There are multiple levels and types of stakeholders for any company with varying degrees of influence and importance to the organization. However, companies need to ensure a benchmark with regard to their engagement with these stakeholders.
Stakeholders can be internal or external and may include the company’s employees, investors, consumers, communities in which the organization operates, NGOs, governments, regulators, the media, business partners, suppliers, vendors, etc.
What is stakeholder engagement?
It refers to the process and channels that companies use to interact with relevant stakeholder groups with the intention of building relationships and trust and creating tangible and intangible value for both parties. The aim is to ensure that the company is responsive to stakeholder concerns and queries. Essentially stakeholder engagement helps achieve mutually-accepted outcomes.
Engaging with stakeholders has multiple benefits for companies and is considered a key aspect of an organization’s business strategy while also having a crucial impact on their reporting, whether annual reports, integrated reports, impact reports, or ESG and sustainability reports.
In this age of extreme competition within the business environment, companies looking to flourish and remain relevant will find that regular interactions with their relevant important stakeholders are a necessity.
Further, corporate social responsibility (CSR) and the impact of the organization’s activities on the environment and society have gained importance to the point where stakeholders look to ensure that their values are aligned with the companies they are associated with. This has brought stakeholder engagement even more so to the forefront of company strategy.
In addition, the evolution of stakeholder engagement has helped ensure inclusive decision-making and accountability, with the company’s annual report acting as a vehicle to report, explain and respond to various stakeholders on the decisions made, the actions taken, and performance across financial and non-financial metrics. Annual reports provide companies with the opportune chance to provide credible disclosures on risks, opportunities, and progress made toward achieving stated targets or goals.
A five-step plan to undertake stakeholder engagement
Identify and prioritize key stakeholders and stakeholder groups.
Develop an engagement plan, select engagement mechanisms, and set the frequency of engagement.
Engage with the stakeholders and identify their legitimate concerns and interests.
Set a process for dealing with conflicts between stakeholder concerns.
Ensure the concerns are considered in the strategic planning of your business.
This is one example of the stakeholder engagement process. Different companies will have different methods of engaging with their stakeholders.
Benefits of stakeholder engagement
A strong stakeholder engagement process and activities can help increase sales and market valuation of the business. This would largely be due to a gain in reputation from regular stakeholder engagement that results in higher sales and an increase in share prices.
Regular stakeholder engagement helps improve the company’s decision-making processes by continuously providing management and employees with feedback on plans, decisions, and actions taken. One can’t stress enough the importance of including stakeholder opinions and thoughts in the decision-making process of the company. This includes being transparent about the decisions taken and the impact of these decisions on the company’s stakeholders. With time, companies have acknowledged that they took better decisions and improved their decision-making process by including stakeholder concerns, thoughts, and feedback. Essentially a company’s ability to analyze situations and circumstances as a part of its decision-making process improves with the added inputs from stakeholders.
Effective stakeholder engagement and relationship management are necessary for companies to attain ‘social licenses to operate'. A company may have all regulatory approvals to operate but can find it extremely difficult to do business in a region without the express approval and support of the communities of that region and civil society, at large. Stakeholder engagement and relationship management in this regard can help companies gain the trust of the local communities by regularly interacting with them transparently and sincerely, thereby getting a ‘social license to operate’.
A schedule of ongoing dialogue with communities can help prevent costly conflicts and will go a long way in ensuring seamless business operations. Companies can avoid disputes with stakeholders and unnecessary losses by having regular engagement with communities. These periodic interactions along with the setting up of grievance mechanisms can help mitigate security risks.
Companies are expected to be socially conscious corporate citizens and to work towards addressing global sustainability challenges. Stakeholder engagement can help companies in this regard. Nowadays, many companies assess and choose one or more of the UN SDGs to focus on and stakeholder engagement goes a long way for the organization to find common ways to fight for these goals effectively. The goals may include fighting for human rights or enhancing education across society etc.
Companies realize the need for effective risk management and having the participation of local civil society can help enhance this aspect of their business. Take the COVID-19 pandemic, for instance, where companies with sound stakeholder engagement within communities and employees can help the organization manage risks, improve financial performances by having vaccination drives and provide other forms of support to help society.
While this may seem obvious, stakeholder engagement is crucial to creating the intended impact with quality reports. The size of the company notwithstanding, elaborating the company report (sustainability, annual, ESG, impact, etc.) requires the active participation of the stakeholders, local communities and authorities, and other groups from the company’s area of influence.
Of course, it may seem easy to acknowledge the need for stakeholder engagement but more difficult to find ways to go about it in an effective manner that produces results that help the company and the stakeholders in question. To help achieve this, companies would need to formulate and implement a stakeholder engagement policy. Below are some points to keep in mind while formulating this policy:
Define the scope of the policy
Define ownership and decision-making process
Define governance process
Identify key stakeholders (individuals and groups)
Develop an engagement plan, the frequency of interactions, methods, and channels
Facilitate stakeholder engagement process
Identify concerns and interests of key stakeholders
Design a process for dealing with conflicts
Ensure alignment by implementing a mechanism to include stakeholder feedback and concerns while planning strategy.
Provide feedback to stakeholder groups
Creating a report that transparently displays data and information along with a convincing narrative is no easy task. This requires expertise on multiple levels, including conceptualizing the report and creating compelling content, which is enhanced by visually stunning designs to ensure easy readability.
For this reason, many companies look to specialized business report design agencies to help get their message across and one such agency is Report Yak, which has years of experience helping companies convey their stakeholder engagement results to all readers. Check out some of our work here or feel free to get in touch to discuss your next annual report.