The global benefits of stakeholder engagement

Blog_Engagement_BCCCCPhilanthropy is commendable, but it must not cause the philanthropist to overlook the circumstances of economic injustice which make philanthropy necessary.

Martin Luther King, Jr.

Effective corporate citizenship programs look not only at the social issues they seek to address, but also at the root causes of those issues, assessing environmental, social, and governance (ESG) issues both at the macro and micro levels simultaneously.

Great citizenship programs look at the big picture—the global threat of climate change, the sweeping ramifications of disease and hunger—while also remembering that at the end of these issues are individual people with individual needs: the mother that needs a vaccine for her child, the little girl that dreams of more schooling to expand her horizons and make a sustainable life possible, the unemployed service worker who may need additional training to participate fully in our global knowledge economy. Talking to these stakeholders is a critical part of understanding how they can be served best.

Are there bad corporate citizenship programs?  Aesop said that no act of kindness, no matter how small, is ever wasted.  Whether your company is in the very beginning stages of corporate giving, or you have developed a sophisticated corporate citizenship program with integrated ESG impact metrics —every investment is an opportunity to start a virtuous cycle.  The question is, “is your investment yielding the most it could for your company and your cause?” 

CSR solutions are as numerous as our problems. So, how can companies balance the possibilities and get the greatest possible social and business value from their investments? Adding stakeholder engagement to your company’s materiality assessment will improve your feedback loop—and the odds that your investment will be maximized.  Stakeholder engagement can help companies determine the issues for which they are most likely to be held responsible and those that are associated with their business in the minds of their customers and critics alike as well as which they are most suited to address.

The value of stakeholder engagement is well supported by existing research, such as a 2013 study that finds that the perceptions of employees and customers are affected by how well a company engages with all of its stakeholders. A 2009 study highlights the financial benefits of engagement, and finds that firms with good stakeholder relations are likely to recover more quickly from poor financial performance.  The power even extends to those working to increase stakeholder engagement. A 2014 study finds that engagement at the leadership level encourages even greater stakeholder engagement overall, as  firms that engage with corporate citizenship decisions at the board-level are more likely to consider the interests of multiple stakeholders, resulting in better engagement with customers, employees, and external stakeholders, and also a higher return on equity overall for the firm.

Yet, even with executive support and a sound strategy in place, global corporate citizenship still has its complications. CSR practitioners must navigate foreign bureaucracies, differences in the cultural definitions of philanthropy, roles of nonprofits, and the differing needs of local communities in multiple global regions. Stakeholders can provide a shortcut to gaining insight about how the firm can engage most effectively, helping the company to determine whether they should work with NGO partners and invest in nonprofit capacity-building, enabling the organizations that understand the local needs and regulations to operate more effectively, focus on their supply chains to ensure that their vendors operate ethically and sustainably around the globe, or both. Many firms, of course, also focus on employee engagement through localized volunteer programs.

Global corporate citizenship can be daunting. The good news? We’re making progress on some fronts. The number of people living in poverty has sharply declined, child mortality rates have fallen drastically, and investment in renewable power is increasing.  By engaging with stakeholders, corporate citizenship professionals are making miraculous strides in the effort to make this a world in which we want to do business, and a world in which we want to live.