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Rebuilding trust through stakeholder engagement

Yazan : Jonathan Ballantine 5 Ekim 2009 Pazartesi

Part One - Why stakeholder engagement matters?
In the past few years CR has undergone a major surgical facelift and is no longer seen as a fluffy element of business or as an exercise in philanthropy. As part of this transformation NGOs are now seen as partners rather than threats, public relations has become transparency, and philanthropy is simply the cost of doing business. CR has become a hardnosed business decision that provides tangible evidence to all stakeholders that an organization recognizes the physical, regulatory, reputational and litigation risks created by its operational footprint.
 
Stakeholder engagement is the foundation of corporate (social) responsibility. If you are effective in your stakeholder engagement, you will open up new ways to improve your organization’s performance and reputation.
 
Following a series of interviews with senior practitioners at leading organisations in preparation for this feature story, there is a clear message that stakeholder engagement should be taken seriously to survive, if not thrive, in the current economic climate.
 
Stakeholder engagement is essential to business strategy and success since it provides important information about the evolving expectations of many of the actors who matter to the future of a company. ¨For a company like Anglo American, with large scale, immovable, long-life assets, predominantly in developing countries, stakeholder engagement is essential¨, remarked Edward Bickham, VP of Corporate Responsibility.
 
This view is shared by stakeholders themselves. Dax Lovegrove of WWF believes committed organisations who genuinely engage in two-way communication with their stakeholders are “future proofing” their business. Dax in his role as Head of Business and Industry Relations helps organisations to understand the wider impacts, right across the supply chain. He encourages organisations to participate. “Bring us to the table, please!” he requested.
 
Dr. Peter White, Director for Global Sustainability, P&G echoed Lovegrove’s comment on how effective stakeholder engagement is at the heart of future sustainable growth. “ We want to help shape the future – now and for generations to come – by collaborating with local, regional and global stakeholders”, he commented. “By working together through multi-stakeholder initiatives we firmly believe we can make a bigger difference together than we can individually”, he added.
 
Of course, many organisations interact with their customers, employees, suppliers and investors every day – usually unplanned and in rather informal ways. However, over the last five years there has been a shift for organisations to carry out systematic stakeholder engagement, to help understand the perceptions and expectations of stakeholders and create open dialogue with them. Two-way dialogue with key stakeholders on current or emerging issues is important in identifying risk and in developing responsible business strategy, providing organisations with valuable insights that enable them to determine whether perception really does match reality.
 
In an interview for this feature Dr. James Hagan, Corporate Environment, Health, Safety and Sustainability of GSK explains carefully how their new CEO Andrew Witty has made ¨Building Trust¨ one of his five strategic goals. GSK, who have been carrying out stakeholder engagement since the late 90´s, advise organisations not to view stakeholder engagement as an ¨exercise¨ or as a ¨tick in the box¨.
 
White supports Hagan’s view that stakeholder engagement must be built into the business and should not be viewed as a ¨bolt on”. “By approaching it as a two-way conversation enabling you to get vital feedback on business performance, it can shape the future success of your company”, White added.
 
Earlier this month GSK announced plans to cut the prices of its leading medicines in emerging markets, an exercise that over time will build trust and prove beneficial to the bottom line.
 
The reverse often holds true…a perfect illustration on the consequences of stakeholder misalignment is the demise of GM, for which, in part, can be attributed to a lack of understanding with one of its core stakeholder groups - its customers. The first signs of trouble came in the spring of 2008 when fuel prices were spiraling upwards. With a ¨super size¨ production business model with vehicles such as the Hummer and SUVs, consumers were forced to turn their backs on these gas-guzzlers. This, coupled together with an increasing awareness on climate change, has played into the hands of Asian manufacturers like Toyota and Honda for hybrid cars and knocked out every hope of GM (and perhaps every US car manufacturer) to sell their products.
 
Stakeholder information makes organisations better understand what actions to take and what priorities to make. Will Swope, VP of Sustainability at Intel remarked, “Stakeholder engagement helps us identify our most relevant sustainability issues and help us prioritize our challenges and opportunities.”
 
The overall consensus from interviewed practitioners was of the inseparability of stakeholder engagement in building trust, and that through the adoption of a collaborative / cooperative relationship with stakeholders, organisations can more easily distinguish challenges, opportunities and weaknesses related to its vision.
 
Part Two - Engaging through your brand
Some organisations may feel uncomfortable opening up for fear of criticism. Although, perhaps hard to take at the time, critical assessments are a valuable source of information that help progressive organisations adapt to changing market conditions.
 
Some argue that a brand´s image could be damaged in the stakeholder process. However, it is important to highlight the difference between brand and reputation management.
 
Captain Dean Plumb, Manager Strategy & Environment, British Airways cleverly separates the two as having distinct owners. ¨Many organisations can control and manage their brand but it’s the stakeholders who own their reputation¨, he claimed.
 
Cautious to remain focused on the core subject it is important to note the changing attitudes that are brewing. The last 12 months have opened many cracks in the walls around financial, political and business institutions, which is increasing the trend towards transparency, and is causing a profound discussion on the ¨business as usual¨ model.
 
Stefan Stern wrote an article in the Financial Times (16th June) on the challenges of rebuilding trust – posing a highly topical question. ¨Is trust a renewable resource?¨. In agreeing with the basis of Stern´s article, few subjects are causing corporate leaders more anxiety right now than the question of trust. It is also not a natural part of business management, involving more of an emotional response. But, like most parts of business, it needs to be measured and proven to have an effect on the bottom line.
 
Using Plumb’s earlier comment, then large organisations should perhaps be viewed more as brand custodians where the reputation and image of the company is managed by the perceptions of its stakeholders, rather than the individual company. It is possible to conclude from both Stern and Plumb’s comments that stakeholder engagement should at the heart of rebuilding trust.
 
The linkage between brand and corporate responsibility is becoming ever stronger. Look closely at the benefits of a company that is viewed as ¨sustainable¨ and the generic benefits of branding, and they are inseparable:
 
Sustainability…

  • Can act as a differentiator between two companies
  • Can encourage loyalty
  • Can help attract talent
 
Branding…
  • Can act as a differentiator between two companies
  • Can encourage loyalty
  • Can help attract talent
 
Santiago Gowland, VP of Brand Development and Global Corporate Responsibility at Unilever was interviewed for this article and highlighted Unilever´s ¨brand imprint¨ programme and the social role of business in the 21st century.
 
Brand Imprint is a tool that helps facilitate brand innovation through the integration of social, economic and environmental considerations. ¨We were intent on examining the relationship between a brand and society, not just the psychological aspirations of consumers¨, he commented.
 
Stakeholders view Unilever as a leader in sustainability and recognise the company for its commitment to address issues at the brand level. Gowland believes that brands can play an important role in educating consumers, which in turn help influence sustainable behavior.
 
In similar vein Sally Uren of Forum of the Future (in a recent article) suggests that global brands could become ¨agents for transformational change¨ and that they are better placed to lead the charge towards a low-carbon world than government. Provided that consumer / stakeholder engagement is at the heart of brand innovation then they may have a critical role in building trust through the repetition of promises.
 
Many organisations are confronted with the challenge of restoring public trust / stakeholder confidence. The brand is a powerful tool that creates two-way conversations between consumers and sellers.
 
For MAN Group, reputation and trust are at the heart of their understanding of the importance of corporate responsibility and their brand, hence their preferred definition responsible behaviour. During an interview for this article Rob Challis, Global Head of Corporate Responsibility at Man Group described responsible business as being routed in four fundamentals “integrity, excellence, performance and innovation”. “Of these core principles, integrity is fundamental, for without it the contribution of the other three principles will be diminished and eroded”, he remarked.
 
For many organisations, particularly the banking sector, the first step of building trust is to understand why they aren’t trusted. An interesting article appeared in The Independent (24th June) which highlighted how banks are failing to learn the lessons of the crisis and that a ¨business as usual¨ attitude has emerged. Or should that read ¨make hay while the sun shines¨ attitude has returned?
 
Many organisations need to address both short and long term issues in order to rebuild trust – both of which will require a greater degree of transparency. For the banking sector this could be on big-ticket items such as the balance between risk and reward and competence, to specific issues such as bank charges.
 
“Our stakeholders” perceptions can easily be influenced by events in our sector or the broader market. We believe this validates our commitment to total transparency in the ways we inform stakeholders about our business and the values that underpin it”, commented Challis. The major inherent problem for many organisations is that they believe they know why they aren’t trusted and fail to test their suppositions on real stakeholders. In answering Stern’s question “is trust a renewable resource?” - for many organisations the answer is no.
 
Part Three - Approaching stakeholder engagement
 
Does an organisation choose its stakeholders or does a stakeholder choose an organisation?
 
The first step of any stakeholder engagement exercise is to identify or map out who your stakeholders are. But who chooses whom? For some organisations they may not have the ability to choose for themselves. The location, scale and nature of operations will determine who sees themselves as stakeholders. Stakeholders will expect to be recognised when the firm's effect on them is direct or immediate.
 
Dr Peter White, Director for Global Sustainability, P&G succinctly puts it as “anybody with an interest or interaction with your business.”
 
To get the most out of the engagement process the organisation should have a clear understanding of the reasons for wanting to have open dialogue. The reason for engaging stakeholders will determine the style of engagement and stakeholders' expectations, all of which could change over time. Select the appropriate engagement approach - this may be focus groups, individual or small group interviews, surveys, formal referrals, key-person meetings, advisory councils or some other.
 
In December 2004 Anglo American introduced their Socio-Economic Assessment Toolbox (SEAT) for managing local stakeholder engagement and assessing their impacts. Since then it has been implemented in almost twenty countries at over 80 sites at mines, steel works, paper mills, forests and agricultural enterprises. “It is a means of ensuring that we understand our impacts and the perceptions, concerns and priorities of those around us”, remarked Edward Bickham Group Head of External Relations.
 
Bickham claimed the toolbox provides Anglo American guidance on how to identify the full range of local stakeholders and appropriate engagement techniques. The output from these engagements is then measured against internal assessments, where gaps are analysed and then worked on with relevant stakeholders. The operation is then expected to develop interventions to be implemented over the following three years to improve their developmental impacts. The operation then feeds back the outcomes and KPIs through a report to stakeholders. “So pleased are we with the results of implementing SEAT, that we are now rolling out a new toolbox for government relations”, added Bickham.
 
Entering into engagement with a spirit of respect and openness will increase the opportunities for mutual benefit. When inviting stakeholders to participate, be clear about the degree of influence they will have and commit to it. “Nothing is more likely to destroy trust and discourage future engagement than revealing part way into an engagement process that the key decisions have already been made”, remarked Paul Burke, Senior Partner, Acona.
 
As part of their stakeholder engagement strategy Intel have developed a number of tools and processes that provide them with valuable ongoing feedback to help them shape their corporate responsibility strategy and public reporting. Intel conducts annual face-to-face meetings with stakeholders, and generates ongoing discussion through web tools and social media. Intel maintain an e-mail account on their Corporate Responsibility web site, enabling stakeholders to share issues, concerns, and comments directly with members of their corporate responsibility team. Through this e-mail account, they receive and respond to hundreds of messages from stakeholders each year on a wide variety of topics.
 
In addition, Intel have launched an external CSR@Intel blog, where members of their corporate responsibility team and leaders discuss their views and opinions, and receive and respond to comments made by other blog participants. To prioritise their stakeholders and their concerns, they look at both the relevance of the stakeholder’s relationship to their business and the importance of the particular issue being raised.
 
The digital revolution presents a new opportunity for organisations wanting to engage with stakeholders such as consumers or NGOs about sustainability issues. Corporate engagement through social media (such as YouTube, Facebook and Twitter) can be harnessed to great effect – enabling organisations and stakeholders to share opinions,insights, experiences and perspectives with each other. "It requires a greater investment of time and resources to actively engage with stakeholders - but it's an investment that ultimately leads to improved decision-making and helps make you a better company", remarked Will Swope, VP of Sustainability.
 
The key to success in harnessing social media to drive green messages are authenticity, participatory and ubiquity. Companies that are committed to real, embedded sustainability have already accepted these virtues, as they are key components of stakeholder engagement. ¨The digital economy is shifting the power in society - bringing with it a new era of transparency¨, advised Santiago Gowland, VP of Brand Development and Global Corporate Responsibility at Unilever.
 
In order to be effective stakeholder engagement cannot be a bolt on – it has to be part of the DNA. Remember that dialogue means two parties conversing. Cultivate the capacity for listening.
 
Part 4 - Do organisations engage with their stakeholders or lobby them?
 
It can be said that many organisations are not really engaging with their stakeholders but are in fact adopting lobbying tactics to convince them that their approach is acceptable rather than a genuine attempt to help in the identification, development and implementation of solutions. ¨I have lost count of the number of times I’ve read in reports words along the lines of “stakeholders views inform/influence our strategy/policies/actions…” and yet when you read the report, specific examples where this has happened are few and far between¨, remarked Paul Burke, Senior Partner, Acona.
 
Paul suggests this is because the way in which companies are structured, and, for some companies, the distance between the CR team and the CEO. For many organisations the CR lead is, at best, middle management and is basing the rational for change on the views of an indeterminate number of stakeholders, which is open to internal criticism and may go against the views of arguably more important stakeholders such as institutional investors. ¨Here I have a lot of sympathy with this argument, given the increasing emphasis on risk management and being able to quantify upside and downside risk. How sensible would it be to make significant changes to core strategy without a nuts and bolts review of what is being proposed?” he added.
 
GSK is one organisation that has CR embedded through its strategy, and is aiming to be recognised around the world by all stakeholders as a company with the highest ethical standards. GSK understand the importance of a genuine stakeholder engagement process in reaching their objectives. “We will engage with a range of stakeholders and will communicate openly about how we are addressing CR issues, in ways that aim to meet the needs of different groups while allowing us to pursue legitimate business goals”, remarked Dr. James Hagan, VP Environmental, Health & Safety.
 
For GSK stakeholder engagement helps them to identify important issues and shape their responses in the interest of our shareholders and wider society. Regular engagement means they are better informed of emerging and current issues and changing societal expectations.It provides an opportunity for them to voice their approach to responsibility issues, obtain important feedback and build trust. “Most of this discussion takes place in the normal course of business. For example, our scientists regularly meet academics, researchers and other pharmaceutical companies through advisory boards and medical conferences”, added Hagan.
 
In 2005 GSK developed an Environment, Health and Safety and Sustainability Stakeholder Panel in the UK which has provided independent feedback on their performance since 2005. The panel of 13 members represents customers, suppliers, regulators, public interest groups and investors. Two senior EHSS representatives from GSK regularly participate and other GSK managers attend discussions on specific topics. The panel is facilitated by The Environment Council, an independent charity. The panel met in April and October 2008 to debate a range of issues. “We have been using the feedback from the stakeholder panel to inform our Environment, Health and Safety and Sustainability programme and also provides input to the new GSK Sustainability Council composed of senior managers from across GSK business units”, Hagan went on to clarify.
 
Panel members provided feedback about the direction the panel should take and the effectiveness of the dialogue. They proposed that the panel should have a broader geographic reach. GSK have therefore added three new European panel members and are recruiting two more. The panel finds GSK honest and open in the discussions so they consider their participation to be valuable. However, they commented that it takes GSK a long time to demonstrate changes that occur as a result of their suggestions and feedback. ¨We value the feedback we receive from the panel and we will look for ways to speed up our response to their recommendations”, Hagan added.
 
During the interview with GSK I proposed to Dr. James Hagan that organisations could incorporate stakeholder panel comments within the CSR report. James has subsequently informed me that the internal response to this was very favorable and that they will present the idea to their stakeholders.
 
My hearty congratulations to James and GSK for their ability to embrace a suggestion from me (a minor stakeholder) with such swiftness – surely a crucial element in the stakeholder engagement process.
 
Arguably the most critical component of stakeholder engagement is the ¨follow through¨. After the dialogue and engagement process have commenced and there is agreement by both the company and the stakeholders on the approach and deliverables, it is important for the participating parties to deliver on their engagement commitments.
 
Part Five - Translating Stakeholder Dialogue into Practice
 
Stakeholder engagement is only the first of many steps in building trust and confidence with stakeholders.
 
All stakeholders will want to know that their concerns have been heard and, ideally, embraced upon. Closing the loop is perhaps the most critical step of the stakeholder engagement process. However, as corporate responsibility often deals with intangible or, at least, difficult to quantify risks it becomes even more problematic to make sure all the numbers add up to deliver the result stakeholders supposedly want.
 
Something not be underplayed that no matter how much senior management talk about the need to listen and respond to stakeholders, there is still a very strong element of senior people who believe one of the reasons they are paid so much is because they know how best to manage the business. “If they have to rely on stakeholders doesn’t that partly undermine their claims to competence – and therefore large salaries”, remarked Paul Burke, Senior Partner, Acona.
 
In recent years, some P&G stakeholders have asked for more information on product safety, and how it is assessed.
 
“We recognised that continuing questions about the safety of chemicals meant that industry must take a more collaborative and open approach”, remarked Dr Peter White, Director of Global Sustainability.
 
This led to a series of stakeholder workshops and the development of websites such as Science in the Box (www.scienceinthebox.com) to get this information out to those stakeholders seeking it.
 
In January 2008, P&G’s Baby Care division in Western Europe held an expert advisory panel on sustainability, consulting with leading sustainability influencers, NGOs, and experts. The event aimed to dive deep into key strengths and opportunities on Baby Care’s approach to sustainability, share progress, gain input on the division’s strategy, determine how to address carbon footprinting, and identify support to help communicate meaningfully with consumers, customers, and other stakeholders. The panel yielded insightful consultation that influenced Baby Care’s strategy and communications, and future direction.
 
The group received support for its Sustainability Strategy, gained traction on its emerging communication plans, and achieved strong agreement on how to address carbon footprint and labeling. Baby Care will continue to further nurture and build on its relationship with participating panelists.
 
P&G receives approximately eight million consumer requests per year (typically through traditional channels) The well-established Careline Services enables consumers to talk to or communicate with an experienced advisor, this coupled with “out of hours” technology has been a huge success – enabling P&G to communicate effectively with more consumers, which of course provides more insights that help them improve products, services and business processes.
 
“We are continuously innovating to ensure that these insights get to our business teams. We understand the world is changing and aim to better serve our consumers so we can feel the power of a real consumer voice”, White commented.
 
Output from stakeholder engagements played an integral role in the development of Unilever’s Brand Imprint – an initiative that has been created to help marketing consider how social, economic and environmental issues present risks and opportunities for the business. For each brand a multidisciplinary team conducts a detailed assessment, looking first at the direct and indirect impacts of their products, or their ‘imprint’, across the value chain. Unilever’s major brands and categories have now completed a Brand Imprint. This has resulted in important commitments and inspired new ideas for addressing social and environmental issues.
 
Unlike many organisations MAN Group value their people as the most important stakeholder, and is demonstrated by the explicit commitment to employment practices, professional development, health & safety and work / life balance.
 
“Our most important stakeholder is our people – our people are our brand and our Corporate Responsibility Programme reinforces this”, commented Michael Robinson, Global Head of Resources.
 
To develop this valuable resource MAN Group run a number of workshops in association with the Suzy Lamplugh Trust both in London and Switzerland. ¨We organise these workshops simply because it is ‘the right thing to do’, but the programme also supports our ‘Employer of Choice’ strategy and evidences one element in the mitigation of a key business risk for us – our people¨, remarked Rob Challis, Global Head of Responsibility.
 
This internal bias is an interesting approach to take and could help improve an organisation’s reputation. At the heart of every service or communication between an organisation and its external stakeholders there are internal human touch points. Codes of conduct and corporate governance can only be effective to a point. The perceived reputation of an organisation / brand will be influenced by the service levels provided by the people employed there, who are in every sense a part of the brand.
 
 
 
Jonathan has undertaking several, multi-stakeholder research projects on corporate responsibility, carbon management and water stewardship. He excels in the brokering of collaborative partnerships between business and NGOs, stakeholder engagement and outreach communications. In 2007, he was appointed to the advisory board of a European Supply Chain & Logistics trade association where he acts as counsel on sustainable supply chain management. He is proficient in Spanish and has served as a Volunteer Surf Life Saver in Australia for two years. Jonathan now lives in Madrid where he is training to be a golf instructor. He is available by email at jonathanballantine@mac.com or through his blog, CR Vision.
 





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