Stakeholder engagement strategies still remain far less embedded in corporate practice in North America than in Europe, and as the results of Accountability Rating 2005 show, elite U.S. companies lag far behind their European counterparts in involving stakeholders in decision-making.
“When I speak with American companies about stakeholder engagement there is less of an understanding of the term, sometimes confusing it with “shareholder,” says Jon Woodhead, director of CSR Network, a consulting agency specializing in corporate social responsibility and stakeholder engagement. (http://www.csrnetwork.com/aboutus.asp)
“Generally the term is now more recognized, but it’s changing slowly.”
The reasons for committing to a stakeholder engagement strategy or submitting to an independent report also remain quite varied, says Woodhead. Some companies view stakeholder reporting as a “communications exercise,” not taking to heart thoroughly the resulting recommendations.
Working with AccountAbility, CSR Network has undertaken its second join-effort initiative to determine the level of social responsibility amongst the word’s largest 100 companies (see: http://www.accountabilityrating.com/methodology.asp). The rating evaluates a company across six domains – stakeholder engagement, governance, assurance, strategic intent, performance management and public disclosure.
“The basic concept is, what does the report tell us about their approach?” asks Woodhead.
Of those who scored in the top ten, seven were European. The top five were all European, with British Petroleum scoring the highest, with an unremarkable 78 out of 100. Wal-Mart placed 89th, with seven points. Time-Warner was 95th, scoring five points.
According to the web-site, the report shows that corporate social responsibility and willingness to engage with stakeholders in meaningful ways is, amongst the North America’s largest corporate players, still largely a token, peripheral practice.
“European companies score well in complying with internationally recognized labour, human rights and environmental standards. Eighty-eight per cent of European companies in the rating are signed up to these types of initiatives, compared with 24 per cent of US companies.
US corporations also fall short in the rating’s stakeholder engagement and assurance criteria. Few seem willing to engage with stakeholders to understand their concerns and co-design solutions, and even fewer want to subject themselves to independent evaluation of their social and environmental performance.”
Woodhead, surprised at the data, notes that if stakeholder engagement was a de rigueur practice it would help organizations prepare for the future.
“Information is power, and there are clear linkages between stakeholder feedback that drives agenda and the success of an organization. Companies that do it well use [stakeholder engagement] to see issues on the horizon.”
Current stakeholder engagement practices range from large scale dialogues including forums and public events, the institution of panels within governance structures, and issue-oriented approaches surrounding specific products. Woodhead notes new, innovative approaches, where companies offer competitions, quizzes, and invite stakeholders to tour facilities in order to “make issues real.”
“But there’s no substitute for dialogue,” he says, especially in local regions where the populace will be affected directly by company initiatives. While undertaking a pipeline project that snakes through Azherbiajan, Georgia, and Turkey, British Petroleum began to assess the expectations and feedback of people in remote villages. The process was more challenging, Woodhead explains, due to the unfamiliarity of some of these communities with modern society.
CSR Network is currently involved in a stakeholder mapping project to assist companies in determining all of their relevant stakeholders. Independent assurance reports are another recent project of the UK-based consulting agency, examining the level of transparency companies allow.
Stakeholder engagement is only successful, he adds, if citizens are willing to provide the necessary feedback, a gesture infrequently done in a fast-paced world where cynicism towards corporations is commonplace.