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The Importance of Stakeholder Engagement in Sustainability
Transcript
So, one of the most fundamental principles behind sustainability is stakeholder engagement. And stakeholder engagement refers to the business’ ability to communicate with and engage with stakeholders outside of the company. Now, why is that so important for businesses when we talk about sustainability in particular?
When our stakeholders care about an issue, then they can make that an issue for our company. And if we want to take advantage of sustainability aspects, then talking to our stakeholders to find the best solutions is frequently the best way for us to proceed. So, we need a way to define stakeholder engagement for our company going forward.
Fortunately for us, there are a number of standards out there that are already available for us to really understand stakeholder engagement and the best practices. We selected one, and that is the AccountAbility 1000 standard. It’s a standard written by The Accountability Group based in London, and they outline four basic principles for stakeholder engagement to be effective: inclusivity, materiality, responsiveness, and impact.
Inclusivity refers to the ability of the company to include stakeholder feedback into its decision-making process. That’s actually a very difficult standard to uphold. And the reason that’s difficult is because not only am I trying to understand what stakeholders are telling me, but I have to demonstrate to stakeholders that I’m reacting to what they expect from my company.
The second principle is materiality. Materiality is a core principle. And that is because we, as a company need to understand which issues are most important to us as a company, but also to our stakeholders. So, we have to come up with a system by which we are going to understand which issues are most important and prioritize those issues in order to respond to stakeholders.
Which brings us to the third principle, which is responsiveness. Once I’ve identified which issues are important through materiality, and I’ve figured out how to engage my stakeholders in that decision-making process, then I have to respond to the stakeholders. I have to tell them what I’m doing, and I have to act on behalf of those stakeholders against those material issues.
The final principle is impact. Once I’ve had the engagement process underway with stakeholders, I have to demonstrate that I’m monitoring, and measuring, and performing against those material issues. I have to be accountable for those material issues, and I have to demonstrate that to the stakeholders.
So, these principles are going to help us to develop a best practice stakeholder engagement system. And that system is going to be fundamental to how we proceed as a business in our decision making. We’re going to understand stakeholder expectations. We’re going to determine how those expectations influenced the way we run our business. We’re going to respond to stakeholders, and that’s going to help us to be much more effective at risk management as we proceed.
Stakeholder engagement is a fundamental principle of sustainability. A business must be able to communicate with its external stakeholders in order to stay relevant, and to better meet the needs of its customers.
In this video, Todd Cort, Program Convener in the Corporate Sustainability Management: Risk, Profit, and Purpose online program from the Yale School of Management Executive Education, explains how this relationship supports sustainability.
Some of the biggest opportunities and risks facing businesses today lie in the world of sustainability. Many of these will emerge from the needs of stakeholders, and businesses able to listen to these needs will be best placed to respond. This video highlights four principles of effective engagement: inclusivity, materiality, responsiveness and impact.