Going with the two-way flow
Only around 20% of company reports include information on stakeholder engagement, according to a recent survey – Corporate Responsibility – a United State? – carried out by Context, a London-based corporate responsibility (CR) communications and strategy consultancy.
“One can assume that if a company is not reporting on it then it is not doing much,” says Simon Propper, Context’s managing director.
Propper notes that corporate responsibility is still a backwater in most companies. “It is under-resourced compared with the main company functions. For example, marketing departments command far larger budgets than the corporate responsibility departments to research their stakeholders – the customer.”
Reluctance to address this issue adequately may be due in part to the factthat getting to know your stakeholders means facing difficult, uncomfortable issues. “Companies need to expose themselves to the views of their critics,” he continues. “The company’s corporate responsibility programme will be credible only if it canvases a broad range of views and responds to them. Clearly a proportion of those views will not be positive.”
But this presents a dilemma. Should the CR department tell its stakeholders that yes, it will implement their suggestions? Should it tell the board that there is bad news on the corporate responsibility front? “These issues create tension, because the CR staff may be creating an expectation that the company cannot fulfill,” Propper explains. “And there is no point the CR department opening up a dialogue if it is not empowered to respond with something of substance.”
There is an associated danger that a company may allow its strategy to be driven by its stakeholders. “There needs to be a balance between what the stakeholders say and the company’s own judgement,” Propper explains. “The importance of the company’s own experts leading should not be forgotten.” Propper describes the stakeholder as an early warning radar: “They tell you what are the issues are and through their feedback provide a test of the company’s strategy.”
The good news is that the level of engagement with stakeholders is increasing. “But this also gives rise to two questions,” Propper notes. “Firstly, who are the stakeholders – which people can make an impact on the business? And which issues are material? Companies need to make a clear statement on this.
“Shareholders, employees and customers can impact on a company’s performance,” he adds. “These are the obvious groups. However, companies tend to target their CR communication at the pressure groups, assorted opinion leaders and local interest groups, whose impact on the business is quite variable. The reason for this is that it is the pressure groups which are best informed about CR issues and most likely to give feedback and raise difficult issues. As a result we have a situation where specialists are talking to specialists in a consultation ghetto. There’s a danger of having a purely academic interaction outside of the genuine business planning process.”
But he notes that the pressure that has been brought to bear by the special interest groups has been very beneficial.
Propper points out that in the meantime “those that can impact on the business - the shareholders, employees and customers - are the last people to be informed. The way in which companies communicate to these groups on CR is often very poor,” says Propper. “Given that company CR reports are targeted at the specialist groups, they are specialist in nature. Companies need to address their mainstream audiences more energetically.”
But some companies are doing just that. Propper cites Vodafone, which publishes an internal corporate responsibility report for staff which, he notes, “is both accessible and interesting. There is a very different report for the CR geeks.”
But do CR issues matter to employees that much? “Employees don’t want to feel bad about their company,” Propper says. “It is often cited by HR professionals that good corporate responsibility is good for recruitment.”
Furthermore, the institutional investor has also had a beneficial impact thanks to the legislation requiring pension funds to disclose any social or environmental investment criteria they apply. “Now they also ask companies what they are doing to engage with their stakeholders – what issues have been raised and how they are reacting, he notes.”
Propper notes that “this has helped the UK move forward in this area more quickly than most markets and UK companies are more advanced in terms of transparency. In this area our report confirms that UK and European companies have the edge over US companies. The big question is: will they be able to translate this into gains in the marketplace?”