Stakeholder Engagement; The Role of NGOs

• Author: William R. Blackburn
• Pages: 373-417

Chapter 11

Stakeholder Engagement; The Role of NGOs

“Oh, wad some Pow’r the giftie gi’e us

To see oursels as ithers see us!”1

—Robert Burns

Why Organizations Should Engage With Stakeholders

Good metrics, goals, monitoring systems, and reports can improve a

company’ssustainability performance and make it a stronger, more com-

petitive organization. However, to achieve superior performance, a busi-

ness must do more. As James Collins points out in his best seller, Good to

Great, a common characteristic of great companies is that they under-

stand and confront “the brutal facts.”2Companies that see the world only

through the eyes of their management and industry associates often over-

look these facts, comforted by an incestuous dialogue based more on

hope than reality. Certainly no organization wants to hear unpleasant

things said about it or its strategies. But great companies have the cour-

age to listen—not only to hear what stakeholders say, but to ask for their

views and to pay careful attention to the response. Such companies then

reflect their stakeholders’ views in strategic objectives and communica-

tions. These companies don’t do this because they are masochists, but in-

stead because it raises early warning of issues that if left unchecked,

could result in reputational damage, production delays, and inefficien-

cies, and in stock slides from boycotts, strikes, lawsuits, and other prob-

lems. They do it because this engagement provides valuable insights that

can lead to better, more workable decisions. And finally, they do it be-

cause, as we observed in Chapter 3, it creates a quid pro quo, securing

the trust and support of the very people who will make their organization

a success.

For these and other reasons, a growing number of companies have be-

gun to see engagement with stakeholders—meaningful discussion, feed-

back, and problem-solving with them—as an essential part of their busi-

ness processes. These stakeholders have included activists, communi-

ties, governments, investors, suppliers, joint venture partners, employ-

373

ees, and others who may affect the company or perceive they may be af-

fected by it. Why the increasing interest in stakeholders? One reason is

obvious: as most business managers would concede, stakeholders influ-

ence business decisions. See, for example, the results of a 2004 survey of

515 U.S. business executives shown in Figure 11.1. Firms that don’t lis-

ten to their customers, investors, and employees usually don’t last long.

But there are additional factors pushing companies toward more formal

processes of engagement. Certain businesses—especially those in land

development, mining, waste disposal, power generation, or other heavy

industry—now realize that no major development project can proceed

without such engagement. Public comment and hearings are often re-

quired for necessary permits or other governmental approvals. With the

implementation of the Aarhus Convention, over 40 European and West

Asian countries will have additional laws guaranteeing the rights of the

public to environmental information and involvement in environmental

decisionmaking.3New financial reporting rules, like those in France,

may require companies to explain what they are doing to engage stake-

holders.4Engagement may also be mandated by funding institutions.

For instance, under the World Bank’s Equator Principles, which have

been endorsed by over 35 major banks, projects costing over $10 mil-

lion are financed only if it can be shown that the borrower, the govern-

ment, or a third-party expert “has consulted, in a structured and cultur-

ally appropriate way, with project affected groups.”5Moreover, the

voice of the NGOs themselves has grown louder in urging companies to

engage. The GRI and AA 1000 standards both call for businesses to en-

gage their stakeholders to help identify issues for sustainability plan-

ning and reporting.

374 THE SUSTAINABILITY HANDBOOK

Companies like Dow,Suncor, BT, and Intel have found it pays to listen

to stakeholders proactively—not just when law demands it or contro-

versy is feared, but during the regular course of business. They see this

engagement as a kind of annual checkup for assessing the health of their

organizations. Moreover, such processes demonstrate respect for the

needs of others—an ethical value at the core of sustainability. Art Gib-

son, while he was vice president of Environment, Health, and Safety at

Home Depot, expressed it this way:

A company can’t realize the full potential of sustainability unless the

organization and its stakeholders are aligned on the important aspects

of that concept in a way that brings mutual benefit. Certainly that’s

been true with regard to our sustainability-certified wood products. A

good way to achieve that alignment is through an engagement process.

And from our experience, a proactive well-planned process is much

easier than a reactive one.7

STAKEHOLDER ENGAGEMENT 375

Source: The Center for Corporate Citizenship at Boston College and

the U.S. Chamber of Commerce Center for Corporate Citizenship6