Maintaining good stakeholder relations is ‘the right thing’ for companies to do, but how many pay lip service and don’t grasp its vital feedback role?
What is a stakeholder? Traditionally, shareholders and clients were the stakeholders, with the workforce also usually acknowledged. Nowadays the definition has broadened to include all those parties who will be affected by the activities of the company – or whose activities and interests may affect the company’s ability to operate.
In integrated and sustainability reports we page through beautifully crafted tables listing who the company identifies as its stakeholders, how it has engaged with them, and what their issues are. Some include a column explaining how they are dealing with the issues. These tables are so eerily similar from company to company that I’m convinced that many simply copy and paste from good reports, without actually conducting formal stakeholder engagement.
Yet established companies obviously engage routinely with stakeholders, albeit not formally, to fit neatly into reports. If a business doesn’t question what its customers and suppliers need, while keeping its employees reasonably satisfied, then how does it stay in business? Nevertheless, from the reports I see, companies are not closing the loop of how stakeholder feedback gets back to the top, and to what extent executives consider it when making key decisions. Companies that don’t pick up trends quickly from stakeholder feedback are potentially heading for disaster.
Two examples illustrate perfectly how organisations can cause immense damage by not properly evaluating feedback through the stakeholder channel. Lonmin and the Marikana tragedy are first. The second is Sanral and its e-tolls. The Lonmin platinum mine group is a regular award winner for its annual and sustainability reports. For those who actually read annual reports, these are works of art. But somehow Lonmin’s management did not pick up early warnings coming through from the stakeholders described in those glossy pages. We all know the tragic consequences for the strikers, Lonmin and South Africa’s entire mining sector. In its 2012 Sustainable Development Report, Lonmin mournfully explains: “Our intention is to take the necessary time to understand the event, the causes and how to prevent this from ever happening again.”
At a recent GRI sustainability workshop, we conducted a stakeholder engagement exercise as if we were Sanral intending to implement a toll road system. Given that we had the advantage of hindsight, working through the exercise showed clearly how Sanral had muddled its stakeholder priorities. This error has destroyed Sanral’s reputation, is bleeding billions in revenue and has sparked off civil disobedience throughout Gauteng.
Used as intended, stakeholder engagement is a vital feedback loop for future proofing today’s companies. Ignore it at your peril. ❐
Author: Clive Lotter is an integrated reporting consultant and writer of annual reports