Working with stakeholders - engaging, not enraging!

18 March 2014

This month we’ve seen performance drivers like profit and ROI hit the headlines. Malcolm Preston, PwC Global Sustainability leader, reflects on the pressure CEOs are under to do business in the right way.  He cites the results of our on-line vote, in which we asked you to step into the shoes of a CEO, to show decisions are not always clear cut and that it’s hard to keep everyone happy all of the time.

You would think it would be a CEO’s ruthless pursuit, all £ signs in his eyes, that’s hit the headlines.  But no … Tim Cook, CEO Apple, took a grilling at his latest shareholder meeting from a NCPPR representative looking for more transparency.  Apple is committed to source all its power from renewable energies, something the NCPPR didn’t see as the best ROI for its money. Tim’s response was to reinforce that his company does “a lot of things for reasons besides profit motive” and that “we want to leave the world better than we found it.” Allegedly he was heard to say, “If you want me to do things only for ROI reasons, you should get out of this stock.”

First Energy, one of the country’s biggest utility companies in the US, faced the opposite experience bowing to shareholder pressure to commit to working toward reducing its carbon emissions. First Energy now say “What we’re trying to ensure is that in the long run that profitability is sustainable. We do see tremendous risk if issues of climate change are not incorporated into corporate strategy.”

Sometimes it’s hard to please everyone all the time.  Back to Apple for a minute for a quote from Steve Jobs – once asked “what keeps you awake at night?”, he replied “shareholder meetings”.  They are a great opportunity for stakeholders to come together to have their say, to question and to challenge business strategy.  But how can you keep your stakeholders on your side… engaged, rather than enraged? Enthused rather than bemused?

In September, we launched TIMM, our total impact framework.  It’s all about putting a value on the social, economic, environmental and tax impacts of your business so that you can compare the total impact of your strategic and investment choices, and manage the trade-offs that result.  It gives business leaders the full picture (going beyond the usual financial analysis) to make more informed decisions, helping them to identify potential reputation and trust risks along the way.  If they want to, it’s information to share with their stakeholders to explore the available choices.

To show how it works, we asked you, to step into the shoes of a CEO and decide what to do.  We posed a decision any brewer might face – to grow crops locally to support expansion into Africa or to ship in crops from abroad. 

At this level, there’s never a clear cut decision. And there are numerous perspectives. Growing crops locally in a country with a water scarcity issue creates problems in itself, not only for crop vitality, but also for the local communities who see their own water sources depleted.  There are issues too from the loss of valuable ecosystems as land is cleared for agricultural purposes and less advanced waste management that might result in water pollution. Set-up costs are greater for the Brewer – investment is needed to develop the supply chain and the community, increased staff and offices. But, on the upside, local farmers benefit from access to a secure market, the economy receives support to develop a better business infrastructure, and livelihoods, health and education are all improved. Greenhouse Gas emissions are lower too and, from the brewer’s perspective, it’s a lot cheaper in the longer run to grow locally and committing to the local community enhances the brewer’s reputation and drives up demand and loyalty.

So how did everyone vote?  Interestingly, 76% voted for growing the crop locally.* It’s an interesting choice as there’s a clear trade-off between the environment and people’s wellbeing.  It’s a real dilemma.  So with no obvious answer and no clear win-win scenario, it’s about agreeing the optimal solution with the best stakeholder engagement which will help make implementation successful. It means there’s greater transparency and that stakeholders can be engaged, rather than enraged.

*Source: PwC Brewery Trade-off On-Line Vote March 2014 (708 votes)

For more information: visit www.pwc.com/totalimpact