As businesses become more modernized in a landscape where media communications are always-on, information is available wall-to-wall. Companies will find themselves with increasingly different business intangibles, more informed and engaged stakeholders, sophisticated and intertwined models of corporate and social governance among the stakeholders as well as higher expectations of the companies to be reactive to the stakeholders’ concern.
For years, Corporate Social Responsibility programs have been developed with minimal engagement with the material stakeholders of the company, namely customers, suppliers, employees, communities and investors. It is no longer the case where we see global brands such as Google, Microsoft, Walt Disney, IKEA, Asia Pulp & Paper develop programs which actively involve the stakeholders.
One such successful campaign, albeit with a little skepticism from the public at its initial stage, was held by Asia Pulp & Paper1. Previously accused of “greenwash”, an act where a company attempts a pro-environmental image to solidify its standing with the public and decision makers, made a landmark commitment to cease all forest clearance activity. This was done with Greenpeace – the campaign group that has been one of Asia Pulp’s most vocal critics. This move saw a prominent return of U.S. giant Staples, which had dropped the company five years ago.
This was an example of industry leaders making the effort to make their stakeholder engagement into a collaborative exercise, one that helps the clients to achieve their business objectives and also to gain credibility with the relevant stakeholders. It becomes more of a value generation exercise as compared to an appeasement of stakeholder groups’ exercise.
Google has consistently been at the top of the Reputation Institute2 (RI) where companies are ranked on their Corporate Social Responsibility reputations globally. Most recently, Google has created a nationwide competition which aims to source out future leaders of China to become valued agents of social change. Ideas flowed in from the nation and proposals were vetted by Google which provided funds for the students to run the projects. The competition aims to educate the talented young minds of the world on the world’s big social issues as well as to introduce new perspective to the current situation.
This was an example of Google bucking the trend which noted that “between 56 and 61 percent of consumers across the 15 largest markets in the world are neutral or unsure if the companies can be trusted to deliver these CSR dimensions3.”
Another technology giant, Microsoft has spending exceeding $1 billion on Corporate Social Responsibility initiatives. At Microsoft, its mission is to “empower every person and every organization on the planet to achieve more” by being able to get today’s great technology benefits to people who need them. Having great technology created is no longer sufficient. Employees of Microsoft have raised millions for non-profits around the world and volunteered millions of man hours to developing software for non-for-profit organizations. This form of inclusion allows the stakeholders to become directly involved in the company’s Corporate Social Responsibility policy. More than 86 percent of employees surveyed stated that they would recommend Microsoft as a great place to work4. This highlighted Microsoft’s ability to create value of its business, retain its talents, as well as involve its employees in the company’s grand scheme of Corporate Social Responsibility.
Ensuring the company is in line with corporate social responsibility standards can also have a visible impact on the bottom line. From 1991 to 19985, Nike faced unrelenting criticism on their child labor and sweatshop practices as they moved away to a low cost production model that outsourced manufacturing to third world countries in a bid to boost their bottom line. This resulted in a drop in their share price; coupled with the recession of 1997, Nike recorded a stunning 4Q loss in 1998 and incurred capital costs in relation to its restructuring. Fast forward to 2016, this resulted in Nike being one of the most valuable brands in the shoe industry; as well as being a leader in CSR practices.
Other companies have found tangible value in engaging in CSR too. Apple currently engages in a recycling program that encourages consumers to hand in Apple products for a rebate. This allows Apple to make money off the extraction of valuable components and rare earth metals. It also “locks” the consumer into purchasing another apple product, which results in another sale for the company.
In recent years, Corporate Social Responsibility programs have become recognized as an expanding area of strategic value creation for companies. For example, in Singapore, Sustainability Reports have been issued for companies listed on the Singapore Exchange (SGX). This aims to help meet the growing demand from investors for more information on the non-financial aspects of businesses. This new requirement challenges firms to provide timely disclosure on what they have done in this area to investors who have invested in their equity. Companies who are able to do it well will tend to have investors that are likely to be more lasting and ultimately translate into value for the company.
In 2011, it was noted that a major failing of the Australian mining industry was due to a severe lack of stakeholder engagement. There was little communication between the mining companies with farmers, community groups, non-governmental organizations, and local governments which resulted in stakeholder disgruntlement and ultimately saw a slowdown of mining operations.
However, proponents of the opposite side are able to put up certain shortcomings in stakeholders engagements. Stakeholders’ engagements should be a collaborative one, where all departments in the company are involved in planning and decision making. However, this role is sometimes left to the communications departments which take up the heavy lifting because of the lack of strategy and set of skills from the other departments which also do not consider stakeholder engagement as part of their day to day operations for their core operations.
Without a proper strategy on how to involve and engage all parties for a meaningful Corporate Social Responsibility policy, discussions become unfocused and will often end up with an executive with a long list of unrealistic recommendations from unknown stakeholders that could not be implemented.
This can quickly turn into a case whereby engagements are seen as a mechanism for consent, control, co-operation, or approval, anything but discussion. It becomes a substitute for genuine trust, a true course towards corporate social responsibility.
There is also the moral status of stakeholders’ engagement. For the most part, the executives make the decision on what goes into the policies and reports. It would become a case whereby employee engagement are not voluntary and active in the process, as companies feel the need to portray an outlook whereby the thoughts of the blue collar employees are heard and would table a discussion purely for the purpose of posturing.
Yet, stakeholders’ engagement is not to be misunderstood or assumed as Corporate Social Responsibility. It is in fact a model of complex interaction between stakeholder engagement and corporate responsibility to replace a simplistic assumption of responsibility. Both parties are responsible and accountable for the value and the outlook of the business.
For a meaningful Corporate Social Responsibility policy to be present, early engagement with the relevant stakeholders is necessary. This allows both parties to iron out any issues faced and address them at the planning stage. Furthermore, during the course of the discussion, any insights gained could be new business opportunities, such as the initiative taken up by Sony, which introduced its ‘Road to Zero’ environmental plan, to pursue a long-range objective of zero greenhouse gas emissions by 2050. This initiative saw Sony being recognized by governmental ministries for exemplary long-term environmental goals in the Low-Carbon Cup 20166.
Therefore, to avoid viewing Corporate Social Responsibility and Stakeholder Engagement as two completely isolated necessities, a company will have to look at the stakeholders as a fountain which provides a wealth of information. It is crucial to note that the stakeholders can be, and should be leveraged to produce meaningful Corporate Social Responsibility policies for the betterment of the company.