Stakeholder engagement and management in relation to Sustainability and Integrated Reporting

1. Stakeholder Management
In the Context of Sustainability
and Integrated Reporting
Next Generation Consultants
Reana Rossouw
2013

2. Towards the future:
Emerging trends in Stakeholder Engagement (1)
• Understanding stakeholder needs, interests and concerns is a fundamental
part of managing indirect or non-financial risks.
– Engaging with stakeholders, and using information from stakeholder
engagements in decision-making, is fundamental to understanding non-
financial risks and managing an enterprise responsibly. For this reason, social
investment indices, such as the Dow Jones Sustainability Index and the JSE-
SRI Index, give more weight to stakeholder engagement than to any other
social impact measure.
• The measurement of stakeholder engagement used in standards,
guidelines and performance assessments such as the Dow Jones
Sustainability Index, JSE-SRI Index, rely on the existence of processes and
policies for engagement.
– In other words, companies are judged on whether they do or do not engage.
More sophisticated measures of engagement are being developed to
measure the degree of “embeddedness” of stakeholder engagement, and it
is likely that scrutiny of engagement capabilities will increase.
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3. Towards the future:
Emerging trends in Stakeholder Engagement (2)
• As society’s expectations about private enterprise change,
companies may need to engage on a broader number of issues.
– Increasingly, issues that are important to society—water scarcity, HIV
treatment, and climate change — are becoming important issues for
companies to address. Boards and executives will always need to do
what is in the best interest of the company and its shareowners, but in
the future, prioritising issues based on a company’s needs may be less
effective if these fail to also reflect society’s needs.
• Finally, in a move toward corporate governance systems that are
truly responsive and accountable to stakeholder interests, more and
more companies are going beyond engagement to develop
collaborative partnerships with stakeholder groups or enlisting
stakeholders to propose solutions or monitor outcomes.
– To be effective and fair, these governance systems should also have
the capacity to respond to differences in power and access to
resources between and within stakeholder groups.
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4. Lessons from our Experience
• Process
– Identify most material issues
– Identify most material stakeholders as it pertains to the MM issues
• Remember it confirms content, indicators, report style and format
• Basis for definition and identification – risk, opportunity, strategic
• Consider existing stakeholder engagement (stakeholder database), operational
divisions, roles and responsibilities
– Prioritise and map stakeholders together with issues and assign
responsibility
• Define/confirm discussion and engagement methodology and assign
responsibility
• Conduct engagement – link to operational strategies – include in KPI’s, link to
indicators, complete stakeholder register (continuously)
– Engagement confirms content – activities, strategies, programs and
priorities for the reporting process and period – next reporting cycle
– Engagement must also be linked to Disclosure on Management
Approach in report to provide and confirm sustainability context
– Engagement also provides framework for the Integrated Report and
therefore analytical commentary must link to Engagement input,
outcome and impact
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5. In Summary
• Stakeholder engagement has tremendous value across the business
• Stakeholder engagement is best understood if the whole business is
involved
• Stakeholder engagement is better supported if managed in relation
to other communication activities
• Don’t lump stakeholders in homogenous groups
• Don’t make assumptions about the specific risks/issues that will be
discussed
• Don’t pre-empt the process by linking indicators or KPI’s to soon
• Be flexible and allow stakeholders to dominate discussion
• Remember it requires commitment to feedback the outcome and
result to the stakeholders after the event
• Materiality is still the most important principle!
• Less is more!
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6. Do’s and Don’ts of community
stakeholder relations
• Do seek stakeholder partners with real credibility and strong credentials, whose
independence and integrity are unquestioned in the stakeholder communities you
are trying to reach.
• Do give the stakeholder organizations you create or work with genuine
independence, allowing them to set up their own policies and procedures and
giving them the opportunity to communicate with the outside world freely and
without censorship.
• Do involve your own key leaders who are in a position to make and keep
commitments on behalf of the company.
• Don’t create an “Astroturf” organisation—a phony grassroots group that
masquerades as an independent NGO while secretly serving your corporate
interests.
• Do be up-front about your role in helping create and, if necessary, fund a
stakeholder group; if the connection is exposed against your wishes due to
investigative work by the media, it will seriously damage both your credibility and
that of any stakeholders involved.
• Don’t renege on any commitments you make; the damage to your company’s
reputation will be doubly serious if you first boast about, then try to eliminate, any
moves toward dialogue and partnership with outside stakeholders.
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7. Stakeholder Behaviour in difficult
circumstances
• People are often resistant
because of :
– Fear that something bad or
difficult is going to happen
– Uncertainty about the
future
– Doubt about how an issue
will affect them
• And as such it influences
their behaviour
– Denial – resistant - will not
engage
– Turbulence –
argumentative, emotional
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8. Stakeholder Relationships in conflict
situations
Compete
(win/lose)
Collaborate
(win/win)
Avoid/withdraw
(lose/lose)
Accommodate
(lose/win)
Compromise
(half win/half lose)
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9. Reaching consensusConsensus
True consensus
All stakeholders are engaged and
commit to an agreed outcome.
This commitment hold into the
future under challenge
We aim for true
consensus
Qualified consensus
All stakeholders are engaged and
agree on many aspects. However,
there are outstanding issues
We recognise that
this may happen
False consensus
Consensus is declared, but is not
valid due to false restrictions, lack
of engagement, conflict or
avoidance of issues. This leads to
chaos, dissatisfaction and
resentment.
We must avoid this
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10. Overcoming hostility
• Engage in issues that matter
– Focus on clear objectives that require action. Stakeholders have limited time and will prefer to
engage on really important project concerns.
• Be ready to act
– Use engagement to drive decisions, not as a public relations exercise.
• Engage the right stakeholders
– Identify the right stakeholders. Ensure the process is inclusive and diverse. Consider
stakeholders’ expertise, level of influence and willingness to engage.
• Engage empowered representatives
– Engage stakeholder representatives who are empowered to take decisions for their
constituents
• Seek shared value
– Ensure that each stakeholder benefits directly from engagement and understands how project
decisions will impact on other stakeholders
• Agree rules of engagement
– Establish the scope, objectives, roles, rules and risks of engagement at the beginning. Agree
the process of decision-making, conflict resolution and evaluation
• Manage exceptions
– Make certain that all parties have realistic ambitions and agree on clear outcomes of the
engagement
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11. Overcoming hostility
• Provide adequate resources
– Devote adequate resources (time, money and people) to ensure success
• Choose the right formats
– Choose the appropriate format (e.g. private meeting, roundtable discussions, stakeholder
panels, etc.) to achieve the objective of the each engagement
• Act fairly
– Be sensitive to perceived or actual power differences and facilitate the process to allow fair
participation
• Listen to (critical) stakeholder views
– Ensure engagement is a dialogue and not a one-way information feed. Allow stakeholders to
voice their views
• Build trust
– Take time to build trust based on the personal chemistry of the individuals and the common
values of the organizations involved. Commit to long term relationships with stakeholders
• Be open
– Be responsive, consistent and timely in communications. Communicate well in advance,
document the engagement rationale and processes and allow for stakeholder feedback
• Be accountable
– Link the engagement process to project decision making and governance
• Look beyond the engagement
– Learn from the engagement. Involve stakeholders to assess the success of the engagement as
well as the project outcome. Examine whether any next steps are required
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12. Towards Best Practice (1)
• Start early
– Relationships take time to build. Trust and mutual respect are established over time. Trust is
also much harder to build if stakeholders are only consulted when there is a problem or crisis.
• Keep an open mind
– The outcome of a truly open and responsive stakeholder engagement process cannot be
defined in advance as solutions that satisfy multiple parties can seldom be guessed at
beforehand. Consultation where the company has already determined their plan of action is
likely to be perceived as an untrustworthy public relations exercise.
• Tailor engagement practices to the needs and interests of the company and its
stakeholders
– Explain what input is needed from stakeholders and how it will be used in the decision-making
process — driving a “shared values” continuum. Ask for input on how information should be
disclosed.
• Manage engagement as a business function
– Taking a systematic approach that is grounded in the business strategy and operations
increases the likelihood that engagement will create value. As with other key business
functions, direct reporting lines and the engagement of senior management are critical.
• Take a long-term view
– For issues that are intrinsically related to company strategy, on-going dialogue and standing
stakeholder bodies can be more valuable than one time, ad hoc engagement. Publicly
disclosing information that is important to stakeholders helps to ensure that on-going dialogue
is useful for all parties involved.
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13. Towards Best Practice (2)
• Engage in issues that matter
– Focus on clear objectives that require action. Stakeholders have limited time and will prefer to
engage on the really important project concerns.
• Be ready to act
– Use engagement to drive decisions, not as public relations exercise.
• Engage the right stakeholders
– Identify the right stakeholders. Ensure the process is inclusive and diverse. Consider
stakeholders’ expertise, level of influence and willingness to engage.
• Engage empowered representatives
– Engage stakeholder representatives who are empowered to take decisions for their
constituents.
• Seek shared value
– Ensure that each stakeholder benefits directly from engagement and understands how project
decisions will impact on other stakeholders.
• Agree rules of engagement
– Establish the scope, objectives, roles, rules and risks of engagement at the beginning. Agree
the process of decision-making, conflict resolution and evaluation.
• Manage exceptions
– Make certain that all parties have realistic ambitions and agree on clear outcomes of the
engagement.
• Provide adequate resources
– Devote adequate resources (time, money and people) to ensure success.
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14. Towards Best Practice (3)
• Choose the right formats
– Choose the appropriate format (e.g. private meeting, roundtable discussions, stakeholder
panels, etc.) to achieve the objective of the each engagement.
• Act fairly
– Be sensitive to perceived or actual power differences and facilitate the process to allow fair
participation.
• Listen to (critical) stakeholder views
– Ensure engagement is a dialogue and not a one-way information feed. Allow stakeholders to
voice their views.
• Build trust
– Take time to build trust based on the personal chemistry of the individuals and the common
values of the organizations involved. Commit to long term relationships with stakeholders.
• Be open - be responsive, consistent and timely in communications
– Communicate well in advance, document the engagement rationale and processes and allow
for stakeholder feedback.
• Be accountable
– Link the engagement process to project decision making and governance.
• Look beyond the engagement
– Learn from the engagement. Involve stakeholders to assess the success of the engagement as
well as the project outcome. Examine whether any next steps are required.
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15. After the Engagement
• Follow-through is important to any relationship and this certainly applies
to relationships with stakeholders. Whether or not a company is able to
implement what it has learned from stakeholders, there is an obligation
to report back, to make it clear that stakeholder concerns and interests
were heard, considered, and valued.
• Companies have a responsibility to respond to stakeholders about
concerns shared, to explain how or whether concerns or suggestions are
being addressed.
• In addition to responding to issues raised by stakeholders, companies
should keep track of any promises or commitments they have made to
stakeholders. Just as a company would hold themselves accountable for
promising earnings growth to shareowners, commitments to community
members or environmental groups/experts (or any other stakeholders)
need to be taken seriously for an engagement process to be considered
credible.
• Information reported to stakeholders should be translated into local
languages and in easily understood formats, and any material changes to
commitments or implementation actions should be communicated very
clearly.
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16. Questions?
• Reana Rossouw
• Next Generation Consultants
• Specialists in Sustainable Development and
Reporting, Stakeholder Management and
Human Rights Management
• Tel: (011) 2750315
• E-mail: rrossouw@nextgeneration.co.za
• Web: www.nextgeneration.co.za