A company and its activities have an impact, not only on the environment, but also on other people and other institutions. These individuals or groups of people who are potentially and actually affected by these activities or who can also influence them are referred to as stakeholders. Dialog with the various stakeholder groups will become increasingly important for companies and in a few years will already be standard for every modern company. The company is thus redefining its ecosystem.
What are “stakeholders” and what does “stakeholder dialog” mean?
To define the term stakeholder, the world’s most established sustainability reporting standard, the GRI (Global Reporting Initiative), refers to an OECD definition. According to this, stakeholders are “(…) individuals or groups who have an interest that is affected or could be affected by the activities products, or services of the reporting organization (…)”.
“Stakeholder dialog” is a sometimes one-time, often ongoing, documented, and institutionalized interaction process between an organization and its stakeholders. In general, there are different levels at which this dialog can take place with different objectives:
The goal is to achieve legitimacy and consensus with one or more stakeholder groups, some of which may be complex or contentious. This is mostly pursued as an objective within sustainability reporting.
- Talking to each other or opening a dialog channel.
The goals pursued via this are mutual enrichment, learning together, and inspiration. Instruments such as panels and focus groups are often used for this purpose.
Focusing on sustainability often involves institutionalized working groups not only learning together but correcting each other and developing system-relevant or -changing solutions to problems.
- Co-design and shared engagement.
When governance processes continuously involve key stakeholders to systemically control, evolve and influence the overall system, mechanisms, rules of the game, or business model of the enterprise, a comprehensive learning and change process takes place.
Of course, it may well be that a company works with different stakeholders at different levels, for example informing competitors and initiating a co-design concept with other partners.
A stakeholder dialog can also provide transparency and understanding of different or even conflicting needs within stakeholder groups, e.g. between consumers, suppliers, NGOs, and associations.
The stakeholder dialog in sustainability reporting starts with the system analysis.
Stakeholder engagement is one of the most important principles of sustainability reporting. This is not only because stakeholder dialog is an integral part of GRI reporting and gives structure to the transformation to greater sustainability from the outset. For the stakeholder dialog, it must be known which stakeholders the company has, and so the ecosystem is understood and defined with the involvement of all those who have an influence on the future of the company. Therefore, the first step to a successful stakeholder dialog of a company is the so-called system analysis. This serves to find all aspects, all parties, and all mechanisms of a company and to put them into context. Based on such a system analysis, the relevant stakeholder groups usually emerge very quickly.
A stakeholder dialog on the environmental, social, and economic impacts of a company can also be part of an impact analysis. The latter is about collecting and assessing these impacts. This gives a clear and comprehensive idea of the actual impact a company has on the environment, society, and the economic environment in which it operates. These impacts are complemented in the impact analysis by exploring how the external context affects the company, i.e. what sustainability risks and opportunities it is exposed to. Together, system and impact analysis thus provide a comprehensive picture of the issues the company needs to consider when developing a sustainability strategy and thus shaping a promising future.
Identifying trends, reflecting on positions, prioritizing topics – many things are possible.
From a strategic perspective, gaining insights into trends is also a good reason for a stakeholder dialog. Suppose a manufacturing company sells goods abroad to various target markets. There may be local intermediaries with whom it makes sense to establish a dialog and ask what the market conditions are like and what cultural or political developments are taking place. This helps to create services or products that help customers reduce their environmental impact, even in “foreign” markets, taking into account future trends.
It can also capture and prioritize opinions and insights on key strategic sustainability issues, such as: How should we position ourselves on the topic of sustainability, in general, or in comparison to competitors? How is the company perceived as a business partner in the industry?
Which topic is relevant from a stakeholder perspective?
Distinguishing between internal and external stakeholders
Why is it useful to distinguish between internal and external stakeholders? In the case of internal stakeholders – the company, supervisory board, shareholders, subsidiaries, employees – other topics can be queried, such as expectations of the company or the upcoming sustainability strategy, or the extent to which the sustainability strategy already enjoys internal support and is thus lived out authentically and credibly.
External stakeholders such as business partners, suppliers, freight forwarders, NGOs, banks, insurance companies, retailers, consumers, and local authorities can be asked to provide an external perspective and at the same time set an example. Simply holding a stakeholder dialog shows that the topic is taken very seriously.
Relevant aspects and challenges of implementation
To start a stakeholder dialog, the purpose must be clear, then stakeholders can be identified and “mapped,” i.e., assigned to groups. Duration, frequency, timeframe, communication channel and format need to be determined The range is wide: depending on the nature and involvement of stakeholders, shorter or longer intervals make sense. Whether an online click-through survey is enough, it should be face-to-face interviews or even a workshop – the level of engagement is relevant here: How far does the company want to involve stakeholders?
Even at the lightest intensity level, experience shows that formats with opportunities for personal exchange deliver a much higher density of information than a written survey. The effort required compared to automated online queries is disproportionately higher – as it is a high level of individual information that needs to be processed, but it is worth it: online, relevant nuances are often missing or the understanding behind which points there is really an interest or need.
Asked about the biggest challenges in stakeholder dialog, sustainability consultants would certainly name this one point at the very beginning: Selecting the right stakeholders is the most important thing. It is a matter of really understanding what relevance each stakeholder has and what concrete significance they have. This assignment will probably not be perfect in the first year of the dialogs and will therefore change over the years. The important thing, as with all sustainability issues, is to start the dialogue and move into action.
Helpful for the long-term success of a stakeholder dialog are the well-known “quick wins” – smaller, easy-to-implement projects that quickly signal that something is happening and thus maintain motivation in stakeholder participation.