Three Ways to Meet Stakeholder Expectations for Local Content Development

Authors

Desislava Kavaldzhieva, Assistant, BSR

Business plays a critical role in community development as an employer, a provider of goods and services, and a purchaser. Many companies have helped spur the economic and social development of communities near their operations by developing local content strategies to hire and source locally, thus making a step toward building an inclusive economy.

“Local content development” is often defined as the added value that a company’s activities bring to a host government and local communities, which in turn stimulates job creation and domestic market growth. Generally, companies address local content development through community training programs and investments in supplier development services.

Local content strategies also create business benefits. These include ensuring access to qualified labor, a stable local supply of goods and services, government permits, and a social license to operate, which means community acceptance, cost reduction, and business continuity.

The Rio Tinto Oyu Tolgoi mine agreement with Umnugobi communities in Mongolia is a leading example of this approach. The agreement sets out employment targets of a minimum 90-percent-Mongolian workforce, construction of and improvements to vocational training centers in seven Mongolian towns, and investments in healthcare facilities and road infrastructure. Positive impacts of the agreement have included a more effective, transparent relationship between the company and community, as well as increased cooperation and mutual socioeconomic benefits.

Despite these types of efforts, there are still communities that incur more negative impacts than benefits. To address this, governments, civil society, and financial institutions have begun to implement regulations and standards that require companies to invest in local community programs and lasting socioeconomic benefits, such as building local skills and the expansion of small businesses.

Although well-intentioned, these standards sometimes can be unrealistic for businesses to meet, since local content development approaches must vary, depending on geographic and social context. Additionally, getting all stakeholders on the same page can be challenging. When companies cannot find common ground with stakeholders, both the business and community face different liabilities. Companies may find themselves in violation of regulations or standards, or lose their social license to operate. Communities may face environmental degradation, unchanged or even increased poverty, or a rise in corruption, among other challenges.

To prevent these pitfalls when developing local content strategies, companies should strengthen their internal and external structures and coordination, which will help them meet stakeholders’ expectations and enhance business benefits. They should start with three steps:

1. Identify stakeholder needs and expectations: Strategies will differentiate by location, the scope of the project, and specific community and host government regulations. As a first step, companies should engage with host governments, employees, communities, and nonprofit organizations to identify the most urgent needs and expectations and align them with the business. Companies should approach local stakeholders in their languages and work with local contact points, who can facilitate coordination with all parties. Newmont’s community engagement approach is a good example.
    
2. Map skills and competencies: To set realistic and achievable targets and successfully execute strategies that deliver local benefits, companies should map their existing resources and employment and procurement needs, as well as the workforce skills and existing suppliers available locally for each procurement category. In 2009, Monsanto partnered with the Indian Society of Agribusiness Professionals (ISAP) to launch project SHARE (Sustainable Harvest—Agriculture, Resources, Environment). The project combines Monsanto’s expertise in food production and agriculture technology with ISAP’s local competencies to equip Indian farmers with knowledge and skills to increase their yields and income and improve food security and market linkages.
    
3. Create continuing transparency and engagement: After defining stakeholder expectations and mapping existing internal and external capabilities, companies should make sure to keep the momentum in engaging with relevant stakeholders. In this essence, companies should track progress, report regularly to stakeholders, and continually receive stakeholders’ feedback and inputs. For instance, long-lasting collaboration with stakeholders is key to the Unilever’s Sustainable Living Plan. The Unilever Enhancing Livelihoods strategy aims at fairness in the workplace, opportunities for women, and inclusive business. The company communicates its progress through regular sustainability reports and interactive maps and uses dedicated platforms to solicit stakeholder feedback and tackle challenges collaboratively.

Businesses working to building through strategic engagement and local content strategies with host governments and communities face a variety of opportunities and challenges. Through careful consideration of company and community needs, aligned with businesses’ capabilities and stakeholder expectations, companies can facilitate local content development strategies that deliver long-term, inclusive economic and social development.