Founder & CEO of Sesame Associates | World Bank Ambassador on Climate Change & Young Global Leader nominee of the World Economic Forum
getty
Sustainability is increasingly becoming a necessity for corporations due to changing perspectives around the world. It is becoming even more critical for companies to address the gap between knowing and doing by embracing sustainable business practices. Sustainability can be defined as providing for the present needs without compromising the needs of the future generations to meet theirs. It has three pillars: economic, environmental and social.
The Importance Of Sustainability
Although 90% of executives think sustainability is important, only 60% of companies have a sustainability strategy. Often, companies that speak of being sustainable are lacking when it comes to implementation. One of the reasons I believe this is happening is because CEOs and corporate boards are not as engaged as they should be with sustainability strategies.
Starting a business to make the world more sustainable can not only highlight someone as a hero, but it also can provide a lot of wealth, as Elon Musk proved by becoming the world's richest person. The world is faced with the overexploitation of resources. According to McKinsey, having a sustainability strategy allows a company to make long-term investments. When it comes to sustainability, a do-nothing approach can mean a bigger loss in the future. Many corporate leaders are becoming aware of the need to reuse and recycle and are moving toward the circular economy. It is a huge area for growth as well with the renewable energy market expected to be $2.15 trillion by 2025.
As someone who specializes in corporate strategy and is also a World Bank Ambassador on climate change, I've put together some of the top reasons why you should implement sustainability strategies in your company:
• Add Brand Value And A Competitive Advantage: Millennials are the largest generation of the population. A survey by Nielsen shows that millennials are twice as likely as baby boomers to say they are changing habits to reduce environmental impact. Generation Z is soon to become the next dominant generation and is equally concerned, and in many cases more concerned, about sustainability than millennials. This shows that corporate brands can increase their values tremendously by focusing on sustainability, and many of the world's leading brands are doing just that. Apple has committed to becoming 100% carbon neutral for its products and supply chain by 2030. Companies that embed sustainability into their business models and corporate governance can have a lasting competitive advantage.
• Meet Consumer Demands: Nielsen studies show that 66% of consumers would spend more for a product if it came from a sustainable brand, and 81% of global consumers feel strongly that companies should help improve the environment. There is a changing trend among consumers toward supporting sustainability, and it is only getting stronger as the number of millennials and generation Z increases. Though sustainability is also about social and economic aspects, environmental concerns lead the thinking.
• Increase Efficiency: According to McKinsey, a sustainability strategy can reduce costs substantially and can affect operating profits by as much as 60%. It also lowers energy consumption and water intake. Building sustainability into business units can increase an organization's chance of profiting from its sustainability activities. It is also good to be transparent about sustainability activities. When Puma published data on the water used and carbon emitted through its supply chain, it helped identify ways to reduce water, energy and fuel consumption by 60%. Being sustainable can also improve relations with the government and the local community. It can get the company tax incentives and subsidies.
• Attract Talent: Being sustainable is important when it comes to attracting talent. Nearly 40% of millennials have taken a job because of the company's sustainability, and they are even willing to take a pay cut to work at an environmentally responsible company. With millennials becoming the largest workforce, not having a sustainability strategy can mean losing out on a lot of good talent. Being sustainable can also lead to the employees being more motivated to work because they see value in what the company is doing.
• Create New Opportunities: A strong sustainability proposition can help companies tap new markets and expand into existing ones. China's initiative to fight air pollution is to create investment opportunities worth more than $3 trillion through 2030. Corporations that focus on sustainability will be in the best position to get valuable new business opportunities.
A Corporate Strategy For Sustainability
Corporations have heard the message very clearly, and now I've observed that there is an increase in the number of large corporations that have a chief sustainability officer (CSO). Not only are there more CSOs, but the rank of the CSO is also rising. Economic, social and environmental sustainability is a must in today's business environment. It has a lot of benefits as well. A corporate strategy focusing on sustainability can add brand value, meet consumer demands, increase efficiency, attract valuable talent and create new opportunities.
Talal Rafi is a World Bank Ambassador (GYCN) on Climate Change. The opinions expressed are solely representing this position.
Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
What it involves
There are numerous guides on how to undertake stakeholder engagement from different knowledge bases including project management (the APM BoK), sustainability reporting (GRI Reporting Principles for Stakeholder Inclusiveness), internal auditing, and industry-specific expertise. This also points to potential internal stakeholders such as project managers, risk managers, and auditors, and communications teams (as well as employees and managers).
In industry, some organisations have produced stakeholder relationship management frameworks to guide interactions at the program and project levels. Examples of these include:
Recent guides worth noting are the Institute of Internal Auditors (IIA) – Australia White Paper on Stakeholder Relationship Management (updated 2020) and the Building Queensland Stakeholder Engagement Guide 2020. The IIA White Paper includes useful exhibits on prioritising stakeholders and development of a stakeholder relationship management program while the Building Queensland Guide draws a lot from the International Association for Participation (IAP2) and provides a stepped process to follow and useful tools.
The answer to ‘what it involves’ is a cycle (or circular) because the stakeholder mix or balance may change, and/or the views or interests of individual stakeholders may change. In general, there are five steps common to most frameworks for different contexts:
1. Identify stakeholders
2. Analyse materiality and stakeholder balance
3. Plan for engagement
4. Engage in accordance with the plan
5. Appraise stakeholder value - i.e. assess the value or quality of.
Points 1, 2 and 5 align with the GRI Tests for stakeholder inclusiveness (in defining report content):
the reporting organisation can describe the stakeholders to whom it considers itself accountable
the report content draws upon the outcomes of stakeholder engagement processes used by the organisation in its ongoing activities, and as required by the legal and institutional framework in which it operates
the report content draws upon the outcomes of any stakeholder engagement processes undertaken specifically for the report
the outcome of the stakeholder engagement processes that inform decisions about the report are consistent with the material topics in the report.
The IIA White Paper is specific to internal auditing but the process may be applied to many activities. Highlights relating to the cycle above are:
analysis helps to prioritise relationships for managing resources and realise benefits by sharing of insights that have an impact
a good plan identifies those responsible for taking care of the relationship, and tailors contact (e.g. frequency, type of communications). It also provides the ability to monitor emerging risks, trends, and issues
engage/appraise – a successful relationship must follow through on commitments given.
Similarly, the Building Queensland Guide expands on many points in the context of infrastructure proposals (seven step process) but one that stood out was planning to establish a participation level for stakeholders, i.e. inform, consult, involve, collaborate, and/or empower.
Also related to planning but at the business level, it is important to make sure stakeholders only appear on maps where they have an interest to avoid engagement fatigue or mixed messages. This might be a project level map (such as an infrastructure proposal), a program level map (where stakeholders have interest in multiple projects) or a portfolio level map (for all projects, programs and areas of business as usual).
Appraisal is important and, like change review processes, it allows the capture of issues and concerns addressed through engagement, evaluates if benefits were achieved and provides suggestions for further improvement. If this is documented and utilised well, it will enable an organisation to stay on top of stakeholder needs and prioritise actions. The benefits of this approach come to the fore during times of crisis, such as is currently faced with COVID-19.
Where internal resources are constrained, collaboration through partnerships may be helpful. A good example is the partnering with an NGO for community consultation for a large infrastructure project or the establishment of a community advisory group.
Potential challenges
To successfully implement stakeholder relations management, it is important to consider and integrate responses to key challenges within the planning process.
One of the most obvious challenges is resourcing because:
stakeholder engagement requires additional time and resources
where resources are limited, stakeholder engagement must be carefully planned to ensure the plan has impact
it may divert resources away from core business activities
personnel must be on board with achieving the desired objectives of stakeholder engagement from the outset (e.g. activities are not tokenistic or undertaken for the wrong reasons).
Other challenges arise if the group of engaged stakeholders is imbalanced or not representative or there is potential conflict that has not been considered. There may not be guidance in place for how to deal with stakeholder conflict or appropriate training may not have been provided.
Stakeholders should be briefed at the start of the engagement process (e.g. for a specific project, new customer/employee/supplier) to ensure understanding of the purpose and their inputs. Specific criteria may be useful in some circumstances (e.g. project approvals, environmental management).
The engage and appraise components of the stakeholder relations plan should specify how to keep stakeholders interested and involved for the required time. Making sure information is kept confidential where necessary is another challenge to address but on the other hand, so is acknowledging inputs where appropriate.
Some specific business processes
This section discusses stakeholder relations management through an environmental sustainability lens. Stakeholder engagement may be a requirement of the Environmental Impact Assessment (EIA)/planning process for project approval at national and State/Territory levels (e.g. Community and Stakeholder Engagement Plan (CSEP)) but organisations may also opt to undertake this voluntarily (for the many benefits discussed in this article).
Similarly, good stakeholder relations facilitate day to day environmental management, particularly the concept of ‘social licence to operate (SLO)’ or community acceptance of the activities undertaken. Effective stakeholder engagement is also a pillar of sustainability reporting to demonstrate how an organisation has acknowledged and responded to reasonable expectations and interests.
Project planning, approval, and delivery
Large scale infrastructure projects (e.g. roads, airports, maritime ports, and water and electricity networks) provide case studies for how good stakeholder relations can help to deliver project success. Stakeholders may be engaged at all stages of the project development: strategic assessment, options analysis, constructability, delivery, maintenance, and closure.
Infrastructure Australia recommends early engagement, noting that consultation processes typically engage communities to a greater extent at the project assessment and delivery phases rather than during concept development and review. Earlier engagement may reduce opposition during approval and delivery through a greater understanding of the challenges and potential solutions.
The Next Generation Engagement Project 2017 is an Australian national study into community engagement in infrastructure. It provides a good summary of project experiences such as, how projects turned out, how influential was stakeholder and community pressure and the causes of project delays (see also their post on $20 billion reasons to care about social licence).
Environmental management
Environmental management of the use of infrastructure once operational also requires good stakeholder relations, since the impacts for residents and other stakeholders are ongoing. The Port Authority of NSW, for example, manages key environmental aspects such as air and noise emissions, associated with its port assets and activities. Their approach is described in strategies, policies, and monitoring programs.
The Authority puts community front and centre with a dedicated web page on their site. They were due to start consultation on a new Port Noise Policy for commercial ships at Glebe Island and White Bay by in April but this has been delayed due to COVID-19. Nonetheless, the goal is to manage the port in a way that is acceptable to residents and the local community while recognising it is a long-term working port. What are the benefits to all stakeholders? The Port Noise Policy “will provide certainty for residents, industry, regulators and approval authorities about anticipated and acceptable levels of noise collectively from port activities both landside and vessels”.
Sustainability strategy
Stakeholder engagement can also help an organisation to shape its sustainability strategy and focus resources. Mirvac for example, recently refreshed their sustainability strategy to focus on issues that matter most to the organisation and their stakeholders, so that they can make a bigger difference in these areas (see the diagram below).
This type of analysis also provides the framework for considering how an organisation contributes to achieving the SDGs and vice versa to shape and steer the sustainability strategy. Using this example below, this includes SDG3 Good Health and Wellbeing, SDG 11 Sustainable Cities & Communities, SDG 12 Responsible Consumption & Production, SDG 13 Climate Action and SDG17 Partnerships for the Goals.
Key Learnings
Viewing stakeholder management through a sustainability lens (i.e. for economic, environmental and social outcomes) is essential for businesses to unlock the value provided by developing stakeholder trust with those that may have an influence.
In addition, understanding and engaging with stakeholders strengthens an organisation's ability to anticipate risks and avoid crises. Even when crisis is unavoidable, good stakeholder relations enable a company to recover more readily, such as from a cycle of bad financial performance.
The investment in stakeholder relations also develops assets such as loyalty, reduced employee turnover, and improved reputation and stakeholder perception which increases competitive advantage and avoids indirect costs along the way due to unforeseen issues or conflicts.
There are many examples of organisations that implement stakeholder relations strategies voluntarily and numerous guidelines to assist them in realising the benefits of engagement. To be effective, it is important to evaluate the knowledge gained for use in future strategic decisions and continual improvement.
——————————————————————————————
Written by Shelley Anderson, a freelance certified Environment Practitioner and Sustainability professional with experience in Australia and the UK. Her expertise includes pollution and fate, biodiversity creation, sustainability reporting, environmental risk management, and due diligence, across a broad range of market sectors. She was also a Director of the Cotswold Canals Trust (UK) where she applied her skills to charity governance and impact.
—————————————————————————————-
Click here to read about iSystain’s new Stakeholder Management module or contact us directly to speak to an iSystain consultant.