Stakeholder management and reporting

Stakeholder ManagementIn the Context of Sustainability

and Integrated Reporting

Next Generation ConsultantsReana Rossouw

2013

Next Generation Consultants 2

Towards the future: Emerging trends in Stakeholder Engagement (1)

• Understanding stakeholder needs, interests and concerns is a fundamental part of managing indirect or non-financial risks. – Engaging with stakeholders, and using information from stakeholder

engagements in decision-making, is fundamental to understanding non-financial risks and managing an enterprise responsibly. For this reason, social investment indices, such as the Dow Jones Sustainability Index and the JSE-SRI Index, give more weight to stakeholder engagement than to any other social impact measure.

• The measurement of stakeholder engagement used in standards, guidelines and performance assessments such as the Dow Jones Sustainability Index, JSE-SRI Index, rely on the existence of processes and policies for engagement. – In other words, companies are judged on whether they do or do not engage.

More sophisticated measures of engagement are being developed to measure the degree of “embeddedness” of stakeholder engagement, and it is likely that scrutiny of engagement capabilities will increase.

1 March 2013


Towards the future: Emerging trends in Stakeholder Engagement (2)

• As society’s expectations about private enterprise change, companies may need to engage on a broader number of issues.– Increasingly, issues that are important to society—water scarcity, HIV treatment,

and climate change — are becoming important issues for companies to address. Boards and executives will always need to do what is in the best interest of the company and its shareowners, but in the future, prioritising issues based on a company’s needs may be less effective if these fail to also reflect society’s needs.

• Finally, in a move toward corporate governance systems that are truly responsive and accountable to stakeholder interests, more and more companies are going beyond engagement to develop collaborative partnerships with stakeholder groups or enlisting stakeholders to propose solutions or monitor outcomes. – To be effective and fair, these governance systems should also have the capacity

to respond to differences in power and access to resources between and within stakeholder groups.

1 March 2013


Lessons from our Experience• Process

– Identify most material issues– Identify most material stakeholders as it pertains to the MM issues

• Remember it confirms content, indicators, report style and format• Basis for definition and identification – risk, opportunity, strategic• Consider existing stakeholder engagement (stakeholder database), operational

divisions, roles and responsibilities

– Prioritise and map stakeholders together with issues and assign responsibility• Define/confirm discussion and engagement methodology and assign responsibility• Conduct engagement – link to operational strategies – include in KPI’s, link to

indicators, complete stakeholder register (continuously)

– Engagement confirms content – activities, strategies, programs and priorities for the reporting process and period – next reporting cycle

– Engagement must also be linked to Disclosure on Management Approach in report to provide and confirm sustainability context

– Engagement also provides framework for the Integrated Report and therefore analytical commentary must link to Engagement input, outcome and impact

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In Summary• Stakeholder engagement has tremendous value across the business• Stakeholder engagement is best understood if the whole business is involved• Stakeholder engagement is better supported if managed in relation to other

communication activities• Don’t lump stakeholders in homogenous groups• Don’t make assumptions about the specific risks/issues that will be

discussed• Don’t pre-empt the process by linking indicators or KPI’s to soon• Be flexible and allow stakeholders to dominate discussion• Remember it requires commitment to feedback the outcome and result to

the stakeholders after the event• Materiality is still the most important principle!• Less is more!

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Do’s and Don’ts of community stakeholder relations

• Do seek stakeholder partners with real credibility and strong credentials, whose independence and integrity are unquestioned in the stakeholder communities you are trying to reach.

• Do give the stakeholder organizations you create or work with genuine independence, allowing them to set up their own policies and procedures and giving them the opportunity to communicate with the outside world freely and without censorship.

• Do involve your own key leaders who are in a position to make and keep commitments on behalf of the company.

• Don’t create an “Astroturf” organisation—a phony grassroots group that masquerades as an independent NGO while secretly serving your corporate interests.

• Do be up-front about your role in helping create and, if necessary, fund a stakeholder group; if the connection is exposed against your wishes due to investigative work by the media, it will seriously damage both your credibility and that of any stakeholders involved.

• Don’t renege on any commitments you make; the damage to your company’s reputation will be doubly serious if you first boast about, then try to eliminate, any moves toward dialogue and partnership with outside stakeholders.1 March 2013


Stakeholder Behaviour in difficult circumstances

• People are often resistant because of :– Fear that something bad or

difficult is going to happen– Uncertainty about the

future– Doubt about how an issue

will affect them

• And as such it influences their behaviour– Denial – resistant - will not

engage– Turbulence –

argumentative, emotional1 March 2013


Stakeholder Relationships in conflict situations

Compete(win/lose)

Collaborate(win/win)

Avoid/withdraw(lose/lose)

Accommodate(lose/win)

Compromise(half win/half lose)

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Reaching consensusCo

nsen

sus True consensus

All stakeholders are engaged and commit to an agreed outcome. This commitment hold into the

future under challenge

We aim for true consensus

Qualified consensusAll stakeholders are engaged and agree on many aspects. However,

there are outstanding issues

We recognise that this may happen

False consensus

Consensus is declared, but is not valid due to false restrictions, lack

of engagement, conflict or avoidance of issues. This leads to

chaos, dissatisfaction and resentment.

We must avoid this

1 March 2013


Overcoming hostility• Engage in issues that matter

– Focus on clear objectives that require action. Stakeholders have limited time and will prefer to engage on really important project concerns.

• Be ready to act – Use engagement to drive decisions, not as a public relations exercise.

• Engage the right stakeholders – Identify the right stakeholders. Ensure the process is inclusive and diverse. Consider stakeholders’

expertise, level of influence and willingness to engage.• Engage empowered representatives

– Engage stakeholder representatives who are empowered to take decisions for their constituents• Seek shared value

– Ensure that each stakeholder benefits directly from engagement and understands how project decisions will impact on other stakeholders

• Agree rules of engagement – Establish the scope, objectives, roles, rules and risks of engagement at the beginning. Agree the

process of decision-making, conflict resolution and evaluation• Manage exceptions

– Make certain that all parties have realistic ambitions and agree on clear outcomes of the engagement

1 March 2013


Overcoming hostility• Provide adequate resources

– Devote adequate resources (time, money and people) to ensure success• Choose the right formats

– Choose the appropriate format (e.g. private meeting, roundtable discussions, stakeholder panels, etc.) to achieve the objective of the each engagement

• Act fairly – Be sensitive to perceived or actual power differences and facilitate the process to allow fair

participation• Listen to (critical) stakeholder views

– Ensure engagement is a dialogue and not a one-way information feed. Allow stakeholders to voice their views

• Build trust – Take time to build trust based on the personal chemistry of the individuals and the common values of

the organizations involved. Commit to long term relationships with stakeholders• Be open

– Be responsive, consistent and timely in communications. Communicate well in advance, document the engagement rationale and processes and allow for stakeholder feedback

• Be accountable – Link the engagement process to project decision making and governance

• Look beyond the engagement– Learn from the engagement. Involve stakeholders to assess the success of the engagement as well as

the project outcome. Examine whether any next steps are required1 March 2013


Towards Best Practice (1)• Start early

– Relationships take time to build. Trust and mutual respect are established over time. Trust is also much harder to build if stakeholders are only consulted when there is a problem or crisis.

• Keep an open mind– The outcome of a truly open and responsive stakeholder engagement process cannot be defined in

advance as solutions that satisfy multiple parties can seldom be guessed at beforehand. Consultation where the company has already determined their plan of action is likely to be perceived as an untrustworthy public relations exercise.

• Tailor engagement practices to the needs and interests of the company and its stakeholders– Explain what input is needed from stakeholders and how it will be used in the decision-making

process — driving a “shared values” continuum. Ask for input on how information should be disclosed.

• Manage engagement as a business function– Taking a systematic approach that is grounded in the business strategy and operations increases the

likelihood that engagement will create value. As with other key business functions, direct reporting lines and the engagement of senior management are critical.

• Take a long-term view– For issues that are intrinsically related to company strategy, on-going dialogue and standing

stakeholder bodies can be more valuable than one time, ad hoc engagement. Publicly disclosing information that is important to stakeholders helps to ensure that on-going dialogue is useful for all parties involved.

1 March 2013


Towards Best Practice (2)• Engage in issues that matter

– Focus on clear objectives that require action. Stakeholders have limited time and will prefer to engage on the really important project concerns.

• Be ready to act– Use engagement to drive decisions, not as public relations exercise.

• Engage the right stakeholders– Identify the right stakeholders. Ensure the process is inclusive and diverse. Consider stakeholders’

expertise, level of influence and willingness to engage.• Engage empowered representatives

– Engage stakeholder representatives who are empowered to take decisions for their constituents.• Seek shared value

– Ensure that each stakeholder benefits directly from engagement and understands how project decisions will impact on other stakeholders.

• Agree rules of engagement– Establish the scope, objectives, roles, rules and risks of engagement at the beginning. Agree the

process of decision-making, conflict resolution and evaluation.• Manage exceptions

– Make certain that all parties have realistic ambitions and agree on clear outcomes of the engagement.• Provide adequate resources

– Devote adequate resources (time, money and people) to ensure success.1 March 2013


Towards Best Practice (3)• Choose the right formats

– Choose the appropriate format (e.g. private meeting, roundtable discussions, stakeholder panels, etc.) to achieve the objective of the each engagement.

• Act fairly– Be sensitive to perceived or actual power differences and facilitate the process to allow fair

participation.• Listen to (critical) stakeholder views

– Ensure engagement is a dialogue and not a one-way information feed. Allow stakeholders to voice their views.

• Build trust– Take time to build trust based on the personal chemistry of the individuals and the common

values of the organizations involved. Commit to long term relationships with stakeholders.• Be open - be responsive, consistent and timely in communications

– Communicate well in advance, document the engagement rationale and processes and allow for stakeholder feedback.

• Be accountable– Link the engagement process to project decision making and governance.

• Look beyond the engagement – Learn from the engagement. Involve stakeholders to assess the success of the engagement as

well as the project outcome. Examine whether any next steps are required.1 March 2013


After the Engagement• Follow-through is important to any relationship and this certainly applies to

relationships with stakeholders. Whether or not a company is able to implement what it has learned from stakeholders, there is an obligation to report back, to make it clear that stakeholder concerns and interests were heard, considered, and valued.

• Companies have a responsibility to respond to stakeholders about concerns shared, to explain how or whether concerns or suggestions are being addressed.

• In addition to responding to issues raised by stakeholders, companies should keep track of any promises or commitments they have made to stakeholders. Just as a company would hold themselves accountable for promising earnings growth to shareowners, commitments to community members or environmental groups/experts (or any other stakeholders) need to be taken seriously for an engagement process to be considered credible.

• Information reported to stakeholders should be translated into local languages and in easily understood formats, and any material changes to commitments or implementation actions should be communicated very clearly.

1 March 2013

Questions?• Reana Rossouw• Next Generation Consultants• Specialists in Sustainable Development and

Reporting, Stakeholder Management and Human Rights Management

• Tel: (011) 2750315• E-mail: [email protected]• Web: www.nextgeneration.co.za

Investor Relations

Stakeholder management and reporting