Stakeholder engagement
Stakeholder engagement is a process which is close to the heart of all major organisations which have a sound operating philosophy. By engaging with the stakeholders, the CEO’s ensure the long term success of their business or projects. This is by getting the various interested parties to buy into the success of their venture by making them a part of the decision making and also ensuring that their concerns or requirements are met. Even though this may be driven by rules and regulations to a great extend, we are witnessing a more proactive, inclusive and broader approach in recent times. This is usually a cradle to grave approach taking into consideration the whole life span of the project and its continued or total impact on the various parties involved. The positive impact of good stakeholder relationship on reputation and in turn the profitability of the venture is well recognised by the business community. In fact the brand value of a company is directly proportional to its positive rapport with its stakeholders. As in any relationship mutual trust, respect, transparency and understanding, all play a part in maintaining a constructive engagement with the stakeholders. It takes time to build trust and past records become very important for an organisation embarking on a new venture.
Organisations have to tailor their engagements to suit their business depending on the size of the project, its nature and impact on the stakeholders and the environment. The more controversial the project is likely to be, the earlier the stakeholder engagement has to begin and their views considered before firm plans are drawn up and resources are committed. The engagements can be achieved through formal or informal channels and no one formula can be applied to all cases. Each and every scenario can be different especially with a new venture entering an existing framework thereby causing realignment of the status quo. This can pose several challenges including social, cultural, economical, political and historical.

Identification of the Stakeholders

Stakeholders have to be identified at the time of project conception so that conflicts are identified early and resolved timely. There are several definitions for the word ‘stakeholder but in a broad sense any individual or group who can affect the profitability of the business or can affect or is affected by the groups operation can be considered a stakeholder. In the case of the Metal Manufacturing firm we can list the below stakeholders and their area of interest

I. Shareholders

They can be individuals, families, financial institutions, Governments or Government organisations or another company. Their main stake in the venture is finance or resources and their goal is to maximise profits. They normally track the share price closely and the CE’s performance is directly measured by the value he generates for the company. It may be noted that any profits gained by ignoring the impact of the waste products will be short lived as the subsequent penal action by regulators and/or the loss of reputation can be crippling. Reputation is hard won and easily lost and the damage can be long term. Investors may choose to exit their positions in the company and banks may choose not to finance new projects.

II. Employees

The livelihood of the employees and their families are directly linked with the prospects of the company. As in any other instance, all the employees cannot be generalised into one group. There may be a particular section of the work force that may be directly impacted by the waste products of the company and its associated health problems.

III. Local Population

The impact on the local population who has to contend with the health problem is direct and serious. They will strive to obtain justice and to this end will pursue all options available to them. Longer such an issue remain in the public domain the more damaging it becomes for the company and its reputation.

IV. Consumers

Even though customer choice is driven a lot by price and quality, there are other factors that influence choice. Individuals, especially in responsible societies, like to be seen as being socially aware and politically correct. Consuming products from a tarnished company could be frowned upon and they may not want to associate themselves with the metal manufacturer.

V. Government Regulators

If there are sufficient grounds to suspect the credibility of the company’s waste management and environmental credentials, then government regulators will not grant the required licenses to operate. If proven that the waste products are the cause of the reported health problems then the company will attract regulatory audits and subsequent penal action if found guilty.

VI. Local Health Care

The impact of the issue on the local healthcare service can be severe and can stretch the available funding and resources causing anger and resentment.

VII. Media

There is no news like bad news and the media will always strive to take maximum mileage out of this potential issue. For the CE media management becomes a key issue as the power of the media to generate public opinion is immense. VIII. Politicians and Political Parties

For a politician or political party whose survival depends on their vote bank this issue can become an important vehicle to further their agenda. There could be opposition as well as support for the venture.

IX. Environmental Activists

Various environmental organisations use issues such as this to capture the imagination of the public and also to raise funds. They also have a great influence on regulatory bodies responsible for statutory environmental clearances. It is imperative that their concerns are addressed.

X. Suppliers

Suppliers may become concerned about the profitability of the company and may withhold or suggest unfavourable terms for the supply of raw material due to fear of non payment of dues. They may also fear a loss of reputation by association.

XI. Insurers

Insurers decide on premiums on the basis of track record of the company and issues such as this will definitely drive premium payouts upwards.

XII. Public

Public opinion plays a large part in the success of any organisation. Negative publicity stays in public memory far longer than any positive news and this issue can cause long term damage to the company’s reputations and its brand value.

How to Engage Stakeholders
As stated in the beginning stakeholder engagement has to commence when the project is conceived. Any subsequent engagement especially after the rise of a problem will be seen as crisis management and not stake holder engagement. Stake holder engagement is a positive action whereas crisis management has negative connotations. Stakeholder engagement has to be treated as a key business function allotting time and resources for the same. It should form a part of the overall strategy and vision of the company. The accountabilities for the same have to lie with the senior management thereby underlining its importance to the company. The CE should ensure that the true nature of the waste product and its affects should be investigated. The results should be corroborated by independent bodies and a process should be put in place which neutralises any ill effects of the waste product. Then the process should be verified by Government regulators as well as environmental organisations willing to work with the company. Once the efficiency of the process is confirmed then all stakeholders should be engaged to show that the new plant will have no negative impact on the local populace. In this case the focus should be on allaying the fears of the local populations and also ensuring that the company has a sound waste management plan. At the same time the positive impact on the society as well as the economy should be highlighted.

Among all the stakeholders I have considered above I believe the requirements of the supplies have the least priority.

Reference:

Jeffery, N. (2009) Stakeholder Engagement:A road map towards meaningful engagement. [Online]. The Doughty Centre for Corporate Responsibility, Cranfield School of Management. Available from http://www.som.cranfield.ac.uk/som/dinamic-content/think/documents/CR_Stakeholder.pdf [Accessed 27th October 2012]
International Finance Corporation (2007) Stakeholder Engagement: A Good Practice Handbook for Companies Doing Business in Emerging Markets [online]. International Finance Corporation. Available from: http://www.ifc.org/ifcext/enviro.nsf/attachmentsbytitle/p_stakeholderengagement_full/$file/ifc_stakeholderengagement.pdf [Accessed on 27th October 2012]