This article looks into the common concerns of three different types of stakeholders. Listening to and addressing stakeholder concerns is the bedrock of corporate responsibility.
Stakeholders are groups who have an interest in the company. I have always found it useful to differentiate between internal stakeholders and external stakeholders as shown in the diagram below.
The sequencing of this article is no mistake and it is based on the vision of Jack Ma, the founder of Alibaba.
Customers have a range of valid concerns about the businesses that they buy goods from.
Chief among these is a lack of trust. It’s not just the major scandals such as Enron and the BP Deepwater Horizon blowout that have damaged customer’s trust in businesses. But excessive executive compensation for what in some cases is sub optimal performance has also damaged trust in businesses.
Taking a look at the 2018 Edelman Trust Barometer, we can pick out a number of interesting findings.
If we look at the figure below, the trust in business in the general population survey, the figure of just 52% of people trusting business is remarkably low, albeit higher than government and the media. It was interesting that the informed public figure was higher and that the number was down one percent year on year.
The figure below on the public’s expectations of CEO’s was the other statistic that really jumped out at me when I was reading this year’s Trust Barometer.
The fact that 64% of respondents said that they expect CEO’s to lead on issues and not wait to be regulated shows that we are operating in a new paradigm. The risky option is to do nothing. The safest option is to move forward with sustainability and corporate responsibility.
Try and create a business that stands for and embodies noble values and live up to those values whenever and wherever your business operates. Social and environmental issues fit into this category.
With the advent of the internet and social media, customers are becoming increasingly sophisticated in their ability to access information about the social and environmental performance of businesses.
No one wants to shop at a company that they know is deliberately causing harm to the planet or its inhabitants. This sort of activity does not make your brand aspirational and can take a long time to rectify.
Customers are increasingly concerned about what went into your product to get it onto the shelf, how it uses resources whilst it functions and how easy the product and its packaging are to recycle after it is used.
Businesses should be ready to be challenged on these areas and should strive for excellence in the social and environmental performance of their offering.
Employees are the second most important stakeholder group and businesses should pay attention to what concerns them.
Employees are concerned about the things that they have always been interested in. This includes areas such as pay, job security, working conditions and job satisfaction. But the 21st century has seen the development of new concerns amongst employees that move beyond their historical areas of interest.
Employees are increasingly focused on the reputation of the company. This is an asset for companies such as Patagonia and Interface who draw top talent towards them. But this is a liability for companies with a bad record on social and environmental issues, who will find it hard to attract the best talent.
People also like to work for businesses who hold similar values to themselves. In many cases this will be responsible businesses who give back to communities and work to minimise their impact on the environment.
Investors are a stakeholder group with very specific concerns. Shareholders are often very concerned about how companies they have invested in operate their governance structures and they are increasingly interested in social and environmental aspects too.
Most institutional shareholders will be investors with long time horizons. They aim to commit capital with time preferences much longer than any individuals. As such, their primary concern is risk. This includes reputational risks, operational risks and social and environmental risks. These risks all have the ability to jeopardise investments and possibly lead to a loss of principal.
Other concerns include those held by practitioners of responsible investing. This small but growing area looks for a balance between financial return and social and environmental aspects. This can be in the form of screening out of negative investments or positive screening for sustainable investments.
Other investors may simply view sustainability and corporate responsibility as indicators of good governance. If businesses are willing to go far out of their way to cover matters that are not statutory, they are surely very unlikely to have any issues with legal compliance.
Overall, interest in sustainable investment and sustainable finance more broadly is an area which is not only growing but will become increasingly important going forward.
There was an article which I came across last week which impressed me and I felt really showed how important sustainable finance is. You can find a link to this below.
I think it is empowering because we all make decisions of how to save for the future and plan for retirement. We need to see a mainstreaming of responsible investment and if that happens the impact would be enormous.
What you need to know
This article looked into the common concerns of three different types of stakeholders.
We looked at customers, who have a very low level of trust in businesses. Sustainability and corporate responsibility can address this.
We looked at employees who are moving beyond their common concerns to evaluate whether they share common values with their employer or prospective employer.
We looked at shareholders and this is a subgroup which is characterised with an excessive concern with risk management.
Overall, these are three incredibly important stakeholder groups who responsible businesses would be engaging with and solving any problems that arise.
Thank you for reading,
By Barnaby Nash
Please share your thoughts in the comments section below or reach out to me on social media. What do you think of the stakeholder concerns that I laid out in this article?
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