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Stakeholder Engagement

Sustainable companies recognize salient stakeholder groups, their key issues, and their potential for helping or harming the business. A widely accepted and popular definition of a stakeholder is that "any group or individual who can affect or is affected by the achievement of the organization's objectives."46 Stakeholders exhibit at least one of these characteristics: (1) the potential to be positively or negatively affected by organizational activities and/or is concerned about the organization's impact on his or her or others' well-being, (2) can withdraw or grant resources needed for organizational activities, or (3) is valued by the organizational culture.47 Industry leaders develop expertise in stakeholder engagement and are able to address their concerns and interests. Key questions companies may ask include the following:

Stakeholder Engagement

• In my organization do units engage with external stakeholders (e.g., suppliers, customers, local communities) in order to carry out their projects?

• Does the company have an assessment tool to evaluate social and environmental performance of its key suppliers?

• Does the company educate and/or assist its suppliers in meeting environmental/sustainability goals?

• Does the company measure its customers' demands for environmentally and socially responsible products (and/or services)?

Stakeholder engagement includes processes for information gathering about the interests and expectations of stakeholders, information giving to share activities and performance, and dialogue and consultation. Nearly half of the respondents indicated that they engaged stakeholders by communicating with them. Tactics varied from engaging in formal dialogue or surveys to informal engagement (staying in touch with customers, discussing sustainable issues during other communiques, etc.). Although a company benefits from such communication processes, a collaborative effort with stakeholder groups provides greater opportunities "to become better aligned with their stakeholders and better positioned to become sustainable enterprises."48

Industries vary in the degree of engagement with specific stakeholder groups—especially customers, regulatory agencies, and suppliers. Manufacturers tend to have a greater focus on suppliers than nonmanufacturers. Although consumers and employees receive the largest attention overall, services and retail are most attentive to these two groups. Highly regulated industries, such as utilities (e.g., energy and air travel) and industrial manufacturing, have the greatest focus on regulatory groups. One interesting story from the interviews relates to a multinational corporation working with a regulatory agency. Prior to starting business in Costa Rica, the company discovered deficient chemical and environmental regulations. Rather than take advantage of a lack of regulatory oversight, the company immediately collaborated with the government to design and pass environmental legislation modeled by the most stringent U.S. guidelines.

Suppliers are important stakeholders for a firm, yet many companies do not consider the supply chain in social and environmental programs. Social issues relating to suppliers relate to diversity, the environment, and labor concerns. The complexity of the global supply chain suggests a greater likelihood of accepting responsibility for the actions of their suppliers. Firms with a larger percentage of their sales or supply from outside of the United States should pay particular attention to address employee concerns. A need to focus on employees is a reflection of the various legal and regulatory issues with labor in international markets, as well as the difficulty in managing and controlling supplier labor practices. Industry leaders in sustainability select and evaluate suppliers based on their social and environmental performance, helping competent vendors become socially responsive, and helping socially responsive vendors to become competent. Inclusion of social and environmental issues in vendor selection has far-reaching effects in an industry. Of the companies interviewed, more than a quarter of respondents require their suppliers to meet government regulations, industry standards, or voluntarily codes for sustainability. Other respondents implement social and environmental programs to continue to supply a major customer.

Understanding customer demand for products that have a positive social and/or environmental impact is critical for a strategic sustainability strategy. Consumer expectations regarding health and safety, marketing and advertising, and product performance influence buying habits. Industry leaders seek customer input for developing solutions that address social or environmental issues. For example, at Ecolab they survey field sales staff to understand their customers' operations, collect quantitative and qualitative research on customer satisfaction and perceptions, and encourage customers to meet with management to build mutually beneficial relationships.49

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