Are you making peace with your new stakeholders?
On our new playing field, with the increased focus on sustainability and ESG, your list of potential stakeholders has expanded considerably, as have their needs.
by Paul Pierroz
Strategy | Sustainability | Marketing
September 8, 2021 - The sustainability bar is high and moving higher. To keep it within reach, we need to recognize it and have strategies for satisfying our stakeholders and others emerging with new requirements and expectations. It matters. Our reputation, relationships, and businesses are on the line.
KEEP YOUR CORE SOLID
Your core group of stakeholders is awake and restless. I think about your current employees, customers, investors, and the communities where you operate as the core. It’s safe to assume they are at least as serious and passionate about sustainability and social responsibility as you are.
Let’s consider current employees and communities for a moment. I’ve worked with and surveyed employee groups in several countries. About 40-60% of employees respond to typical surveys. The rate for our sustainability surveys was well over 80%. The connection with the topic is overwhelming. In the surveys themselves, the vast majority indicated sustainability was a critical issue for their organization and personally. Post survey, when it came to workshop attendance, an invitation decline was the exception rather than the rule. Regardless of workload, people were taking the time they didn’t have to learn and contribute. It was beyond business for them; it was personal.
The days of accepting vague responses and hollow platitudes are gone. Instead, employees are interested in straight talk about priorities, involvement, actions, and performance. As I was moving along in my career, my father mentioned this gem quite casually, “Remember the 99 are watching the one.” He was referring to how he approached coaching students and ensured their fair and consistent treatment in his job as a large high school vice-principal, but it’s applicable here too.
When it comes to sustainability and ESG issues, your employees watch and take note of your tone, approach, and results. And they are not the only group. I think you’d agree that the communities you operate have a unique position among your core stakeholders. Sure, there is always the threat of business closure or them leaving to join another community, but on the whole, the relationship is deep and interconnected. The interdependence comes from your bricks-and-mortar operations, your common border, and the resources you share. Financial, operational, natural, physical, and social resources make up the fabric of the community lifelines into your organization.1
Your inner circle – customers, employees, investors, and the communities in which you operate. I’m sure you’ve realized a few may be missing. We need to think about all those with a stake in your near- and long-term viability. A stake is a vital interest. Your stakeholders are simply the individuals and groups who are interested in your organization or are somehow affected by you.
You may be thinking this definition is too broad and casts too wide a net. Of course, it is broad, but this is precisely how you should be approaching your view of stakeholders and building your purpose-driven marketing profile with them. On our new playing field, with the increased focus on sustainability and ESG, your list of potential stakeholders has expanded considerably, as have their needs. Let’s look at a few of them more closely through the lens of your sustainability and ESG requirements:
• New customers will do business with you if you can help them perform better. If your solutions improve their sustainability and ESG profile, you have an inside track, but not without clearing the hurdles we’ve discussed. Selective and more sophisticated qualifications, rating systems, and exploratory meetings are being developed that screen you in or out. The advantage of going through this additional scrutiny is that you can use it to improve your profile in the long term and pursue new customers.
• Prospective employees are free to choose where to apply and invest their knowledge, skills, and abilities. Recruitment and selection, at their essence, involve mutual assessment, career forecasting, and value-seeking. Assume your organization’s purpose and sustainability approach, along with your programs and performance, form part of every candidate’s evaluation. Remember, as you decide, so do they.
• Prospective investors, insurers, and banks have upped their game regarding their sustainability and ESG criteria and evaluation. Financial institutions continue to build and strengthen their sustainability teams, which are front and center in the screening process. These are powerful voices with the ability to influence decisions. Some investors prioritize your sustainability profile more than others. However, with emerging studies showing the association between returns and ESG performance, it will increase over time.
• Prospective communities will closely review your intentions, sustainability track record, and present and future environmental and social benefits and impacts, both positive and negative, with more scrutiny. The effort required to obtain and retain permits will become increasingly challenging as ESG related criteria, measurement, and regulatory requirements strengthen. Communities and citizens are increasingly concerned with sustainability and ESG matters, and your ability to address them can make or break a new development.
• Governance organizations and ESG rating agencies are growing in influence as they build capability, standardized frameworks, and acceptance of ESG issues. For many of you, governance and rating agencies are already in the zone of critical stakeholders. They can influence guidance and voting recommendations put forward by governance coalitions and agencies representing shareholder interests. Specific strategies are required to ensure you meet their requirements and advance your interests.
• Industry regulators and standards bodies have taken a keen interest in sustainability and ESG issues and are joining the fray. Securities, industry, and product oversight for these areas are increasing, as are their budgets, expertise, and the resources applied within each agency. Regulatory regimes frequently consider economic and social development elements, including consumer privacy, social justice, human rights, opportunity accessibility, diversity, inclusion, and equality. Policies, standards, and compliance incentives are increasingly developed and engineered with end-state outcomes in mind.
No one can dispute the significant shift to sustainability investing. Of course, investors and those who provide the finances and protection to your organization are essential, but more stakeholders exist with equally demanding requirements and expectations.
1 This information is from the Integrated Reporting website, The tool for better reporting, “Get to grips with the six capitals.” https://integratedreporting.org/ what-the-tool-for-better-reporting/get-to-grips-with-the-six-capitals