/ 18 May 2018

Integrating stakeholder engagement with shared value creation

Stakeholders' interests must be thoroughly understood for true shared value creation
Stakeholders' interests must be thoroughly understood for true shared value creation

So much goes so wrong so quickly when we fail to understand each other; how perplexing, as we have been communicating for hundreds of thousands of years — first through body and sign language, then through symbols and drawings, and eventually using the spoken and written word.

Despite the evolution of our communication methodology, our ability to secure widespread understanding through our communiques, especially within the corporate arena, is lagging. The primary reason for this failure does not lie in our inability to articulate ourselves well, but rather in our unwillingness to listen. The ability to listen, with the intent to understand and appreciate what is being said, is critical regarding what we choose to say and do thereafter.

Pertinent in our time is the concept of “shared value creation”, which has quickly become a catch phrase for many corporates seeking to express the valuable role they play in society, primarily in creating wealth, developing human capital and producing goods and services.

There are many interpretations of shared value creation, but for the purpose of this article, a face value interpretation is chosen wherein one must query: what value is created by corporates? For whom is the value created? And how is this value shared?

Usually companies have their own internal conceptualisation of what shared value entails, which is often based on the assessment of philanthropic and/or other forms of socioeconomic or environmental spend, outputs, and in some cases, outcomes. However, the most illuminating and pertinent answers arise when these questions are posed externally to individuals or groups of individuals who are impacted by corporate activity.

The purpose of external consultation or stakeholder engagement is to listen to how others have experienced or perceived value creation and value sharing. Undoubtedly rigorous debate will follow; however, the findings will be far more accurate and enlightening than blindly believing that great value has been created and appropriately shared according to narrow internal definitions.

Since stakeholder engagement is considered good practice by various governance and sustainability reporting guidelines, many companies have retitled stakeholder communication in their reporting headlines as stakeholder engagement.

However, the practice of “engagement” has not yet been fully grasped or implemented, and traditional forms of communication are still executed under the guise of engagement. One-way stakeholder communication through reports or electronic media, or two-way methods via feedback on surveys and questionnaires, or even face-to-face town hall sessions are no longer adequate approaches for obtaining an in-depth understanding of the context within which businesses operate.

Rather than simply providing key stakeholder groups (such as employees, communities, government, customers or shareholders, among others) with selected pre-packaged information when the need arises, a dynamic, multi-faceted engagement strategy that suits the engagement needs of a variety of stakeholders must be developed. This engagement strategy must then be integrated into the overall corporate strategy and operations from inception to close-out, thereby guiding the formulation of appropriate policies and plans that meet both corporate and societal needs.

Stakeholder engagement strategies that are designed in a manner that supports a thorough understanding of corporate activities among a broad range of stakeholders will lead to meaningful discourse on value creation as well as the consequent negative realities of corporate impact. A highly inclusive engagement process must also serve to identify, prioritise, and address the legitimate needs, concerns and interests of various stakeholders. Regular engagement of this nature will enable stakeholders to make informed decisions on risks, impacts, trade-offs, and opportunities, and in so doing assist in identifying risks before they evolve into threats, and highlight opportunities that could strengthen both corporate and social growth and development.

To achieve this level of insight corporates need to employ facilitators and negotiators with robust social skills that include the capacity to listen with an open mind and understand stakeholders’ interests and concerns from differing points of view.

Importantly, issues need to be raised and discussed in a respectful manner that is not intimidating, without the constant reminder of the unequal power distribution that exists between the parties. Stakeholders who are vulnerable due to their dependency on corporate support need to be assured of a protected environment in which they may express their concerns without the threat of negative repercussions. Care should also be taken to avoid pacifying or gaining favour amongst aggrieved stakeholders by raising unrealistic expectations that could later be dismissed as misconceptions or misunderstandings. Stakeholder engagement should be considered as ideal opportunities to solidify meaningful relationships with stakeholders and consequent respect for corporate leadership and trust in the company.

Embarking on a comprehensive stakeholder engagement initiative requires integrity, courage, intelligence, empathy and humility at the corporate level, particularly among company leadership. Integrity, to ensure honesty and transparency without hidden agendas and undisclosed negative impacts; courage, to face detractors or antagonists with respect and accountability; intelligence, to articulate strategic and technical operational queries in terms laypersons can understand; empathy, to understand fears and concerns and respond accordingly; and humility, to learn from the wide variety of backgrounds and experiences that stakeholders represent.

Without these traits is a profit-only mindset that believes that the giant machinery of the corporate will grind on regardless of what is left in the company’s wake; and sadly, this mentality is still quite prevalent. However social activism has been empowered by the technological revolution, and the influence of society on the financial sustainability of any company is greater than ever.

Enabled by the quick and easy access to various social media platforms and a voracious inclination to access information at our fingertips, the rallying cry of a few disgruntled individuals can rapidly become the rallying cry of the masses. Once public anger is unleashed, any attempt to begin engagement with stakeholders from scratch will be met with contempt and considered to be self-serving and unauthentic. The instantaneous dissemination of uncensored and often emotive information on company activity, whether factual or not, could result in detrimental consequences; hence companies need to work harder to engage stakeholders as often as possible about concerns related to real and perceived value, and real and perceived negative impacts.

Based on the learnings gleaned through engagement, the onus is on corporate leadership to establish the policies and procedures required for assessing and understanding the true social, environmental, and economic cost of company activity that is to be evaluated alongside financial returns. The understanding of the true cost of doing business juxtaposed with the value created, and an understanding of who bears the brunt of the true cost, and who gets a share in the value that is created, is fundamental to ensure that the needs of society, the natural environment, and the economy are appropriately balanced.

Important external stakeholders must be informed of, and allowed to provide input on, what the resultant benefits are, who will share in the benefits, and in what proportion the benefits will be shared. Hence decisions on value creation, through inclusive stakeholder engagement, become collaborative with aligned, unambiguous, documented and approved goals and expectations. When there is consensus-based decision making on what is considered as value, how value is created, and how value will be shared, stakeholders become partners in a journey to secure the relevance and longevity of a company — and fundamental to that journey is our willingness to listen!

Dr Ven Pillay is a sustainability advisor and non-executive director