For the last 50 years, most businesses have operated based on shareholder primacy. This model states that the only responsibility of a business is to create value for the shareholder and that it must do everything in its power to meet this. However, this idea is now starting to change.
The third webinar in our sustainability and business series looks at how you can map your stakeholders and how business practices affect them.
Stakeholders and how business practices affect them
People are becoming increasingly aware that the shareholder primacy model has caused business to contribute to some of the global challenges we are facing today, such as environmental degradation and social inequality. It is recognised that businesses are incredibly powerful and dynamic levers of change and so, if we can harness the power of business to address these challenges, we can create a more equitable economy and a more stable planet.
This is done by businesses not only taking responsibility for the value they provide to shareholders, but also by making commitments to all their stakeholders. These stakeholders are defined as groups that can be affected by or can affect the company’s operations, such as;
- suppliers, and;
- the communities.
Many high-profile businesses are now accepting this imperative and taking steps to measure and manage their impacts on people and the planet. In August 2019, the business roundtable, a group of over 180 Chief Executive Officers (CEO) of the largest companies in the world redefined the purpose of a corporation as an entity that ‘serves all’. Likewise, international businesses from Microsoft to Amazon to Apple have all made public announcements that they will take steps to reduce the negative impacts their companies have on their stakeholders.
How can I improve my relationship with my key stakeholders?
Firstly, a company’s employees are integral to its success and so improving their relationship to the business should be a high priority. There are various policies and practices that a business can put in place to do this, whether it is looking after their financial security by paying the living wage, offering bonuses or employee ownership schemes, to addressing work-life balance through flexible hours and generous primary and secondary caregiver leave. There are many more examples and B Lab offer a bank of best practice guides to support companies in this area. B Lab are a home to the B Corp movement, a global community of people using business as a force for good.
In addition, companies should also explore how they can improve their relationship with their suppliers, especially if they are reliant on a few key suppliers. This can be done by engaging them in conversations about their environmental footprint and putting in place policies to encourage improved sustainability. Through this, businesses can find values-aligned partners that will be long-term dependable suppliers. There are further resources on creating a Supplier Code of Conduct and creating impact through purchasing.
Another important stakeholder for a business is the community in which they operate. Companies can improve their relationship with these communities by corporate philanthropy. Providing cash or product donations to charitable organisations in the area and through volunteering, which also builds a company's relationship with its employees. They can also develop this relationship further by working to create a diverse workforce that represents those communities. Actively recruiting from underrepresented groups or those with traditional barriers to employment as well as creating inclusive work environments can not only improve the relationship with this key stakeholder but will add diverse and valuable viewpoints within the business. There are a wealth of resources around increasing diversity and inclusion.
Finally, more and more businesses are measuring and managing their impact on the environment, seeing it as a critical stakeholder to consider when making their decisions. From recording and offsetting greenhouse gas emissions to implementing environmental management systems, there are many ways a company can minimise the negative effects that it creates for the planet. Whether it is water, energy or waste, the first step is to measure the business’ use and then set ambitious targets for reduction. There is more guidance on how to do this effectively.
While this process of mapping the key stakeholders of a business and then implementing policies and practices to manage the negative affect that the operations of the company creates can seem lengthy and difficult, it has the potential to create positive outcomes for the business itself. That definition of a stakeholder is, again, a group that can be affected by or can affect the operations of the business. Therefore, if a company takes steps to improve relationship, share how the company looks after people and planet the effects on these groups can be positive.
- Their employees are more motivated
- The suppliers are more reliable
- The communities are more welcoming
- The customers are more loyal
James Ghaffari is a Director at B Lab UK. B Lab UK is home to the B Corp movement, a global community of people using business as a force for good.
For more information, view our Sustainability & Business – Who are my stakeholders? webinar