The Role of Business in Society: Stakeholders & Perspectives 

Part 1

Introduction to the Topic

3

Business and Society

BusinessThe collection of private, commercially oriented organizations

SocietyA broad group of people and other organizations, interest groups, a community, a nation.

Defining Business Objectives

There are five+ one major types of business objectives:

• Survival, • Profit Maximization, • Growth, • Managerial Objectives, • Sales Revenue Maximization,

&

Image and Social responsibility.

Growing Influence of Companies

Country/CompanyGDP/Revenues ($ bil) Global 500 Rank

1. United States $13,202 N/A2. Japan 4,340 N/A3. Germany 2,907 N/A4. China 2,668 N/A.

22. Exxon Mobil 486 123. Poland 339 N/A24. Austria 322 N/A25. Wal-Mart 315 226. Norway 310 N/A27. Saudi Arabia 310 N/A28. Royal Dutch Shell 307 329, Denmark 275 N/A30. BP 268 4

Present Business Environment

Increasing Demand from the Government

+

Increasing sophistication of general public

+

Increased Advocacy groups and watch Dogs

+

Regulatory regimes and Media TRPs

=

Costly and Challenging operating Environment

Why Interface between Business and Society on Social Issues Contd….

• India ranked at 119 in Global HDI index• More than 500 million poor• 62% literacy Rate• 250 million do not have access to basic health services• 450 million to not have access to Sanitation

In contrast• India has one of the highest mobile penetration• Some of the low cost business solutions have worked

This proves that business has the ability to be more effective in market led solutions in some situations

• Both are living organisms and have symbiotic relationship– As seller of goods – As buyer of goods and services– As employer and employee– As individuals and pressure groups– As Govt and regulator

• Issues that matter– Prices– Safety– Well Being/ Trust – Income– Opportunities– Transparency

Contd………Why Interface between Business and Society on Social Issues

Societal Aspirations and Expectations

• Demonstrate a commitment to society through action.

• Insulate society from any negative impacts of company operations, products and services.

• Share benefits of company activities with key stakeholders.

• Increase revenues of company through innovative approach.

• Wealth creation and equitable distribution

Understanding Stakeholders

Stakeholders- Who?

Business: Immediate Sphere of Influence

Who – is to be influenced?

13

Understanding Business Impacts

What groups will be

affected?

What groups will be

affected?

How will they be affected?How will they be affected?

What is the timing of initial and

later effects?

What is the timing of initial and

later effects?

What is magnitude of the effect?

What is magnitude of the effect?

What is the duration of the impact?

What is the duration of the impact?

To what extent will the impact be

diffused in the community?

To what extent will the impact be

diffused in the community?

Evolution of Stakeholder Expectations

Economic Environment SustainabilitySocial

Govt

Media Groups Activists Peers

Community NGOs

Complexity of Stakeholder Expectations

Trust Me Tell Me Involve MeShow Me

Govt

Media Groups

NGOs

Peers

Community

Activists

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Stakeholder Interface with Direct and Immediate Business Impact

• Legal license to operate:– Land title– Permits– Environmental approvals

• Social license to operate:– Access to land: perceived legitimacy of title– Community permission: ‘If you don’t listen when we

have a small problem, we’ll make a big one”– Social acceptance: ability to remain, expand, and

operate uninterrupted

• Koodankulam- Atomic power plant • Nigeria – Niger Delta• Peru – Minera Yanacocha• Gulf of Mexico- BP Oil spill• Singrur- Tata Nano

Examples of Unmatched Expectations and Its Consequences

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Failed Engagement Costs

• Security • Project modification• Risk management• Material damage• Lost productivity• Capital• Personnel• Reputation• Redress

Section 3

Towards Solutions

Mapping Stakeholder Expectations- Illustration

Stakeholder Significance to Business/ Risk Linkage/ Opinion Influencing

Expectation

National level Politicians High - Fluctuates Large physically visible project

Regional Politicians High- Fluctuates -do-

Policy makers/ Compliance Depts.

Medium - Sustained Adherence to best standards

Local Govt. stakeholders High- Sustained. Influenced by above 3

Supplement local development effort

Advocacy groups High- Fluctuating Local development. Disclosures/ transparency, participation in development process

Local stakeholders/ influencers

Medium- Sustained Creating platform for their visibility through opportunities of local development

Community (in project affected areas)

High- Sustained Participation in progress

Public Low Seen to be doing good

Perceptions, Facts and Challenges

Issue Essar Community Challenges

Employment Cant employ locals. They don’t have required skills

Employment is my right.

Not everyone can be employed. Safety at site

Contracts Technical jobs cant be given

We are given only low value contracts. Company has no serious intent to develop us

Developing contractors and entrepreneurs requires much more than just training

Development Infrastructure “If I have water- am I developed”

Infrastructure is visible immediately and development is not

CSR To keep the community engaged

Superficial. No vision on “change” or “solution”

Requires significant investment and long term plan

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Cost of Conflict

Some survey’s suggest: • >30% of cases involve a fatality/injuries, damage to

property and/or suspension or abandonment• 50% involve physical blockade• Environmental/community health & safety issues are

the most common proximate cause of conflict• Most common underlying issues are economic and

social – distribution of benefits, communication, consultation processes – that affect the quality of the relationship

Engagement Models with inclusions

Economic Development, Health,Education, Infrastructure Development

Local Cooperatives Best R&R policies Local Employment Policy

Best HR PoliciesTraining & developmentEmployee volunteer programmeInternal moves

Business Issues (Core Sector) and CSR

Business Issue Where CSR can help

Community expectations Help manage expectations through continuous engagement. CSR will enable engagement on developmental issues hence open a neutral engagement front

Contracts Help in developing small time contractors from community to offset pressure from big daddies

Employment Provide skills for enabling employment elsewhere

Political influence Create forums where community leaders can stand besides Essar

Translating Perceptions, Facts and Challenges into Business Solutions- Core Sector

Issue Business Community Challenges Potential Solution

Employment Cant employ locals. They don’t have required skills

Employment is my right.

Not everyone can be employed. Safety at site

Prepare people with skills before the start of the project. Provide multi skills to align with changing needs during project cycle

Contracts Technical jobs cant be given

We are given only low value contracts. Company has no serious intent to develop us

Developing contractors and entrepreneurs requires much more than just training

Have a long term vendor development policy that enables vendors to evolve at an early stage

Development Infrastructure “If I have water- am I developed”

Infrastructure is visible immediately and development is not

Minimize gap between “your” and “their” infrastructure. Leverage their resources and participation

CSR To keep the community engaged

Superficial. No vision on “change” or “solution”

Requires significant investment and long term plan

Participatory planning

Case Studies Where Business Models have Impacted Society

• Financial Sector-

– Awareness on Financial Tools has helped increase savings

– Micro finance has triggered rural economy and consumption

– Mahindra rural home finance

• FMCG

– Project Shakti and E- Choupal are globally acknowledged examples

• Kisan Kendra/ Agri Information and Services

– Tata, Mahindra, Rallis

• NSDC

– Created training modules with private sector particpation and sponsorship

Thank You