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The top five mistakes companies make in engaging stakeholders

Wayne Dunn

I’ve known, fished with, and worked with Wayne Dunn since about 2007.

He’s one of the most knowledgeable and experienced advisors in the field of CSR and sustainable business that I have met in my years in the field.

When I first met him he was working on a plan to take submerged timber from lake Volta in Ghana and elsewhere around the world.

He’s done all sorts of interesting jobs all over the world, so I thought his advice on what stakeholder engagement means to him since 2014 would be useful for readers.

My questions and his practical responses are below. I think you’ll find they are worth ten minutes of your time.

Wayne is a Professor of Practice in CSR at McGill University and the President & Founder of the CSR Training Institute.

I recently worked with Wayne on CSR training in Ghana, during which we trained three cabinet ministers and thirty other senior corporate managers and NGO reps on some of the latest thinking.

There’s a link at the bottom of this post to a two day workshop Wayne and I are running in London on October 30-31. That’s all about stakeholder engagement in emerging markets

Here are my questions and his answers:

1) Has corporate stakeholder engagement lost its meaning because it’s so casually over used by companies today?

It gets real meaningful real quick when your operation gets shut down by disgruntled stakeholders and their allies!

The reality on the ground, where business meets community is usually way different than the language of corporate websites and presentations. Call it what you will; and yes, many phrases are over-used so much the words are nearly meaningless.

Still, how companies engage with local stakeholders, and how they can organize operations and activities to bring meaningful benefits to local stakeholders, can often mean the difference between long term success and shuttered operation and damaged brand.

2) I would suggest FMCG companies and extractive firms are the leading sectors in viewing engagement as strategic, would you agree?

Absolutely.  And I think that is driven by their vulnerability.

Extractive firms have complex permitting processes to navigate at start-up and ongoing.  These create intervention platforms for unhappy stakeholders and their allies.

They provide a process that allows stakeholders to publicly communicate their concerns and they can often delay, disrupt and sometimes kill projects, damage corporate reputational capital and derail individual careers.

Fast Moving Consumer Goods (FMCG) companies are vulnerable because they have so much value tied up in Brand.

In today’s always on, instant global communications world disgruntled stakeholders can find ways to reach consumers and influence how they think about brands. This can have big and quick impacts on sales and profitability (and on companies and careers).

Both sectors are vulnerable to the impact that disgruntled stakeholders can have so finding ways to deliver value to stakeholders and engage effectively with them is highly strategic.

3) Big companies now understand that stakeholder engagement is just good risk management, but how many really see the opportunity side? Surely without that, firms risk slipping into complacent box ticking?

Stakeholder relations can be an effective risk management tool, but simply ticking the boxes only gets a company part way there. There is a big difference between strategic stakeholder engagement and compliance focused engagement.

With the ever-increasing number of global standards, reporting frameworks and engagement protocols it often feels safer to focus on compliance.  It is an easier story to tell and easier to manage.

Unfortunately, a purely compliance based approach too often misses key strategic opportunities; opportunities to create value for stakeholders and company. And these strategic opportunities that can create new value for stakeholders and company are often the best opportunities to mitigate risk.

Coming from a hockey background (I’m Canadian, eh?) I see strategic engagement as more like offense and compliance focused engagement more like defense.

The balance between offence and defense; strategic and compliance, is not easy to find.  Effective stakeholder engagement takes both.  You don’t win many games with just one.

4) Give us some examples of companies who do engagement well, or have done it well

There are many examples of projects, or even business units, that do stakeholder engagement well, but not nearly so many where a large company does it well across all of its operations.

One of my favourite examples comes from the 1990s. Cameco Corporation, the largest Uranium mining company in the world at the time, was a leader in developing the Saskatchewan (Canada) uranium industry.

The industry was based in northern Saskatchewan with a population of 40,000 people, largely Indigenous) scattered over 250,000 square kilometres.

Literacy levels were low, there was little history of industrial employment and many families were only a generation away from a nomadic lifestyle on the land.

There were regulatory requirements around consultation and benefits but Cameco realized that it had to find a way that local indigenous peoples would benefit directly and substantially. That required a strategic approach.

By late 1999, 450 aboriginal employees, representing about 45% of the site operations workforce, made Cameco one of Canada’s leading industrial employers of aboriginal people.

A northern supplier development program was finding new and innovative ways to engage local people in the industry supply chain. Today northern suppliers, many of them indigenous, are supplying ½ billion/year in goods and services.

However, despite the incredible success Cameco was having in Canada with stakeholder engagement and benefits this wasn’t consistent across the company.

In 1999 the company’s share price along with its reputation and its operations in Kyrgyzstan took a pummelling. The impacts of an accident and a cyanide spill were compounded exponentially because of poor or non-existent relationships with major groups of stakeholders.

5) You work a lot in emerging markets, what are the top five mistakes you see companies making in stakeholder engagement, and what does it cost them when they do?

1. Defining stakeholders too narrowly. Too often key groups of stakeholders are missed and this means missed opportunity for companies and stakeholders.

The group that I see missed most often is the international development community

Agencies like the UNDP and development partners like Britain’s Dept for International Development (DfID) and the United States Agency for International Development (USAID), etc. are committed to MDG priorities such as education, health, poverty alleviation and gender issues

These objectives are shared with community stakeholders and the company and can create huge opportunities for synergy and collaboration and benefits for community stakeholders.

Unfortunately, many companies define their stakeholders too narrowly and miss these opportunities

2. No balance between defense (compliance) and offense (strategic opportunities). It is not easy to maintain a balanced approach to compliance and identifying and developing strategic opportunities for stakeholder engagement and value creation.

3. Going defensive too quickly. Community/stakeholder meetings, especially in the early stages of a project, often seem to start negatively with people lining up to voice displeasure and concern over one thing or another.

For company representatives, especially senior executives, there is often a tendency to ‘correct facts’ and provide balance and perspective when faced with seemingly endless negative comments. This is a mistake!

I’ve been in hundreds of community meetings and the negative comments and complaints at the beginning are often more about local community politics and posturing than they are about anything the company has done or is doing.

This isn’t to say that there aren’t often real and meaningful grievances and issues, just that the best approach to the early stages of a community meeting is to simply listen.

I’ve found that by sitting and listening the complaints and feelings and issues can come out and, generally, at some point, the energy will shift and a constructive dialogue can develop.

Of course, it doesn’t happen this way all the time, but in general it is best to simply listen and hear in the early stages of a meeting.

4. Concealing self-interest. Let’s be clear. Companies engage with stakeholders and strive to create local value and benefits for them because the company sees that as being in their own self-interest. If they didn’t, why would they spend the time and money.

Too often companies will try to position their engagement and CSR work as being more about the interests of local stakeholders and because the company is ‘good’.

This can not only create an awkward donor/recipient type of relationship and undermines a company’s credibility, but can also lead to questions on the sustainability of the company’s efforts.

If the company is only doing it because it is good for local stakeholders then it seems like it would be easy to cut from the budget if financial challenges arise.

Far better to openly acknowledge self-interest and fully engage stakeholders in the search for those areas where company and stakeholder interests can come together.

5. Communication. Too much, too little, too promotional, too simplistic. And often not disseminated in a way that will reach the intended audiences.

Here’s a two day workshop Wayne and I are running in London, with others, on October 30-31. That’s all about stakeholder engagement in emerging markets. The experts taking part in this workshop have experience at working with companies such as Arcelor Mittal, BP, Anglo American, Rexam, Golden Star, BHP Billiton, Shell, and many others.


Three focused, detailed and practical sustainable business events for your diary

Upcoming Innovation Forum events in 2014:

How business can tackle deforestation
Collaborate effectively with suppliers and NGOs, understand policy and enforcement trends

28th-29th October, 2014, London. More details here.

How to effectively engage stakeholders in frontier markets (emerging markets)
An exclusive two-day executive training workshop, certified by the CSR Training Institute
30-31 October, 2014, London. More details here.

Business and human rights
How to get beyond policy, manage risk and build relationships
10 November, 2014, London. More details here.