Why companies should engage with their stakeholders?
A well prepared and implemented stakeholder engagement strategy is an effective risk management tool and creates value for companies. It guides a company to make informed business decisions and avoid practices which can be detrimental to its operations, brand image and reputation.
We can all recall examples of companies being dragged in the media and then have to spend huge ammounts of money on P.R bills in order to restore their reputation and rebuild trust with the consumer.
Such example of bad publicity is Johnson & Johnson, which in 2010 had to recall 136 million bottles of Children’s Tylenol, Benadryl, Motrin, and a dozen other products. The source of the trouble was found to be in facilities operated by company division McNeil Consumer Healthcare at sites in Pennsylvania and Puerto Rico.
Engaging with stakeholders can present with new market opportunities and product development capabilities. A great exampe is how Nike, by creating the Making app in 2013, publices now its materials sustainability index to the public and allows designers from across the industry to make more sustainable designs and ultimately lower-impact products. Open communication between the company and its stakeholders will lead to new insights relating to innovation and creativity for implementing best business practices.
Principles of engagement
There are great challenges in engaging your stakeholders, but they do not surpass the risks that a company will face if it fails to engage with them effectively.
Below are a few principles that should act as a guidance or a starting point for stakeholder engagement.
Identify your primary and secondary stakeholders and make sure to repeat the process regularly (eg annualy)
- Engage with stakeholders in a timely manner, be proactive, transparent and encourage open communication in order to build trust.
- Engage on issues that matter, set clear objectives and be thorough on how engagement will add value to the business
- Choose the appropriate format for each stakeholder (eg personal meetings, open days, conferences, focus groups, newsletters, sustainability report) and make sure that the appropriate resources are available (time, money, people) to ensure success.
- Empower and engage the right representatives from each stakeholder group and ensure that they understand how they will benefit directly from engagement.
- Agree on the rules of engagement from the very beginning and make sure that all parties involved have set realistic goals and expectations.
- Link engagement with the decision making process of your company and most importanly learn from the whole process, evaluate the outcome and decide upon the next steps.
It is made apparent that stakeholder engagement requires a clear methodology linked to the overall strategy of the company. As employees are involved in the engagement process that is often informal, as well as formal, their awareness and education in the issues and methodologies is critical.
The benefits of succesfully and seaminly integrating the engagement process are immence! The journey towards building a sustainable business requires that stakeholders will actively engage in sustainable business practices as well. After all, we are as Sustainable as our Stakeholders!
Also read Meaningful CSR? Engage your stakeholders (Part 1).