A recent school of thought imposes that businesses cannot run smoothly without engaging stakeholders and demonstrating commitment to address their needs. This is the alternative fast replacing the erstwhile ideology that business exists to provide dividends to shareholders only – the belief that as long as a company was profitable, no other factors really mattered. Stakeholders play a pivotal role in the success of any business and increasingly, the concept of stakeholder engagement is being embraced in response to the call for accountability and corporate governance in developing countries.
However, many organisations have been limited in their stakeholder engagement efforts due to a lack of understanding of the needs and/or expectations of the different categories of stakeholders that have negative impact on their business activities. Engaging stakeholders has been established over the years as crucial to ensure continuous improvement and progress towards the 2030 sustainability goals through corporate governance. Close engagement of stakeholders to fully understand their position is critical to managing the impact of stakeholder actions on organisational activities.
Monaem Ben-Lellahom, in this interview, sheds light on the general expectations of the different categories of stakeholders and how best to manage them. Monaem Ben-Lellahom is the co-founder of Sustainable Square, a micro-multinational firm that specializes in organizational sustainability, transparency & disclosure, responsible investment and social impact.
- From your experience, how has the concept of stakeholder engagement evolved over the years in light of the rise of VUCA (Volatility, Uncertainty, Complexity, and Ambiguity) in African markets?
In the last five years, companies have not only become more aware of their environments but have also gained access to global knowledge and best-case practices from many developed nations. This, in turn, allowed markets like Africa to expedite the same locally. However, there are still complexities, as stakeholder engagement performed in developed markets will differ to those implemented in developing markets. A good example for this, is how the advent of technology plays a big role in European and North American markets, but may not within an African context. Another way of working around these challenges is to get the private sector involved. The private sector plays a crucial part in bridging the volatility, uncertainty, complexity, and ambiguity of stakeholder engagement by voicing their expectations and creating the right conditions to connect with people around them in order for future value creation. While these high expectations have been putting pressure on the private sector, you can see that stakeholder engagement as a practice has evolved to accommodate more expectations in these markets.
- Do you consider the increased demand for corporate disclosure and rise in corporate reporting frameworks a failure of stakeholder engagement and why?
We cannot talk about the importance of corporate disclosure without talking about GRI, and especially the GRI-G4 framework. In the past, companies were engaging in a sort of stakeholder guessing, a situation whereby the company would guess what stakeholders want and put them in reports. This was often in total disconnection of stakeholder’s expectations. Therefore, GRI requested for proper disclosure, which in turn required proper stakeholder engagement. They stressed that they didn’t want to create a set of checklists but rather certain expectations from stakeholders, which necessitated disclosure, which in turn enforced companies to align their reports with stakeholder’s expectations.
- What about internal engagement, how have management practices developed in Africa, to reckon with employees as primary stakeholders?
The private sector is beginning to realize the importance of engaging employees. This year (2017), globally there has been a lot of talks and focus on employees’ engagement. To ensure more sustainable practices, companies now routinely engage their employees. However, that isn’t the only benefit. If companies align what they are doing with their employees, they manage to create good ambassadors of the business. If you respect employee’s expectations from investment and strategy, compensation and growth, you will notice the overall transformation. However, lots of companies are still struggling to increase the rate of employees’ engagement at the workplace. Which puts more pressure on top management to mainstream new practices hoping to enhance the engagement rate.
- What do you think stakeholders really want most of the time – to be informed, consulted or both – and are there opportunities often ignored by organizations during the engagement processes?
Fundamentally, I would say all stakeholders should be informed, but not everyone should be consulted. This is mainly because most of the time, stakeholders wouldn’t know what they want or may not be able to give the input a company desires. So, inform all and consult with few.
- A critical look at the business environment in Africa shows that some multinational corporations have experienced challenges and in some cases, loss of investments due to faulty stakeholder profiling and engagement; would you describe the continent’s peculiarities unique or simply reflective of the levels of economic developments?
Globally, companies have either often failed to define the right stakeholders and/or engaged with the right ones. Back in 2008 and as result of the global economic crises, companies that ranked high in their sustainability index, stakeholder relations, and social interventions were the least affected by the crisis. This is mainly because these companies had maintained strong ties with their communities and stakeholders, and have put in place a strategic stakeholder engagement process that ultimately resulted in a robust and sustainable business operating in an inclusive manner. If we considered stakeholder engagement in Africa, you will find that stakeholder engagement mostly focuses on shareholders, customer satisfaction and employee retention, which leaves other significant stakeholders widely un-engaged. The challenge is that most companies rarely conduct adequate stakeholder mapping and analysis. Another challenge faced is the inadequate localization of multinationals’ business strategies. Most global brands will implement business strategies in African markets without a proper understanding of the cultural, political and social differences existing between the home of origin and the target market.
Lastly, other factors like corruption and bribery, deterioration of currencies; political instabilities, inflation and other issues have continuously affected the process of engagement, which has contributed to economic challenges and failures. To summarize all, yes an effective stakeholder engagement is important. Yes, sustainability plays a big role but there are other factors always need to be taken into consideration.
- How should organizations approach engagement – pre-requisite for decision-making, social license to operate, reporting procedure or annual routine?
It should be an annual routine rather than a reporting task. Engagement must be mainstreamed as frequently as possible. I would also agree with the social licensing to operate but on the condition to approach with a full consciousness to avoid raising expectations and getting more public pressure. As for pre-requisite for decision-making, engagement could be a source of inspiration to innovate products and services. Global research and studies have proven that engaging stakeholders could be a golden opportunity to innovate and develop new business channels that connect with human evolution. You engage with stakeholders to get inspired on what innovations and solutions you can bring to their lives and eventually grow the business. This is the concept of creating shared values being talked about globally. Anything a company produces has to create mutual value between the community and the business.
- What current trends and future possibilities should African organizations pay attention to in developing their engagement strategies?
Definitely, technology. We face the same daily struggles in every market. We lack data from the local communities and the only way you can develop good data in sustainability is to digitize the process of engagement itself. The more you digitize the process, the better you can connect with data on the ground and develop analyses in the future. The next thing would be stakeholder mapping. Most organizations are yet to define and engage stakeholders based on their influence and impact to core business objectives. This means that some of the most significant stakeholders are involved in critical decision-making and disclosure.
The Coca-Cola Company 2016 Sustainability Report: Stakeholder Engagement – http://www.coca-colacompany.com/stories/stakeholder-engagement
Paul Slater (2012); Understanding Your Stakeholders. Retrieved from https://mushcado.wordpress.com/2012/01/26/understanding-your-stakeholders/
ThistlePraxis (2016), CSR Files: What do stakeholders really want? Edition 19: ThistlePraxis Consulting