Stakeholder management

Objectives
Define stake and stakeholder
Differentiate between production, managerial, and stakeholder views of the firm
Discuss three values of the stakeholder model
Consider the concept of stakeholder management
Identify the essence of stakeholder management
Explain stakeholder management capability (SMC)

Origins of the Stakeholder Concept
Who Are Business’s Stakeholders?
Strategic, Multifiduciary, and Synthesis Views
Three Values of the Stakeholder Model
Key Questions of Stakeholder Management
Effective Stakeholder Management
Stakeholder Management Capability(SMC)
The Stakeholder Corporation
Stakeholder Power: Four Gates of Engagement
Principles of Stakeholder Management
Summary

Stakeholders
Individuals and groups with a multitude of interests, expectations, and demands as to what business should provide to society.

Origins of the Stakeholder Concept
What is a stake?
An interest or a share in an undertaking and can be
categorized as:
Interest Right Ownership
Legal
Moral

Stakeholders, Actors & Participants

Identifying Stakeholders, Actors and Participants
These are people directly or indirectly involved in environmental management
People who affect or are affected by, environmental management activities (or lack thereof).
Identifying & characterizing these are important for designing, implementing, and implementing an EMS as:
EMS must respond to their needs;
Take advantage of their information, skills and knowledge;
Identify the opportunities they can provide.

Wide range of stakeholders
Internal or external
Directly or indirectly involved
Relationship can be formal (regulated, official or contractual) or informal
Involvement can be passive or active
Participants can be affected positively, negatively or both
Particularly important to identify stakeholders, actors and participants for environmental communication

Who Are Business Stakeholders?

Who Are Business Stakeholders?
Evolution and Development of the
Stakeholder Concept
Views of the Firm
Production Managerial Stakeholder

Who Are Business Stakeholders?
Production and Managerial Views

Who Are Business Stakeholders?

Who Are Business Stakeholders?
Primary and Secondary Stakeholders
Primary stakeholders are those stakeholders that have a direct stake in the organization and its success
Secondary stakeholders are those that have a public or special interest stake in the organization

Who Are Business Stakeholders?
Core, Strategic, and Environmental Stakeholders
Core stakeholders are essential to the survival of the
firm
Strategic stakeholders are vital to the organization
and the threats and opportunities the organization
faces
Environmental stakeholders are all others in the
organization's environment

Who Are Business Stakeholders?
Legitimacy refers to the perceived validity of the stakeholder’s claim to a stake
Power refers to the ability or capacity of a stakeholder to produce an effect
Urgency refers to the degree to which the stakeholder’s claim demands immediate attention
Legitimacy, Power, Urgency:
A Typology of Stakeholder Attributes

Who Are Business Stakeholders?

Strategic, Multifiduciary, and Synthesis Views of Stakeholders
Strategic approach considers stakeholders primarily as factors managers should manage in pursuit of shareholder profits
Multifiduciary approach considers stakeholders as a group to which management has a fiduciary responsibility
Synthesis approach considers stakeholders as a group to whom management owes an ethical, but not a fiduciary responsibility

Three Values of the Stakeholder Model
Descriptive
Instrumental
Normative

Key Questions In
Stakeholder Management
Who are our stakeholders?
What are our stakeholders’ stakes?
What opportunities and challenges do the stakes and stakeholders present?
What economic, legal, ethical, and philanthropic responsibilities does our firm have?
What strategies or actions should our firm take to best manage stakeholder challenges and opportunities?

Key Questions In Stakeholder Management
Who are our stakeholders
Management must identify generic stakeholder
groups and specific subgroups

Key Questions In Stakeholder Management

Key Questions In Stakeholder Management
What are our stakeholders’ stakes?
Determine the nature/legitimacy of a group’s stakes
Determine the power of a group’s stakes
Determine specific groups within generic groups

Key Questions In Stakeholder Management
What opportunities and challenges do stakeholders present?
Opportunities are to build good productive working relationships with the stakeholders
Challenges are representative of how the firm handles the stakeholders

Key Questions In Stakeholder Management

Key Questions In Stakeholder Management
What economic, legal, ethical, and philanthropic responsibilities does our firm have to its stakeholders?
Philanthropic Responsibilities
Be a good corporate citizen.
Ethical Responsibilities
Be ethical.
Legal Responsibilities
Obey the law.
Economic Responsibilities
Be profitable.

Key Questions In Stakeholder Management
Stakeholder/Responsibility Matrix

Key Questions In Stakeholder Management
What strategies or actions should our firm take to best manage stakeholder challenges and opportunities?
Should we deal directly or indirectly with stakeholders?
Should we take the offense or the defense in dealing with stakeholders?
Should we accommodate, negotiate, manipulate or resist stakeholder overtures?
Should we employ a combination of the above strategies or pursue a singular course of action?

Key Questions In Stakeholder Management
Types of Stakeholders

Effective Stakeholder Management
Careful assessment of the five core questions:
Who are our stakeholders?
What are our stakeholders’ stakes?
What opportunities and challenges do stakeholders present?
What economic, legal, ethical, and philanthropic responsibilities does our firm have?
What strategies or actions should our firm take to best manage stakeholder challenges and opportunities?

Effective Stakeholder Management
Stakeholder Management Capability
Rational level
Process level
Transaction level

Effective Stakeholder Management
Stakeholder Corporation
Stakeholder inclusiveness
Stakeholder symbiosis

Stakeholder Power:
Four Gates of Engagement
Awareness
Knowledge
Admiration
Action

Principles of Stakeholder Management
Acknowledge
Monitor
Listen
Communicate
Adopt
Recognize
Work
Avoid
Acknowledge conflict

Principles of Stakeholder Management

Core Stakeholders
Environmental Stakeholders
Legitimacy
Managerial view of
the firm
Power
Principles of stakeholder management
Process level
Production view of
the firm
Rational level
Stake
Stakeholder
Stakeholder inclusiveness
Stakeholder management capability (SMC)
Stakeholder symbiosis
Stakeholder view of
the firm
Strategic stakeholder
Transactional level
Urgency
Selected Key Terms

Environmental reporting
Refers to the issuance of any report containing information of an environmental nature, from corporate emission levels to national state of environmental reports
Within the organisational EM, environmental reporting refers to the voluntary communication of formalised information about an organisation’s environmental policies & objectives, management systems, and measured environmental performance to the organisation’s stakeholders.

History of Corporate Environmental Reporting (CER)
First corporate environmental reports were released in 1990s issuing reports on emissions
Throughout the 1990s CERs evolved in two directions:
Detail: as companies improved their performance measurement processes, more environmental indicators were included;
Coverage: reports expanded focus from biophysical environment to include health & safety, social, ethical & economic performance.
The expansion in coverage coincided with the trend by companies to merge environmental & H&S management systems.

Evolution of environmental reporting to meet stakeholders information needs.
Source: adapted from the UN Environmental Programme, 1994

Processes of preparing an environmental report
GRI=Global reporting initiative

Reliability of the data
At any time in a corporation, different performance measurement processes will be at different stages of development
Some measurement processes will have been in existence for some time, thus mature, robust & reliable
Performance measurement processes for other areas will be new or under-managed, thus data not very reliable
When the performance data is not considered reliable, reporting on performance will be problematic or not possible
Thus most companies report on their policies, goals and objectives rather than actual performance for areas with emerging systems.

Reporting and verification, measurement processes & reliable data

Frame of reference for reporting based on reliability of data and relevance to stakeholders
Can be used as a screening tool to determine which indicators should be reported or how they should be defined in the report.

Audiences for Environmental Reports
Targeting their audiences, report makers may address the noisiest stakeholders
Other consider their employees as their main audience but also target environmental campaigners, shareholders & local communities.

Driving forces for external assurance
1. The nature of information being reviewed: is the information mainly qualitative, quantitative or some combination?
2. The nature of auditor’s professional opinions: are the assurance providers giving personal opinions (they include their values in their opinion) or objective opinions (professional judgment based on education, experience and professional ethics on whether reported information is factual).
The nature of the assurance depends on two main factors:

Types of assurance
Review & endorsement of company policies & performances – what does the external reviewer think of the company’s performance, policies, programs? Typically provided by auditors who express their own beliefs on how companies should perform.
Verification that management systems meet external standards – does the company’s EMS meet a specified standard (e.g., ISO 14001)? This assurance is credible when provided by consultants and auditors with special qualifications

Interpretation of performance data – what does all environmental data mean? How does this company compare to peer companies? Typically provided by consultants with industry expertise, academics or NGO’s with access to similar performance data from other companies.
Verification of data integrity – are the reported environmental data accurate and complete (= reliable)? Typically provided by accounting & engineering companies with expertise in assessing quantified information and measurement methodologies.
Types of assurance (Cont.)

Four types of external assurance that vary with the quantitative and qualitative nature of data and information discussed above: