STAKEHOLDER MANAGEMENT AND ENGAGEMENT MEANING AND ORIGINS STAKEHOLDER – INFLUENCE ON CSR APPROACH Ing. Pavel Adámek, Ph.D. CORPORATE SOCIAL RESPONSIBILITY/PEM-NACSR STAKEHOLDER MANAGEMENT AND ENGAGEMENT OUTLINE OF THE LECTURE 1.A stakeholder approach to CSR 2. 2.The stakeholders´ participation 3. 3.Four Levels of commitment to the stakeholder approach 4. 4.Research examples – influence of CSR activities towards stakeholders 5. 5. 5. 5. 1. STAKEHOLDER MANAGEMENT AND ENGAGEMENT INTRODUCTION •Stakeholder theory challenges the traditional view of the firm: shareholders/stockholders are the owners of the company. An inclusive stakeholder approach makes commercial sense, allowing the firm to maximize shareholder wealth, while also increasing total value added. • •Today, CSR is focused on a stakeholder model which has become widely accepted among contemporary business organizations. • •Stakeholder theory argues that there are other parties involved with a legitimate “stake” in business decisions, including: • – Communities and their governmental bodies – NGOs and other community groups – Employees and unions – Suppliers and customers • • STAKEHOLDER MANAGEMENT AND ENGAGEMENT INTRODUCTION •Organizations are expected to mange responsibly an extended web of stakeholder interest across increasingly permeable organization boundaries and acknowledge a duty of care towards traditional interest groups as well as silent stakeholders – such as local communities and the environment. • •CSR cannot be imposed against the will of enterprises, but can only be promoted together with them under involvement of their stakeholders. • •For most small and medium-sized enterprises, especially microenterprises, the CSR process is likely to remain informal and intuitive. • •Large companies operate on international markets, they have to be responsible for stakeholders and more competitive to survive on these markets. • • • STAKEHOLDER MANAGEMENT AND ENGAGEMENT INTRODUCTION STAKEHOLDER MANAGEMENT AND ENGAGEMENT 1. A STAKEHOLDER APPROACH TO CSR STAKEHOLDER MANAGEMENT AND ENGAGEMENT 1. A STAKEHOLDER APPROACH TO CSR •Clarkson´s typology of stakeholders is the most widely cited and accepted. • Clarkson (1995) distinguishes primary and secondary stakeholders. •Primary stakeholders are those “without whose continuing participation the corporation cannot survive as a going concern” (shareholders and investors, employees, customers and suppliers, and also governments and communities „that provide infrastructures and markets, whose laws and regulations must be obeyed, and to whom taxes and other obligations may be due”); • •whereas secondary stakeholders are “those who influence or affect, or are influenced or affected by, the corporation, but they are not engaged in transactions with the corporation and are not essential for its survival“. STAKEHOLDER MANAGEMENT AND ENGAGEMENT 1. A STAKEHOLDER APPROACH TO CSR Source: http://www.fujikura.co.jp/eng/csr/group_csr/communication.html Fujikura corporation – stakeholders in detail STAKEHOLDER MANAGEMENT AND ENGAGEMENT 1. A STAKEHOLDER APPROACH TO CSR Source: https://images.jobsataccor.com.au/wp-content/uploads/AccorHotels-Corporate-Responsibility-Report-20 17.pdf ACCOR HOTELS STAKEHOLDER MANAGEMENT AND ENGAGEMENT 1. A STAKEHOLDER APPROACH TO CSR Source: https://images.jobsataccor.com.au/wp-content/uploads/AccorHotels-Corporate-Responsibility-Report-20 17.pdf ACCOR HOTELS STAKEHOLDER MANAGEMENT AND ENGAGEMENT 1. A STAKEHOLDER APPROACH TO CSR Source: https://images.jobsataccor.com.au/wp-content/uploads/AccorHotels-Corporate-Responsibility-Report-20 17.pdf ACCOR HOTELS STAKEHOLDER MANAGEMENT AND ENGAGEMENT 1. A STAKEHOLDER APPROACH TO CSR Source: https://images.jobsataccor.com.au/wp-content/uploads/AccorHotels-Corporate-Responsibility-Report-20 17.pdf ACCOR HOTELS STAKEHOLDER MANAGEMENT AND ENGAGEMENT ACCOR HOTELS video 2017 Corporate Responsibility Report ACCOR HOTELS STAKEHOLDER MANAGEMENT AND ENGAGEMENT 1. A STAKEHOLDER APPROACH TO CSR •The difficulties in managing the relationships from the perspective of business management and stakeholders are issues such as: 1.Divergent and often conflicting expectations between stakeholders. 2. 2.Contextual complexities, that are further complicated by varying interpretations arising out of different geographical regions and cultures. 3. 3.The challenge of identifying what might be con-sidered to be “best practice” with regard to CSR stakeholder dialogue strategy and then com-municating this to stakeholders. • •Cumulatively, the expected benefits to organisations that succeed in meeting CSR expectations of key stakeholder groups are increased company revenue and profitability, lower costs, easier access to finance, and a greater capability to innovate. STAKEHOLDER MANAGEMENT AND ENGAGEMENT 1. A STAKEHOLDER APPROACH TO CSR •These indicates which interest groups are for business crucial : –how they are treated; – –whether the mechanism of strategic CSR is developed; – –how are inform its stakeholders (stakeholder dialogue) about targeted activities; – –how to evaluate these activities (feedback to management or owners); – –are these findings regularly used to promote the interests of the company or for the benefit of a comprehensive approach to CSR in all areas? STAKEHOLDER MANAGEMENT AND ENGAGEMENT 2. THE STAKEHOLDERS´ PARTICIPATION The role of stakeholder engagement • •Engaging with stakeholders early ensures that issues addressed in the CR policy and report are the most meaningful. • •The insights gained from this exchange also provide new business opportunities. • •Corporate reputation is enhanced much more than by pushing forward the most charitable initiatives if these are unrelated to the main concerns of the stakeholders. • •The usual forms of engagement measurement (outreach, media analysis, social media evaluation …) constitute very precious data for CSR reports. In particular those recommended in the AA1000 (materiality, inclusivity, completeness). • • STAKEHOLDER MANAGEMENT AND ENGAGEMENT 2. THE STAKEHOLDERS´ PARTICIPATION Phases and factors in engaging with stakeholders •Phases of managing stakeholder dialogue 1.Selection of stakeholders 2.Stakeholder dialog 3.Interpretation of information from dialogue 4.Decisions about company actions 5.Response to the dialogue through activities 6. •Key factors in acting on stakeholder dialogue 1.Awareness that an issue exists 2.Commitment to prioritize and resource an issue 3.Capacity/availability of resources to tackle an issue 4.Consensus amongst the company and its stakeholders over the issues and relevance of stakeholder dialogue in general • STAKEHOLDER MANAGEMENT AND ENGAGEMENT 2. THE STAKEHOLDERS´ PARTICIPATION •The stakeholders’ participation type covers information notification, specific consultation, communication and common action. • •Information notification helps stakeholders gain a better understanding through information release and collect stakeholders' expectation. • •Specific consultation is to understand and respond to the stakeholders’ expectation in a direct and effective approach through consultation on specific topics. • •It includes survey of stakeholders, comments and suggestions collected from stakeholders, active response to stakeholders’ questions and participation in stakeholders' forum. • STAKEHOLDER MANAGEMENT AND ENGAGEMENT 2. THE STAKEHOLDERS´ PARTICIPATION •Communication is to make dialogues with the representatives of stakeholders to find out solutions and incorporate their advice into corporate decisions. It includes dialogues and meetings with stakeholders and high-level talks. • •Common action is to deepen cooperation, integrate resources, complement each other’s advantages, jointly hedge risks and share benefits to achieve a win-win situation. • •It includes cooperation agreement signing, cooperation to propel sustained development plan and jointly launch social welfare activities for cooperation alliance. STAKEHOLDER MANAGEMENT AND ENGAGEMENT 2. THE STAKEHOLDERS´ PARTICIPATION •Managers perceive a variety of stakeholder groups. They give a high priority to a stakeholder, if they believe that this stakeholder has a legitimate claim, which calls for immediate action (i.e. urgent), and possesses the power to influence organization’s activities. • •According to Mitchell et al.’s classification of stakeholders, if a stakeholder possesses only one of the three attributes, they are called latent stakeholders and have low stakeholder salience. • STAKEHOLDER MANAGEMENT AND ENGAGEMENT 2. THE STAKEHOLDERS´ PARTICIPATION Model of stakeholder salience •Further, the dynamic qualities are accommodated by explaining how stakeholders can shift between classes by attaining or losing one or more attribute. STAKEHOLDER MANAGEMENT AND ENGAGEMENT 2. THE STAKEHOLDERS´ PARTICIPATION STAKEHOLDER MANAGEMENT AND ENGAGEMENT Stakeholders matrix STAKEHOLDER MANAGEMENT AND ENGAGEMENT 2. THE STAKEHOLDERS´ PARTICIPATION The approach of stakeholders´participation STAKEHOLDER MANAGEMENT AND ENGAGEMENT STAKEHOLDERS’ PARTICIPATION PROCEDURES •Identify Topics: Collect and sort out subjects. •Define Objectives: Make clear the expectations on the role and result of stakeholders’ participation. •Learn Expectations: Expectations and requirements of stakeholders. •Analyze Impact: Analyze the possible impacts from stakeholders. •Make Plans: Specify participation rules, resource back-up and work plan. •Implement Plans •Evaluate Performance: Evaluate results and efficiency. •Improvement: Timely summarize experiences, optimize regulations and process and keep progressing. STAKEHOLDER MANAGEMENT AND ENGAGEMENT A PRACTITIONER-BASED MODEL OF SOCIETAL RESPONSIBILITIES Source: https://www.toshiba/ww/en/csr/engagement/stakeholders.html TOSHIBA – MAJOR STAKEHOLDERS STAKEHOLDER MANAGEMENT AND ENGAGEMENT SOCIETAL RESPONSIBILITIES AS A CONTINUUM STAKEHOLDER MANAGEMENT AND ENGAGEMENT A PRACTITIONER-BASED MODEL OF SOCIETAL RESPONSIBILITIES •The managers believe that the firm will be a good corporate citizen that creates value for the firm, the community and the wider society. • •The responsibilities for the products/services, workforce and environment are closely linked to the firm’s internal operations, but also create value for a number of stakeholders in the firm’s environment. • •Product and service provision satisfies customer needs, employees benefit from HR activities and environmental improvements make society better off. STAKEHOLDER MANAGEMENT AND ENGAGEMENT 3. FOUR LEVELS OF COMMITMENT TO THE STAKEHOLDER APPROACH •Company stakeholder responsibility requires that companies be committed to a stakeholder approach to management on the following four levels: • 1.Basic Value Proposition - the entrepreneur or manager needs to understand how the firm can make the customer better off, and simultaneously offer an attractive value proposition to employees, suppliers, communities, and financiers. –How do we make our stakeholders better off? –What do we stand for? STAKEHOLDER MANAGEMENT AND ENGAGEMENT 3. FOUR LEVELS OF COMMITMENT TO THE STAKEHOLDER APPROACH 2.Sustained stakeholder cooperation - the competitive, macro-economic, regulatory, and political environments are so dynamic they necessitate constant revision of the initial stakeholder arrangements. –What are the principles or values on which we base our everyday engagement with stakeholders? 3.An understanding of broader societal issues - today’s managers must recognize and respond to a rising number of international issues, without the moral compass of the nation, state or religion as a guide. A pro-active attitude is necessary towards all stakeholder groups. –Do we understand how our basic value proposition and principles fit or contradict key trends and opinions in society? STAKEHOLDER MANAGEMENT AND ENGAGEMENT 3. FOUR LEVELS OF COMMITMENT TO THE STAKEHOLDER APPROACH 4.Ethical leadership - recent research points to a strong connection between ethical values and positive firm outcomes such as sustained profitability and high innovation. 5. Proactive ethical leadership is possible only if there exists a deep understanding of the interests, priorities, and concerns of the stakeholders. –What are the values and principles that inform my leadership? –What is my sense of purpose? What do I stand for as a leader? STAKEHOLDER MANAGEMENT AND ENGAGEMENT 4. RESEARCH EXAMPLES – SIGNIFIKANCE INFLUENCE OF CSR ACTIVITIES TO STAKEHOLDERS •The target group for the study were SMEs operating in the Czech Republic. The research was conducted in 2012. • •In the survey was included 229 companies. • •The research areas of CSR are based on the requirements of the three basic pillars of CSR - economic, environmental and social. The respondents could choose scale with the values (1-5), the value 5 was represented by the "most important„. • STAKEHOLDER MANAGEMENT AND ENGAGEMENT 4. RESEARCH EXAMPLES – SIGNIFIKANCE INFLUENCE OF CSR ACTIVITIES TO STAKEHOLDERS Sequence of significance influence of CSR activities to stakeholders in Czech SMEs Sequence Stakeholders Micro (scores) Sequence Stakeholders Small (scores) Sequence Stakeholders Medium-sized (scores) 1 Customers 2,173 1 Customers 2,726 1 Customers 3,308 2 Suppliers 1,692 2 Employees 2,356 2 Employees 3,250 3 Employees 1,288 3 Owners 2,288 3 Suppliers 2,885 4 Owners 1,250 4 Suppliers 1,959 4 Owners 2,500 5 Competition 1,212 5 Competition 1,685 5 Competition 1,865 6 The Government 0,846 6 The Government 1,397 6 The Government 1,212 7 Media 0,769 7 Media 1,178 7 The local community 1,212 8 The local community 0,769 8 The local community 1,178 8 Media 1,058 Source: Own research STAKEHOLDER MANAGEMENT AND ENGAGEMENT SUMMARY - TEN PRINCIPLES OF COMPANY STAKEHOLDER RESPONSIBILITY 1.Bring stakeholder interests together over time. 2. 2.Recognize that stakeholders are real and complex people with names, faces and values. 3. 3.Seek solutions to issues that satisfy multiple stakeholders simultaneously. 4. 4.Engage in intensive communication and dialogue with stakeholders not just those who are “friendly”. 5. 5.Commit to a philosophy of voluntarism - manage stakeholder relationships yourself, rather than leaving it to government. 6. STAKEHOLDER MANAGEMENT AND ENGAGEMENT SUMMARY - TEN PRINCIPLES OF COMPANY STAKEHOLDER RESPONSIBILITY 6.Generalize the marketing approach. 7. 7.Never trade off the interests of one stakeholder versus another continuously over time. 8. 8.Negotiate with primary and secondary stakeholders. 9. 9.Constantly monitor and redesign processes to better serve stakeholders. 10. 10.Act with purpose that fulfills commitments to stakeholders. Act with aspiration toward your dreams and theirs. Recomended study: –Chandler, Werther, Jr. „Strategic Corporate Social Responsibility“, 2014, chapter 2. –Blowfield and Murray, Corporate Responsibility, 2014 (chapter 9)