Stakeholder Engagement Tips (2019)

 

Stakeholder engagement

Stakeholder Engagement Tips

The environment in which organizations operate is becoming increasingly complex due to everything from regulatory and voluntary requirements, environmental and social issues, to the increased expectations of stakeholders for transparency and accountability.

 

Organizations are finding that engaging with stakeholders is providing them with opportunities to better understand the challenges they face, to understand and mitigate the risks, and also to explore new opportunities including innovations to products, processes, and strategy.

 

Engaging with stakeholders is nothing new, but the level of engagement is becoming more sophisticated, as diverse groups continue to learn how to leverage and maximize the outcomes of these relationships. Although in the past engagement started in response to a negative issue, companies are increasingly being proactive in this area.

 

Stakeholders are those groups who impact and/or are impacted by the company and its activities. This can include but is not limited to:

  1. employees and their families;
  2. customers;
  3. shareholders/investors;
  4. communities;
  5. indigenous peoples;
  6. suppliers/business partners;
  7. academic NGOs/international organizations;
  8. environmental NGOs;
  9. government/regulators;
  10. trade unions;
  11. media;
  12. advocacy groups.

 

Why is stakeholder engagement important?

stakeholder engagement

Better informed decision-making.

Stakeholder engagement gives an organization a clearer picture of external and internal threats and opportunities. Management can get better information and therefore can make better decisions.

 

Spot problems before they occur. Engagement can help organizations spot trends and issues that may impact their activities as well as possible solutions.

 

It also allows them to assess and manage risks by identifying problems before they occur. The mining industry uses stakeholder engagement tools to engage communities and their representatives prior to breaking ground.

 

Legal and voluntary obligations.

At a basic level, organizations are required to engage stakeholders in their activities and disclose information through different legal requirements, as well as voluntary obligations (e.g., GRI, the Global Compact, SA8000, and the Equator Principles).

 

Increased transparency and credibility.

Companies such as Nike have multi-stakeholder review committees which work with them on the development of their CSR report. As a result of stakeholder dialogue and subsequent feedback, Nike has been disclosing an unprecedented amount of information about its operations.

 

Access to resources.

Companies benefit from a wealth of experience, expertise, and resource sharing by engaging stakeholders. Resources can be technical, human, knowledge, physical, and financial, and can include better access to information and networks, greater reach, improved operational efficiency, more appropriate and effective products, and services, etc.

 

Identify opportunities.

Engagement allows organizations to better understand their customers and their needs in order to develop new products, processes, and services, as well as enter new markets. Working with different partners allows a company to see issues through a different lens and come up with creative and innovative solutions.

 

FedEx partnered with the Alliance for Environmental Innovation to reduce the environmental impact of their vehicle fleet, hoping that the new hybrid electric vehicles will replace the company’s 30 000 fleets, leading to significant reductions in environmental emissions.

 

Making an impact. According to the IBLF, ‘working separately different sectors have developed activities in isolation – sometimes competing with each other and/or duplicating efforts and wasting valuable resources.’ Because partners have similar goals, the idea is that they can accomplish more by working together.

 

Provide a ‘License to Operate.’ When company performance departs from stakeholder expectations, outrage results which can put in jeopardy not only a company’s social license to operate but also potentially its regulatory license. High levels of outrage are disastrous for corporate/industry reputation.

 

Free prior informed consent. The consent of groups impacted by a company’s operations must be given freely, without coercion, manipulation, or undue influence of pressure.

 

These groups or individuals should be provided with all relevant information in relation to the proposed activity before the activity starts and they must agree to the activity. Increasingly, regulations require companies to get this.

 

How to engage with stakeholders

engage with stakeholders

Determine who the stakeholders are and what issues are significant to them. Engagement goes beyond identifying those groups that could have an adverse effect on a company’s activities to actively engaging with those that could also be helpful.

 

Engagement may focus on one group of stakeholders or several and may involve a different group of stakeholders depending on the issue or project. Stakeholders can be determined:

 

  1. By responsibility. People for whom you have legal, financial, or operational responsibility.
  2. By influence. People who are able to influence the ability of your organization to meet its goals and influence others.
  3. By proximity. People that your organization interacts with most.
  4. By dependency. People who are dependent on your organization such as employees, their families, and customers.
  5. By representation. People such as heads of local communities, trade union representatives, councilors, etc.

 

The more information you gather about who your stakeholders are and what issues are significant to them, the better able you will be to engage effectively.

 

A company must also consider a stakeholder ’s capacity for and willingness to engage:

Power and reach of the representative. Not all NGOs are the same. There is a huge variety of global and local NGOs: broad versus narrow scope, some work alone and others work as part of networks, some are campaign-focused while others are more collaborative.

 

Knowledge of the issue. Be clear about the representative’s knowledge of the issue, they may know as much, more, or much less than you do. Different stakeholders will use different vocabulary to express ideas of sustainability. Spend the time to make sure that everyone is on the same page before discussions begin.

Experience

Experience working with business. While business may have little or a lot of experience working with different stakeholders, the stakeholders themselves will also have different levels of experience. Some, such as the World Wildlife Federation and the World Conservation Union, have specific divisions that focus on working with business.

 

Others, in particular, small-scale NGOs, may not have experience and may not have sufficient capacity to engage. This does not mean that engagement should not be attempted, but capacity issues should be accounted for.

 

Strengths and Weaknesses. Consider the strengths and weaknesses of your own organization as well to engage with stakeholders.

 

What level of engagement? Low levels are adequate for solving or addressing minor challenges, but engaging more deeply has the potential to enable more sustained changes and transformation.

 

At earlier levels of engagement, you are able to engage more stakeholders while higher levels (e.g., partnership) require more resources. The level of engagement will depend on your strategic engagement objectives and may be different for different stakeholders.

 

Ignore or monitor. An organization chooses not to engage or communicate with stakeholders and hears their concerns through letters, protests, and websites.

 

Communicate

Communicate

An organization puts together messages targeted to particular stakeholder groups such as brochures, reports and websites, speeches, conferences, and so on, and gets involved in transactional relationships, for example, grantmaking.

 

Consult. An organization collects information from stakeholder groups directly through surveys, focus groups, workplace assessments, one-to-one meetings, etc.

 

Dialogue. An organization works with the stakeholder to gather information and advice but goes a step further by exploring different perspectives, needs, and alternatives.

 

Collaborate. An organization gets involved in two-way dialogues such as advisory panels, forums, participatory decision-making processes, joint projects, voluntary two-party or multi-stakeholder initiatives, driven by both the company and the stakeholder.

 

Partnerships. Both organizations share the risks and benefits of engagement. They look for synergies between competencies and resources; these can be between companies, companies and NGOs, joint ventures, alliances (e.g., Lafarge worked with CARE to develop its health policy in Africa).

 

How to engage?

A company seeking to engage with stakeholders should consider:

How to engage

1. Why does it want to engage? Engagement should not be an add-on or one-off activity. A company needs to strategically think about why they want to engage.

 

2. What should it be engaged in? Engagement can be focused on a particular issue, a process, a product, or a decision. It could be related to the new policy, where to build a new site or help in entering a new market.

 

Sometimes there is no specific subject for engagement and the engagement is focused on developing a dialogue between groups. Be clear about how this is going to benefit the business and what changes you are willing to make based on the engagement process.

 

3. What are the strategic engagement objectives? Think strategically about what you want to get out of the engagement. This can be anything from developing a new approach or managing risks to just gathering more information. Agree on the rules of engagement.

 

The most important indicator of success is clearly tying the stakeholder engagement to a strong business need. This means that there is a clear link to core strategy, resources to support the engagement, and genuine business interest in the outcome.

 

4. Spend time getting to know each other. The success of engagement is often based on the degree of respect in the relationship that has been built over time.

 

Spend time building the relationship, understanding the strengths and weaknesses of both organizations. Minimize uncertainty by agreeing on clear goals and policies and providing the information to act on them.

 

5. Build internal capacity. Assess your organization’s internal capacity for engagement and understanding of the issue. Engagement is part art and part science, and different skill sets are needed, as well as new forms of leadership.

 

6. Embed it into the organization. Engagement should be managed like a business function; it should have a clear strategy, objectives, timetable, budget, and allocation of responsibilities.

 

Engagement should be part of performance evaluations for leadership. It should also focus on strengthening the company’s ability to respond to the issues and opportunities brought up by the engagement process.

 

7. How can success be measured? Ensure that goals and milestones are established and that mechanisms exist for monitoring performance and tracking achievements.

 

Continually revise engagement performance and make needed adjustments. Ensure that there are mechanisms in place to take the learnings and put them into improving your business. Share learning and follow up.

 

8. Establish grievance mechanisms. Stakeholders – in particular individuals, workers, and communities whose human rights are negatively impacted by a corporate operation.

 

Tips

Manage expectations

Manage expectations. Some stakeholders want to open a dialogue while others will expect specific operational changes or adherence to certain performance standards. Be clear about what your and their expectations are.

 

Understand the potential obstacles to participation. Consider the specific cultural circumstances of the engagement such as language, customs regarding social interaction, and gender issues, the scale at which the representative operates – global or local, understand that stakeholders often have limited financial means and staffing capabilities.

 

Be transparent. Provide the stakeholders with enough information so that they can contribute to the process. Be open and honest during the process. Have clearly defined lines of communication.

 

Get in early. Relationship building takes time. Stakeholder dialogue should not be hurried: start early, invest in planning and preparation, and allow people time to learn from and with each other. Allow for sufficient resources to support the engagement.

 

Don’t wait until there is a problem to engage. Often, interacting with stakeholders is viewed as low priority but when a conflict or crisis does arise the absence of an established relationship can challenge communications.

 

Stakeholders are less likely to give a company they don’t know the benefit of the doubt, and making contact with stakeholders in a reactive mode can create lasting negative perceptions as well as questions over whether a company is being genuine.

 

You don’t have to be perfect. Stakeholder dialogue can often be messy, disjointed, and even chaotic at times. Remember to be transparent, open to new ideas, empathetic, listen and reflect. Focus on quality, not quantity. Take it seriously.

 

Understand what the risks are. What arethe risks associated with engaging? What about with not engaging or with engaging poorly? Be patient. Partnerships take time.

 

Strategy

Strategy

‘The fact is, the prevailing approaches to CSR are so fragmented and so disconnected from business and strategy as to obscure many of the greatest opportunities for companies to benefit society. 

 

If instead, corporations were to analyze their prospects for social responsibility using the same frameworks that guide their core business choices, they would discover that CSR can be much more than a cost, a constraint, or a charitable deed – it can be a source of opportunity, innovation, and competitive advantage.’

 

Until recently, the management of social and environmental issues was largely driven by external factors and the response by business mostly tactical and communications driven.

 

Today these issues have ascended to the corporate agenda as issues that are increasingly ‘real.’ With this increased awareness and acceptance is coming a slow, but necessary shift to mainstream these issues into the overall strategy of a company.

 

If sustainability is a puzzle, the strategy is the centerpiece which keeps everything together. Incorporating sustainability into strategy not only shows that a company is taking these issues seriously, more importantly, but it also ensures a real organized effort rather than small, unconnected activities.

 

It inspires employees and mobilizes the whole company and its supply chain toward common goals that benefit both the company and society at large. The goal: that sustainability is so integrated it becomes hard to distinguish from the day-to-day business of the company.

 

Why is it important?

To take full advantage of opportunities. Partial or bolt-on approaches don ’t work. Although individual projects across the organization can have limited success, an organization will not truly see the benefits of sustainability unless it is integrated into a company’s strategy at all levels.

 

To mobilize the whole company. A strong, clear, and inspiring sustainability strategy can guide the actions of employees and get them motivated and excited. A company can better understand its business and maximize the indirect benefits which a coordinated approach to sustainability can bring.

 

Stakeholders are asking for it. Shareholders, regulators, customers, employees, and business partners are increasingly expecting companies to explore these issues and can tell the difference between a company that takes these issues seriously and one that does not.

 

The risk is changing. Business is being confronted with an increasing variety and number of risks. A business ’s ability to achieve its objectives depends on being able to recognize and deal with these. Recognize that not all risk is a downside and that some risks also present opportunities.

 

No longer just for ‘high-risk’ companies. Sustainability has moved beyond being an issue just for companies in sectors like oil and gas, who have an obvious impact on the environment and society. Today, companies in virtually all industries are affected by sustainability issues.

 

Differentiation. In today’s business reality you can’t just do what everyone else is doing, you need to be different, unique. In addition, companies can shape their industries. There is a lot of room for companies to become leaders locally, nationally, regionally, and internationally in these issues.

 

The key concepts

Embedding sustainability into a company’s strategy involves developing an understanding of what the issues are, how they will affect the business, and its ability to continue to do business in the future.

  1. Understand the wider business
  2. Understand how sustainability-
  3.  Understanding risks and magnitude of risks
  4.  Sustainability strategies sustainability strategic options
  5.  Goals and targets the company
  6. Working and learning from others
  7. Companies active in influencing wider change
  8. Getting things right the first time
  9. Identifying and involving stakeholders in strategic decisions
  10. Working with others
  11. Influencing change

 

The wider business environment

 business environment

An organization needs to understand the broader environment in which it operates and how this environment can and will affect their operations. Several tools already used by managers are being expanded to include relevant sustainability issues.

 

These tools are being used not just to see the big picture, but also to explore what the future may bring and how this may affect the way they do business. Based on this information, an organization can decide whether they are interested in just keeping up with the change, or playing a key role in shaping their industry.

 

PEST (political, economic, social, and technological trends) is one such tool. It is a process technology that outlines how forces in the larger business environment will change over time. This process has been expanded further to include other trends:

 

Economic. Health and director of the economy (or economies) in which the firm competes. Variables include GDP levels, inflation, interest rates, money supply, unemployment, and disposable income.

 

Social. This can include demographic variables such as population size, age structure, geographic distribution, ethnic mix, income distribution as well as tastes, fashions, attitudes, and values.

 

Technological. This can include understanding current technologies (e.g., products, processes, materials), as well as emerging or undeveloped technologies.

 

Ecological. This can include concerns for the sustainability of the physical environment, greenhouse gases, waste disposal, environmental policies, and energy consumption.

 

Media. The increasingly important influence of media on business, politics, and society – as an opinion former and shaper – and its power to affect outcomes.

 

Political. This can include government stability, alignment at the international level, taxation and fiscal policy, foreign trade regulation, social welfare policies.

 

Legal. This can include employment law, health and safety, and product safety.

 

Ethical. This includes the rising number of codes affecting the ways a business should operate, which increasingly have a financial impact on the company’s performance.

 

Understanding where you stand

sustainability conversation

A range of widely used management tools can be applied to help guide your thinking on sustainability, whether it be for a whole company or for a particular activity.

 

Because these are familiar tools in business, they can be a good starting point for a conversation about sustainability. ‘Five forces’ is a tool widely taught in MBA courses, used to analyze the competitive forces that shape an industry and that can influence business profitability. The five elements it considers are:

 

How hard is it for new companies to enter this industry?

 

The threat of new entrants is usually based on the entry barriers for that market, or in other words when it is too time-consuming or expensive to enter easily.

 

This can include, for example, patents for green technology. While usually new entrants to a market are considered a threat, sometimes this can turn out to be a good thing.

 

For example, when Clorox entered the green cleaning product market with its green cleaning brand Green Works, rather than taking away market share from other smaller brands such as Seventh Generation, it actually played a role in growing the overall market.

 

The threat of substitute products or services. As with competitors, today new innovative products and services are not just affecting their own sectors, but can also have a huge impact across sectors.

 

New forms of service delivery are bringing in greater profits while also enabling companies to build customer loyalty and long-term competitive advantage. Many consumers are looking to switch to more sustainable options once they become available.

 

Rivalry among established firms. Who are the existing competitors in the industry and what is the level of competition? In the past new innovations and companies usually only affected specific sectors;

 

however, today innovations in sustainability are impacting across sectors regardless of the size or location of the company. Many companies are choosing to work together to further sustainability issues, for example through initiatives such as labeling schemes.

 

The power of buyers. Who is buying the industry’s products and how easy is it to negotiate with them? Many organizations that have made a commitment to sustainability are now also looking at the products and services they are buying.

 

One example is The Warehouse, New Zealand’s largest mixed retailer, who in 1999 declared a national corporate goal of zero waste. In order to reach this goal, the companies it buys from – its suppliers – were given radical packaging reduction targets.

 

The power of suppliers. Who supplies the industry’s inputs and how hard is it to negotiate with them? This includes raw materials, labor, and expertise.

 

For example, some suppliers of green products and services charge a premium for the products, not just because of high costs associated with them, but also because there is a higher demand for these products with not a lot of suppliers offering them.

 

SWOT is another strategic planning tool used to evaluate a company's or project’s strengths and weaknesses in relation to external opportunities and threats.

 

It is also used once objectives have been identified to help in pursuing those objectives. For example, a traditional SWOT analysis conducted on labor issues within the supply chain of a company could look like this:

SWOT analysis

Strengths.

These are attributes of the organization that help in achieving the objective. For example, the company has partnerships with some NGOs who specialize in this area. Some of their suppliers have sustainability-related certifications.

 

Weaknesses.

These are attributes of the organization that is harmful to achieving the objective. For example, the labor practices of some of the company’s suppliers are not known and could be bad.

 

Opportunities.

These are external conditions that are helpful to achieving the objective. The company could have access to new customers if all of their suppliers meet the minimum or high labor standards. Suppliers themselves will also benefit as higher labor standards can create a more stable and productive workforce.

 

Threats. These are external conditions that are harmful to achieving the objective. Poor labor standards could become known by the media or stakeholders and have a serious effect on reputation and ability to keep customers.

 

Different organizations have been looking at how to better incorporate sustainability into the traditional SWOT analysis, for example, the World Resources Institute’s work around a sustainability SWOT (or sSWOT). The elements of this include:

 

Environmental challenges.

Look at which environmental challenges impact your business/project and connect these with other big trends that are shaping future markets. For example, links between climate change and future commodity costs.

Threats

Threats. Where are environmental challenges creating broad threats to future business value, both directly and indirectly? For example, how may higher costs or supply chain disruptions threaten a company’s own costs or its suppliers, customers, or markets?

 

Opportunities.

Where is there a growing gap where you can create new solutions for environmental challenges? Look at those threats where current and best practices are not sufficient to meet the scale and pace of the problem.

 

For example, a company that manages fleets of corporate cars might see an opportunity in the lack of affordable low-carbon vehicles or financial incentives for sustainable transportation.

 

Strengths.

In what unexpected ways can you apply your strengths to environmental challenges? Start with your competitive advantage but also broader strengths such as corporate culture. Include conventional strengths or new and creative ways of leveraging existing competencies.

 

For example, GE and DuPont have remained on top because of their ability to adapt and apply core strengths and are now positioning themselves to provide solutions to environmental challenges.

 

Weaknesses.

Look at your vulnerabilities, obstacles, risks, or blind spots and potential partners who could help in bridging some of these gaps. For example, a water utility and electric power utility may want to partner to manage water resources more effectively amid changing climate conditions and ensure an adequate supply for the community.

 

Act. Prioritize and act on your findings. What can you do in the near term, mid-term, and long-term? What should you invest in today so that you can lead markets tomorrow?

 

Understanding risks

Understanding risks

According to the WBCSD, ‘The challenge for the corporate sector is to understand how different sources and magnitude of risk are likely to affect them (positively or negatively) over the long term.

 

In order to gain that understanding, companies need to take a genuinely holistic approach that includes a consideration of sustainability as well as commercial, political, and societal risks.’

 

A business’s ability to achieve its objectives depends on it being able to recognize and deal with risks. Not managing these risks properly can have a major impact on business reputation and also on financial, social, or environmental performance, as many so-called non-financial risks can rapidly become material.

 

Business is being confronted with an increasing variety and number of risks relating to sustainability. Global population increases are leading to increased demand and scarcity of resources like clean water.

 

With increased interconnectedness related to growing population densities comes greater levels of international trade and significantly improved information sharing across the globe. Increased globalization of markets has led to increased complexity in the way businesses operate.

 

A threat may build slowly from a number of small events, but one of those events can be the catalyst that sets off an uncontrollable reaction. A relatively minor incident in one country can have a bigger impact elsewhere.

 

The WBCSD identified a list of mega-risks, part of the ever-increasing variety of risks that companies are confronted with, that present unprecedented challenges as well as potential opportunities to companies and governments alike. These include:

 

Energy and climate.

The environmental impacts of rising energy production and consumption are introducing uncertain-ties to industries, such as oil and gas, reinsurance and agriculture.

 

Demography. As the population continues to grow, population dynamics are at the root of almost every trend shaping tomorrow's business climate.

 

Intangibles. The value of corporations is increasingly made up not of tangible assets such as property and land, but of intangible assets such as reputation, brand, trust, and credibility – up to 75%.

 

Goals and targets

Goals and targets

Companies that are taking sustainability seriously are setting goals and objectives to guide their actions. Having a clear set of goals focuses on the organization in a common direction. More importantly perhaps, having clear and inspiring goals will motivate employees. Goals should:

 

Be clear. Goals should be clearly understood. Have objectives framed so that all members of the team know whether or not they have been achieved? There should not be so many that they are difficult to follow.

 

Be credible. Goals should be realistic and believable. They should be put in place for the short, medium, and long-term and you should show the steps needed to reach those goals. In addition, don’t have too many. Be absolutely certain that your organization can and will live up to the standards you set.

 

Be consistent. Goals should be visibly supported by management and be incorporated into the way employees are rewarded. They should be used in making business decisions and should not contradict with goals that teams already have.

 

Be challenging. Have elevating objectives that are personally challenging, inspiring, and important. Sometimes more progressive goals are easier to reach than smaller ones.

 

Clothing manufacturer Patagonia is working to meet its goal of recycling 100% of its products through its ‘Common Threads ’ garment recycling the program, where customers can return used clothing which is then turned into new products.

 

Be communicated. Systems should be in place to collect, compile, and report on these goals. Progress toward goals should be reported on frequently, internally and, where relevant, externally.

 

Be celebrated. Build enthusiasm for goals and celebrate reaching those goals.

Be continuously evolving. Goals should be evaluated on a regular basis. P&G provides information on their sustainability goals yearly, along with the progress that has been made. In early 2009 they announced significantly increased targets for 2012 reflecting the company’s continued commitment and progress in sustainability.

 

Be catchy. Package your goals in a story that is easy to remember and which inspires employees and stakeholders. Herman Miller’s ‘Perfect Vision’ initiative is a strategy to achieve a wide range of corporate sustainability targets including zero waste to landfills, zero hazardous waste generation, and a carbon-neutral operational footprint by the year 2020.

 

Companies aren’t just creating goals, in many cases, they are choosing to make this public and once they go public there is no turning back. The Clinton Global Initiative, for example, is an initiative focused on turning ideas into action.

 

Through its ‘Commitments to Action’ initiative, members translate practical goals into meaningful and measurable results aimed at addressing global challenges.

 

Working with others

area of sustainability

In the area of sustainability, no company is expected to figure it all out alone. Businesses are coming together in networks at the local, national, and international level to share best practices and lessons learned, to create minimum standards, and to push the agenda forward.

 

In fact, a lot of the progress being made is because of the increase in strong and meaningful collaborations. They play a key role in bringing like-minded companies together, providing a space for them to share lessons learned and raise awareness of the case for sustainable business.

 

These networks also provide a range of tools and advice on how to put sustainability into practice in their businesses, give organizations access to different sets of expertise, competencies, and perspectives of partner organizations, and allow them to share/reduce the amount of risk and costs sometimes associated with moving forward.

 

There is also evidence that companies that derive profits from their sustainability efforts are far more likely to be taking a collaborative approach.

 

But they go beyond this, collaborations also provide a space for the business sector and often other partners such as NGOs and governments to create visions of what the future of business may look like and help to organize and drive more systemic change.

 

The National Business Initiative, a group of leading companies in South Africa, for example, has influenced government policy in areas ranging from education and housing to skill development, tertiary education, and energy efficiency.

 

This blog presents a wide range of different coalitions which generally fit into the following areas:

Companies that work with each other. This can be several companies collaborating on one issue or project (e.g., Refrigerants Naturally) or on several issues (e.g., company network Business for Social Responsibility). It can also be two companies, even competitors, working together – such as Ford and Toyota (see Trends in this blog for more).

 

Companies collaborating with NGOs or government. NGOs have credibility among stakeholders and a distinct set of competencies and strengths. This can be a company working with an NGO (e.g., Nudie Jeans working with the Fair Wear Foundation) or several (e.g., WWF’s sustainable business network).

 

Single-industry collaborations. This is when companies, NGOs, and governments come together around a very specific industry (e.g., Sustainable Apparel Coalition) or issue (e.g., Roundtable on Sustainable Palm Oil).

 

Multi-industry collaborations. Companies, NGOs, and governments are increasingly coming together across industries to work on several issues in this space (e.g., UN Global Compact) or one specific issue (e.g., FSC).

 

With so many options, how can an organization choose which groups to work with? Here are some things to look at:

 

What themes or issues do they cover? Networks will either pick a few issues and focus exclusively on those or, in some cases, operate at a much broader level and explore the issues that are important to their members.

 

The Rainforest Alliance works to conserve biodiversity and ensure sustainable livelihoods by transforming land-use practices, business practices, and consumer behavior.

 

Who coordinates them?

Networks can be coordinated by any number of groups, including governments, NGOs, the UN, or businesses themselves. Most organizations are already part of a professional or local network of some sort, many of which have started to work on sustainability and provide resources for their members.

 

Where do they operate? There are networks operating at local, national, regional, and international levels. Some groups operate at a national or local level but are themselves part of a larger, sometimes international network. The WBCSD is a global network of companies committed to improving the long-term sustainability of their own operations.

 

The network brings together over 200 international companies from more than 35 countries and 20 major industrial sectors with a shared commitment to sustainable development. The Council also benefits from a global network of more than 55 national and regional business councils and partners.

 

Who are they aimed at? Is the network aimed at organizations working in a particular sector or is it aimed at businesses at a broader level? Is it mainly for large companies or for small ones or both? Who are the other members?

 

Is this a group of organizations you are interested in working with? ICLEI – Local Governments for Sustainability is a network for local governments around the world working on sustainability issues. Cities and towns of all sizes from over 84 countries are members.

 

How do they work in practice? Being part of a network takes time and resources from a company, therefore the decision to join should be taken seriously.

 

Different networks will require different commitments from members; signing on to a code of conduct and upholding certain minimum standards – some have mandatory sustainability reporting requirements.

 

The Sustainable Business Network in New Zealand has a membership fee structure based on the turnover of the company so that small companies pay less in membership fees.

 

What are the benefits of joining? Joining a coalition means that you will be an active participant, so think about whether it makes sense for you. Does the network have influence? Will it help you stay ahead of the game? Does it focus on issues that are material to your business and your stakeholders?

 

For example, the Sustainable Apparel Coalition is an industry-wide alliance of apparel and footwear brands, retailers, and suppliers working to develop an index that measures the environmental performance of apparel products. As one member of the Sustainable Apparel Coalition stated, ‘we need a common language before we can be competitive.’

 

IKEA recognizes that by cooperating with companies, trade unions, and organizations, they are able to learn, share experiences, and accomplish more than they could have done by working on their own.

 

Cotton is one of the most important raw materials for the company; however, conventional cotton growing and processing consumes large amounts of water and chemicals. In order to help guide their strategy, they have chosen to work with different networks:

 

Work with WWF focuses on better management practices in India and Pakistan, environmental practices that enable farmers to reduce environmental impact, improve e-efficiency, maintain crop yields, and increase their gross margins.

 

 Work with the Better Cotton Initiative aims to promote measurable improvements in the key environmental and social impacts of cotton cultivation worldwide to make it more sustainable.

 

Work with UNICEF aims to prevent young girls from working on cottonseed farms in southern India and instead make sure these children gain access to quality education.

 

IKEA also provides, as do many other companies, a list of the organizations they work within their annual reports.

 

Influencing change

Influencing change

One of the most important roles that a company can have in society is influencing and driving change at the highest level. Much of the emphasis when it comes to sustainability has been focused on a company’s own direct impacts, things like tonnes of emissions or amount of raw materials used.

 

However, increasingly there is a much wider recognition of the influence companies have and could have on other parts of the business environment, the way they and their peers will do business in the future.

 

Although traditionally companies have pushed for less regulation, there is a growing number that is pushing for tougher regulation.

 

Companies are recognizing that if they invest the time and resources in becoming more sustainable and being beyond compliant, then they can benefit from this and also stay ahead of their competition when the standards are raised. There are countless ways that companies can influence larger changes:

 

Create an even playing field. According to personal care company Burt’s Bees in the USA, ‘78% of people think that natural personal care products are regulated – 97% of people think they should be . . . the fact is, they’re not.’ The company pushed for a clearer definition of what ‘natural’ is, and is not, in the US market.

 

The result was the Natural Standard for Personal Care Products launched on May 1, 2008, which required products labeled or branded as ‘natural’ to be made of at least 95% all-natural ingredients and to contain only those synthetic ingredients allowed under the standard.

 

Prior to this, companies could label a product as ‘natural’ when they had as little as 1% natural ingredients. This helps Burt’s Bees as over half of their products are 100% natural and they are working on the rest.

 

Companies influencing other companies. Companies are not only using their influence to bring about change at a policy level but also in other companies. In 2007 the Aspen Ski Company removed Kimberly-Clark products from all its facilities. It even renamed one of its ski runs, which for over 40 years had been called ‘Kleenex Corner.’

 

According to Matthew Hamilton, the manager of Community and Environmental Responsibility at the resort, ‘We will not consider using any Kimberly-Clark products until the company has committed to not source from endangered forests, dramatically increase its use of recycled fiber, and source from certified sustainable logging operations.’

 

As a result, they have been able to enter into an environmental dialogue with a company 160 times their size.

 

Companies influencing decisions made by the government by lobbying. The Mary Kay cosmetics company, which has always focused on giving women the chance to succeed, took their founder’s passion one step further to try and stem violence against women.

 

The company actively lobbied the US government to reauthorize the Violence Against Women Act, and the saleswomen from the company spoke to legislators about the importance of renewing it.

 

In 2006 they succeeded, as the act was reauthorized into law. Levi relies on Guatemala for materials, so when the US government in 2001 was looking at whether Guatemala should continue to enjoy duty-free exporting to the USA, they found that they did not have adequately enforced labor laws.

 

So instead of lobbying the US government, Levi went to Guatemala to lobby the Guatemalan government to strengthen labor laws. More recently, 70 large companies such as BT, IKEA, Google, and Unilever signed a joint declaration urging the European Union to set tougher climate change goals.

 

Views on lobbying relating to the government are mixed. Some say companies need to take an active role in pushing sustainability, while others argue that because of their power, they can push for changes that may not be in the best interests of society as a whole.

 

But it can also work the other way around. Because there is a relative lack of transparency about a company’s lobbying efforts, it is very difficult to know what they are actually lobbying for.

 

Some countries require companies to disclose certain information about lobbying; however, this rarely includes the positions they are lobbying about, but rather just the amount of money being put into lobbying, and these regulations are often poorly regulated. Corporate lobbying is sometimes not aligned with sustainability policies, and in some cases can even be against those policies and positions.

 

Although some companies do the lobbying themselves, others are taking part in lobbying through other means, such as by funding other groups who do the lobbying for them (in some cases NGOs) or by being members of groups who are lobbying on different issues.

 

However, there are increasing initiatives happening on the voluntary front to increase transparency around lobbying.

 

The Global Reporting Initiative has two reporting indicators on lobbying that reporting organizations are asked to report on: public policy positions and participation in public policy development and lobbying; and the total value of financial and in-kind contributions to political parties, politicians, and related institutions by country.

 

GlaxoSmithKline, for example, in their annual report lists all the trade associations they are part of, what other groups they are working with, and what their positions are.

 

Challenges?

Challenges

Bringing it all together.

Many companies work on lots of initiatives independently across the company, but will increasingly need to bring these together into a more coordinated effort in order to maximize the benefits.

 

Taking it beyond the specialists.

Sustainability is not just the job of people with the word in their job title. A sustainability strategy is not much use if employees themselves who want to get engaged have no role to play in it.

 

Having a clear message.

 More often than not, employees seem unaware of the strategic directions and priorities that their company has put in place. The goal is not only to communicate the strategy clearly but also to get people involved and excited about carrying it out.

 

Understanding the risks.

Pursuing sustainability strategies can also bring with it certain risks. If sustainability is taken seriously within the organization it can be viewed as greenwashing. It can also raise unrealistic expectations by stakeholders.

 

No one size fits all. Many organizations are looking for a standard that specifically outlines what a green company looks like in the same way that the LEED certification outlines what a green building looks like. Companies need to determine the strategy that works best for them, as no one strategy will work for all.

 

Silo thinking.

For some businesses, the challenge is not to focus too much on one issue without putting in the time to properly explore other issues, which could potentially be more material to the business.

 

Boundaries of responsibility.

Where do one organization’s responsibilities end and another begins? How can we consider an organization’s individual responsibility when it is participating in a socio-economic system which only rewards certain sorts of behavior?

Understanding risks

According to the WBCSD, ‘The challenge for the corporate sector is to understand how different sources and magnitude of risk are likely to affect them (positively or negatively) over the long term.

 

In order to gain that understanding, companies need to take a genuinely holistic approach that includes a consideration of sustainability as well as commercial, political, and societal risks.’

 

A business’s ability to achieve its objectives depends on it being able to recognize and deal with risks. Not managing these risks properly can have a major impact on business reputation and also on financial, social, or environmental performance, as many so-called non-financial risks can rapidly become material.

 

Business is being confronted with an increasing variety and number of risks relating to sustainability. Global population increases are leading to increased demand and scarcity of resources like clean water.

 

With increased interconnectedness related to growing population densities comes greater levels of international trade and significantly improved information sharing across the globe. Increased globalization of markets has led to increased complexity in the way businesses operate.

 

A threat may build slowly from a number of small events, but one of those events can be the catalyst that sets off an uncontrollable reaction. A relatively minor incident in one country can have a bigger impact elsewhere.

 

The WBCSD identified a list of mega-risks, part of the ever-increasing variety of risks that companies are confronted with, that present unprecedented challenges as well as potential opportunities to companies and governments alike. These include:

 

Energy and climate. The environmental impacts of rising energy production and consumption are introducing uncertain-ties to industries, such as oil and gas, reinsurance and agriculture.

 

Demography. As the population continues to grow, population dynamics are at the root of almost every trend shaping tomorrow's business climate.

 

Intangibles. The value of corporations is increasingly made up not of tangible assets such as property and land, but of intangible assets such as reputation, brand, trust, and credibility – up to 75%.

 

Globalization.

Globalization is creating increasing interdependence, making it all the easier for dangerous viruses, pollutants, and technical failures to spread. The legal framework in which companies do business remains local, even though the world has ‘gone global.’

Globalization

Political risk and terrorism. Political risk is by no means a new threat, but changing political realities have amplified its magnitude and thereby its capacity to disrupt critical systems.

 

Ecological risk. The world economy depends on a base of natural resources that is showing signs of severe degradation. Without improved environmental performance, future business operations will be exposed to additional risks such as rising prices for water, materials, and waste disposal.

 

Litigation risk. There has been an exponential increase in society's willingness to get involved in litigation, primarily driven from the USA.

 

Infrastructure and security. Health services, transport, energy, food and water supplies, information and telecommunications are examples of sectors with vital systems that can be severely damaged by a single catastrophic event or chain of events.

 

Pandemic and health risks. Despite a century of rapid progress in improving human health, many people still do not have access to basic healthcare or hygiene to protect them from infectious agents in the environment, and many new and serious risks continue to grow.

 

Innovation and technology.

Innovation and technology

New technologies offer substantial benefits but are seldom risk-free. In some cases, the risks are not always obvious at the time of introducing new technology, for example, freons and the ozone hole.

 

For business, these mega risks translate into:

Market risks. For example, regulatory bans, reduced market demand for products, degradation of product quality by environmental factors, customer boycotts.

 

Balance-sheet risks. For example, remediation liabilities, insurance underwriting losses, impairment of real property values, damage assessments, and toxic torts.

 

Operating risks. For example, costs of cleaning up spills and accidents, risks to workers, safety from handling hazardous materials, the rise in prices of material and energy.

 

Capital cost risks.

Capital cost risks

For example, product redesign to meet new industry standards or regulations, costly input substitutions to meet new industry standards or regulations.

 

Sustainability risks. For example, a competitive disadvantage from energy or material inefficiencies, the impact of mandatory take-back rules, future taxes and regulatory restrictions.

 

  1. Legal risks. For example, companies being held responsible for actions that were legal at the time but later determined to be harmful.
  2. Liability risks. For example, penalties and fines, higher insurance premiums, product liability costs, site remediation costs.
  3. Reputation risks. For example, attacks on your image, bad-mouthing of your product, and boycotts.

 

For many, sustainability begins as an exercise in identifying and managing risks to the business. The risk is often defined as those things that stop or limit a company from achieving its objectives.

 

However, this is only half the story. As the WBCSD puts it, ‘the traditional approach to risk has been fragmented, largely reactive and focused on the short term.

 

Because risk is multi-dimensional, managers tend to associate it with the loss, rather than weighing up the downsides against the upsides.’ It is crucial for companies to understand the risks posed by sustainability issues and decisions facing an organization, where they are coming from, and how to mitigate them.

 

It is also important that companies go beyond just identifying risks to also exploring the opportunity presented by taking risks, for example in terms of new products and services.

 

Sustainability strategies

Sustainability strategies

Companies have taken a wide range of different approaches when it comes to their sustainability strategies. Some companies take a whole-company approach while others approach it separately. Some examples include:

 

Sustainability at the heart of how a company does business. For some companies, sustainability is an integral part of how the company chooses to do business and is at the core of their business model from the start.

 

Ben and Jerry’s ice cream company is focused on making business decisions based on their values, as well as the power of their business to change the world for the better.

 

They have been making all-natural ice cream since 1978 and are focused on what they call ‘Values-Led Sourcing,’ supporting suppliers who are also trying to make the world a better place with, for example, fair trade chocolate, cage-free eggs, and strawberries from leading-edge sustainable agricultural practices.

 

Companies who have reinvented themselves through sustainability. Other companies such as Interface, a carpet manufacturer, did not start out being focused on sustainability. The founder became committed to industrial ecology after reading Paul Hawken’s The Ecology of Commerce in 1994. Their vision today:

 

To be the first company that, by its deeds, shows the entire industrial world what sustainability is in all its dimensions – people, process, product, place, and profits by 2020, and in doing so to become restorative through the power of influence.

 

They aim to do this through a whole-company approach, integrating sustainability into everything they do. Based on their experiences over the past 14 years in this area, the company now provides a peer-to-peer advisory service for business.

 

Staying ahead of the pack. While some companies start with a focus on values and doing the right thing, others quickly identify the incredible range of business opportunities sustainability can present.

 

The CEO of GE recognized this and launched ‘eco-imagination’ in 2005, a business initiative to help meet customers’ demand for more energy-efficient products and to drive reliable growth for GE. ‘While we had investigated other corporate socio-environmental programs, we knew they didn’t make cultural sense for GE.

 

Metrics and accountability are major reasons why GE continues to flourish after 130 years, and the building blocks for the initiative could be no different . . . Simply put: ecomagination had to make money for our investors.’

 

In 2011 ecomagination reached US$105 billion in revenue. Ecomagination products have increased by 34 new products, bringing their total number to 142, and the revenues from these products have continued to grow at twice the rate of total company revenues.

sustainability brands

Companies testing out the success of sustainability brands. These are companies that do not necessarily have a sustainability strategy but are experimenting with sustainability through acquisitions or new product lines.

 

This is often done to try new things out before committing the whole organization, and to learn lessons that could be applied to the organization as a whole.

 

Companies adopting different shades of sustainability. Many leaders in this area have not changed what they do; they are now using sustainability as a tool to do it better.

 

Sustainability becomes an extension of what the company already does. Companies such as IKEA and Marks and Spencer haven’t necessarily changed their products, but they have changed how those products are sourced, the ingredients, their packaging, etc.

 

Companies expanding their focus. Some companies are adopting sustainability practices by expanding the range of products and services they provide as a response to increasing and changing consumer demands.

 

Several traditional oil and gas companies such as BP and Shell have expanded the focus of their operations to include new forms of renewable energy such as wind, solar, and biofuels.

 

There are a growing number of companies around the world that have a sustainability story to tell. Pick the companies you buy from and look at their websites and annual reports to see what they are doing.

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