Managed stakeholder relations foster partnerships, innovation
• A clear objective and scope based on board’s strategic tone characterise effective approach
Abusiness is the expression of complex and dynamic interests and expectations of many stakeholders, all of whom are brought together by the pursuit of the common purpose of stakeholder value creation and capture. Any individual or collective that is affected by the value-creation endeavours of a business qualifies to be a stakeholder of the business.
Stakeholders can be internal to the business — such as employees, shareholders, board members, customers and suppliers — or external, such as the government, media, labour and communities.
Stakeholders wield enormous power over a business and its ability to exist and prosper. Their individual or collective actions and concerns present considerable business risk, especially if not attended to proactively and effectively.
Perhaps no institution illustrates this better than the government and the enormous power it wields as a single and highly consequential stakeholder. After all, the government can bring its enormous regulatory might to bear in influencing either the emergence of a new industry, or the demise of an existing one.
Such significant stakeholder power is not the sole preserve of the government. An isolated community member in the rural outskirts armed merely with a smartphone and social media account can single-handedly mount a successful rearguard resistance against the perceived selfish objectives of a wellresourced multinational.
Such a David and Goliath encounter can trigger a series of events that can inflict irreversible reputational damage and significant corporate value forfeiture. Stakeholder influence and power over the prospects of a business are also non-static, and keeps evolving from one incident to the next, and from one stakeholder to the other, often unpredictably.
How successfully a business embraces and integrates stakeholder relationships management within its strategic core is often influenced by how it defines its role within the wider society. If a business has fully internalised the idea that its success is inseparable from that of the society in which it operates, it tends to adopt a more expansive and constructive approach to stakeholder relationships management. This is especially appropriate in this era of heightened stakeholder expectations and impatient demands.
The King IV codes for corporate governance place the responsibility for effective stakeholder management squarely within the board’s purview.
The board not only has to strike the right organisational tone and culture, but is also expected to inculcate a stakeholder-inclusive approach that attempts to balance the needs, interests and expectations of all stakeholders — all this in the best interest of the business, without which there is no stakeholder to speak of.
The King IV codes are accompanied on this path by the likes of the Global Reporting Initiative (GRI) corporate reporting frameworks, in their advocacy for a proactive, deliberate and sustained programme of stakeholder engagement and management within the business.
The codes and GRI emphasise a broad perspective of stakeholder engagement and their dual impact as a risk response and an opportunity capture mechanism for the business.
Viewed through this lens, stakeholder relations management ceases to be a mere risk management tool but is a source of valuable partnerships, innovation and a competitive advantage for the business. Cultivating an environment of expansive and constructive stakeholder management within an organisation is neither a reactive, isolated intervention, nor is it a tactical response to the eruption of a public relations crisis.
The hallmarks of a robust and effective stakeholder relationship management approach are a clearly defined objective and scope that derives directly from the board’s strategic tone and posture. It has to be systematic, deliberate and proactive,
with measurable outcomes. It has to encompass clear communication about why it needs to be done, what the issues are to be covered, and who needs to be involved.
The AA1000 Stakeholder Engagement Standard lays out a stakeholder engagement process and plan that includes profiling and mapping of stakeholders and the mobilisation of sufficient internal resources to engage with them.
The standard also advocates for ongoing, transparent and honest reporting of stakeholder engagement activities as well as monitoring and evaluation of its health and effectiveness as important components of an effective approach.
Also key is honesty, transparency and a willingness to listen and hear different stakeholders’ perspectives to ensure a relationship of trust and collaboration between the business and
stakeholders. A relationship of trust is a reservoir of corporate reputational capital and goodwill that can be drawn upon during times of tension and conflict. The gently pervading undercurrent of healthy tension between a business and its stakeholders can never be removed permanently because both parties, though united in purpose, have interests and concerns that don’t always overlap. Therefore, instead of pursuing the mirage of infinitely calm stakeholder relations, the business must embrace the inevitable tension as an opportunity to engage.
Once a relationship of trust, accountability, mutual respect and open and honest engagement is established, conflicts arising between the parties will cease to spell a moment of existential crisis for the business.
ALSO KEY IS HONESTY, TRANSPARENCY AND A WILLINGNESS TO LISTEN AND HEAR STAKEHOLDERS’ PERSPECTIVES