchcompanies,2007

9 MarshallRosenbergNonviolentcommunication:alanguageoflife-PuddleDancerPressBook,2003

10 Senge,ArtKleiner,CharlotteRoberts,RichardB.Ross,BryanJ.Smith,Thefthdiscipline,FirstEditions,2000

11 Sengeetal.,Collaboratingforsystemicchange,MITSloanManagementReview,winter2007,vol48no2

12 Fromwordtoaction:thestakeholdersengagementmanual:UNEP,Accountability,Stakeholdersresearchassociates,2005

13 Senge,Thenecessaryrevolution,Howindividualsandorganizationsareworkingtogethertocreateasustainableworld,Doubleday,2

14 CourtesyofClaudePerras,DirectorCommunityRelations,RioTinto

15 DukeExecutiveLeadershipSurvey(http://www.leadershipandethics.org/),Fuqua/CoachKCenteronLeadership&Ethics,DukeUniversitysFuquaSchoolofBusiness,fall2008

16 PeggyHolman,TomDevaine&StevenCady,TheChangeHandbook,BerrettKoehlerSanFrancisco,2007

17 http://www.openspacecanada.org/

18 http://appreciativeinquiry.case.edu/

19 http://www.sas2.net/20 CarolJ.Forrest,ReneeHixMaysThepracticalguidetoenvironmentalcommunityrelationsJohnWiley&Sons,Inc.1997

21 PeterSengeandthelearningorganization,MarkK.Smith,theencyclopediaofinformaleducation,2001

www.deloitte.ca

Deloitte, one o Canadas leading proessional services rms, provides audit, tax, consulting, and nancial advisory services through more than7,700peoplein57ofces.DeloitteoperatesinQubecasSamsonBlair/Deloitte&Touches.e.n.c.r.l.DeloitteistheCanadianmemberrmofDeloitte Touche Tohmatsu.

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