Is It Time to Overhaul Stakeholder Engagement?

October 4, 2016
  • Sara Enright

    Former Director, BSR

  • Alison Taylor portrait

    Alison Taylor

    Senior Advisor, BSR

Stakeholder engagement is in need of an overhaul. A mainstay of corporate sustainability for the past 25 years, the practice of stakeholder engagement is widely recognized as essential to building greater trust with groups critical to a company’s growth and survival. Yet, in an era of hyper-transparency and political and social disruption, when businesses face unprecedented competitive pressure to integrate new ideas and voices into their work and stakeholders increasingly expect the private sector to step up its contribution to global sustainable development, companies are finding that their current approach to stakeholder engagement too often misses the mark.

BSR’s new report, “The Future of Stakeholder Engagement,” argues that stakeholder engagement must evolve from a process too often undertaken merely for the sake of doing it, into a strategic priority that integrates stakeholder feedback and input deeply into all aspects of a company’s operations. Done well, stakeholder engagement can make corporate decision-making more effective by using diverse external opinions to inform the creation and implementation of corporate strategy. In other words, stakeholder engagement should be collaborative, inclusive, and strategic.

To this end, we introduce a new framework for the future of stakeholder engagement organized around three dimensions:

  1. The purpose of stakeholder engagement: Companies can move beyond consulting their stakeholders on corporate performance by pursuing opportunities to collaborate on challenges of mutual concern.
  2. The type of stakeholder: Companies can broaden their frame of reference to include not only their direct stakeholders but also more diverse and divergent voices, such as supply chain workers and people who are disproportionally affected by the adverse consequences of business operations.
  3. The level of engagement: Companies can move beyond high-level engagements by integrating stakeholder engagement more deeply into corporate strategy, across all functions and geographies.

The report offers many examples of companies that have successfully integrated stakeholder thinking to become more collaborative, inclusive, and strategic. For example, telecommunications company Orange expands its innovation capacity by partnering with a wide range of stakeholder groups across Africa to co-create new products and services that provide internet and telecommunications connectivity and develop mobile applications for key sectors such as education, agriculture, and financial services. The Walt Disney Company partnered with Good World Solutions to access direct feedback on factory conditions and job satisfaction from factory workers across China, thus empowering the voices of workers in the company’s supply chain and creating a new model for partnership with factory management to track progress over time.  And Rio Tinto builds internal capacity and appreciation for stakeholder engagement by training hundreds of executives and managers from around the company in its Stakeholder Engagement Academy.

Companies like these recognize the full spectrum of contributions stakeholder groups can make, including expertise, credibility, and social networks, as well as the opportunities to innovate and collaborate with stakeholders to manage shared societal challenges. They see a more networked world as a way to better understand and manage systemic change and seek to engage beyond their direct network to include individuals and groups that influence the company’s operating environment. They recognize that a thriving company requires thriving communities, which leads them to engage more deeply to address the issues that impede social development. And they understand that engagement cannot be a limited, time-bound exercise run by a single team, but rather requires the ongoing collaboration and involvement of employees across the organization.

By integrating stakeholder opinion and needs into corporate strategy, a company can begin to move from being reactive to the many conversations happening in and around the company, to intentionally contributing to the issues that are most critical to the business, the communities that it operates in, and the wider social and economic environment that supports its industry. It is our premise that these inclusive outcomes can only be fully realized through the adoption of inclusive processes. This is why working toward more collaborative, inclusive, and strategic stakeholder engagement matters to business and society.

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