Why stakeholder engagement is key to successful CSR programs

Why stakeholder engagement is key to successful CSR programs

For years, standard corporate practice has been to invest and develop Corporate Social Responsibility and Sustainability programs with minimal engagement of those they materially affect — customers, suppliers, employees, local communities, investors and others — also known as their stakeholders.

More recently, CSR has become recognized as a growing area of strategic value creation for companies. Nearly all listed companies report having a CSR program. The committed core of these companies is spending in the region of $50 million a year on CSR. While many are achieving positive results, some are hard pressed to account for why that is.

Yet stakeholder engagement is often seen as secondary, even non-essential, to the CSR agenda. Most stakeholder engagement programs today are tick-box approaches comprising two elements. The first is listening: a mass survey and the intermittent roundtable meetings. The second element is promotion: CSR/Sustainability reports on previous year’s accomplishments combined with an invitation to provide feedback or another survey.

As we all know, the experience of taking a survey is neither personal nor enjoyable. Not surprisingly, nor does it provide a sense of emotional connection to the company. Not only are there problems with this model, in terms of costs or risks, but companies are missing at least 80 percent of the value they could be deriving from these programs.

In today’s 24/7, always-on mobile communications landscape, information is ubiquitous. The media is everywhere (and everyone), trust is hard-earned and a company’s reputation is in the hands of its stakeholders. What does this mean for business? Stakeholder engagement is no longer optional for businesses who wish to stay in business.

Positive signs from the industry

Sunny Misser, CEO of AccountAbility, said, "Companies in the foreseeable future will find themselves dealing with different business realities: more sophisticated, informed and engaged stakeholders, collaborative models of governance and decision-making among stakeholder networks, and their expectations that companies have the technological competence to be instantly responsive to each of their concerns."

Danna Pfal, VP of stakeholder engagement at Future 500, said, “Stakeholder engagement has become very popular over this last year. I see it as CSR 2.0 where you cannot have a CSR/Sustainability program without engaging stakeholders on the ground. I really think this is the merging of what it means to be a sustainable company today. But I think it’s still a small sliver of companies that really get it.”

She mentioned Asia Pulp & Paper working with the Forest Trust as an example of effective stakeholder engagement and collaboration around ensuring transparency and accountability in forestry.

“There are some industry leaders,” said Eric Olson, head of stakeholder engagement at BSR, who reported that companies are looking for ways to make their stakeholder engagement into an idea-generative, innovative, collaborative exercise. Hitachi is one example. Olson said, “Not only are our clients looking to achieve their business objectives but to gain credibility with their stakeholders. Today, it’s becoming more about value versus just appeasing stakeholder groups.

“In a rich and rapidly changing stakeholder engagement landscape, information communications technology can reduce the reliance on the ‘usual suspects’ who tend to be tapped for many engagements,” and to lighten a company’s carbon footprint by reducing travel hours.

Besides those boundary spanners who have engaged leading consultancies such as BSR, Future 500 and AccountAbility, stakeholder engagement programs widely could be said to be reactive and underperforming compared to their potential.

If companies are not engaging with their stakeholders, they can incur a number of costs or risks. Compare these to the benefits and opportunities, and you have a clear formula for business value.

Are companies’ CSR programs 'stakeholder approved'?

"The problem companies are facing is that the consumers do not know what companies are doing,” said Kasper Nielsen, executive partner at Reputation Institute. "Between 56 and 61 percent of consumers across the 15 largest markets in the world are neutral or unsure if the companies can be trusted to deliver on these CSR dimensions. The reason is twofold. First, companies have not communicated about what they do in a relevant and clear way. In addition, they are doing many programs which are not relevant to their stakeholders."

In short, stakeholder engagement is a source of value creation (or destruction) in and of itself. Companies today need to have their antennae up for more types of risks and opportunities than ever before to maintain a competitive advantage.

A proven solution

Over the past few years, a plethora of new communication technologies have come onto the market to reach stakeholders where they are: online. Managed online stakeholder communities, a simple and sophisticated solution not yet widely adopted, are a great way to reach broader sets of stakeholders more frequently, proactively and relatively inexpensively.

These communities can be formed with a company’s key stakeholder groups on a technology platform that has a dashboard, data analytics and resembles a white-labeled social media site. Where it differs is in its ability to be an invitation-only private conversation.

Online communities are, arguably, the most attractive solution for proactive stakeholder engagement to expand the base of stakeholders, build trust and reputation capital, increase accessibility and responsiveness to emerging issues while providing an interactive brand experience.

An online stakeholder community can provide near-instant feedback on any number of issues. However, the real value of an online stakeholder community is the ability to have a two-way dialogue with those stakeholders. Interactions can take many forms across a full spectrum of engagement levels, including:

  • Listening to and understanding stakeholders;
  • Distributing information, promoting ideas and education;
  • Crowdsourcing ideas and prioritizing them;
  • Discussing solutions interactively;
  • Consulting and collecting quantitative and qualitative submissions;
  • Visualizing and co-designing options;
  • Co-creating and collaborating to deliver solutions; and
  • Building long-term online stakeholder communities as a source of reputation capital.

Not only do these interactions help companies gain the ability to relate directly to thousands of stakeholders at a time, across multiple forms of media that provide both quantitative and qualitative insights; they also enable them to do so quickly and cost-effectively for 360 degrees of stakeholders, 24/7 and 365 days a year.

Ultimately, stakeholder engagement is about embracing opportunities and managing risks. In today’s business environment, engaging with stakeholders on their terms — conveniently, transparently, authentically and more frequently — is no longer optional. It’s expected.

Top illustration by VLADGRIN via Shutterstock.