Stakeholder Governance: An Analysis of BITC Corporate Responsibility Index Data on Stakeholder Engagement and Governance

By David Grayson Director, The Doughty Centre for Corporate Responsibility Cranfield School of Management, Cranfield University

Stakeholder Governance: An Analysis of BITC Corporate Responsibility Index Data on Stakeholder Engagement and Governance

Some critics of Corporate Responsibility falsely claim that it represents surrendering the running of business to Greenpeace and other NGOs. That is nonsense.

Engaging stakeholders is not an abdication of management
responsibility. It is how effective and successful modern management thrives.

Good management involves reconciling customers, employees’, suppliers’, owners’ and society’s wants and needs with an impending Global Sustainability Crisis (climate change, bio-diversity loss, water and other natural resource stresses, burgeoning populations). Good management also means balancing economic, environmental and social performance. This is not business as do-gooders – just how to do business well.

We need a new mindset for corporate sustainability. This includes harnessing the discretionary time and talent, contacts and commitment, energy and enthusiasm of employees and other stakeholders to help create what I call ‘corporate social opportunities’ – products and services, processes and new business models which are both commercially attractive and simultaneously addressing sustainability. Some companies are already successfully engaging employees and sometimes even their value-chain: suppliers and customers, in order to help innovate corporate social opportunities.

This new Doughty Centre paper by Centre visiting post-doctoral scholar Erik G. Hansen and visiting fellow Heiko Spitzeck shows how a number of companies are developing new consultation and governance mechanisms generally to engage stakeholders. Some of these new governance mechanisms are one company with one or more of its stakeholders; some involve companies collaborating with other companies.

These new mechanisms also include multi-stakeholder initiatives like the Sustainable Palm Oil Council and the Marine Stewardship Council. These initiatives are companies voluntarily adopting higher standards of environmental and social performance and creating new forms of collective, self-regulation and partnered or collaborative governance. Internationally, there are several hundred of these ‘soft-law’, voluntary, privately governed codes and similar mechanisms – for example the Extractive Industries Transparency Initiative and the Kimberley Process.

Now, in the UK, the new coalition government is piloting the concept of ‘Responsibility Deals’ – “a mechanism that enables companies to collaborate more effectively with other groups in society to address issues of common concern in a coherent and focussed way.“ If implemented successfully, the Responsibility deals will represent yet another mechanism. Also in the UK, the Financial Reporting Council watchdog published in 2010 its first Stewardship Code for institutional investors, encouraging investors to take a more proactive role in the companies in which they invest. All these trends suggest that involving stakeholders is going to continue to grow – both in scale and in scope. Therefore, it is important to understand how and why this occurs in best practice.

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