In this short read, Echo Research Client Advisory Board members Rosie Halfhead and Jan Dauman argue that to be effective, organisations need to take greater care in understanding thoroughly the sensitivities and red-line principles of stakeholders if they are to avoid an unplanned entry into ‘tension territory’.
Financial institutions adopted a mindset of KYC (Know Your Customer) decades ago. It is simply considered as business as usual today. On the one hand, it makes good sense and, on the other, it is an essential risk and reputation mitigation measure.
From our work in sustainability, ESG, communications and brand in pursuit of sustained and responsible growth, we believe it is time to challenge whether stakeholder engagement as we know it goes far enough. Do we truly possess sufficient knowledge about our stakeholders? How important are we to them? What is their intention in engaging with us? What influence do they have? What is the potential impact of those intentions and that influence? And how does that affect our decision-making?
Is it time for KYS (Know Your Stakeholder)? A core, continuous and expert-led activity that is a staple ingredient of tomorrow’s business as usual.
First, some context. Although one can argue that there is a congruence between growth and responsibility in the long-term (especially in the context of purpose, sustainability and ESG), the reality is that many Boards and C-suite executives see them as an increasing source of tension. At the extremes, stakeholders with a short-term perspective favour growth at any cost while those with a long-term view may prefer purpose and planet over profit. The reality is of course somewhere in between. That said, the tensions are real and present challenges for decision-making which in turn can have a significant impact in terms of potential consequences.
Communications leaders (and brand and reputation guardians) increasingly find themselves caught up in this tension territory. Well intentioned statements around purpose, ambitions, sustainability commitments and/or reporting on ESG progress can quickly turn into damaging reputational ammunition by increasingly savvy and active stakeholders.
You don’t have to think hard to come up with examples:
While some consumers buying a bar of Dove soap may not give much thought to Unilever’s ongoing presence in Russia what about consumers and employees in Central & Eastern Europe? What about NGOs and investors? What effect does this have on Unilever’s brand reputation, respect and loyalty when it has been so visibly at the forefront of ‘responsible business’?
What is the effect when a leading UK retail bank presents its ‘E’ credentials in glowing terms when at the same time, it is fined for money laundering; accused of treating small businesses unfairly; and criticised for closing dozens of bank branches in rural areas with aging populations who are unlikely to feel comfortable (or able) switching to online banking?
Who foresaw that Google’s employees would demand (and indeed resign) that the company pull out of a project with the US Pentagon as it clashed with the company’s stated principle of ‘do no harm’.
What happened when a successful B-Corp promised to ‘make earth great again’ and had powerful data to support its carbon positive claims, yet was accused at the same time of having a toxic workplace culture?
These are complex issues, and as observers and consumers of the associated news stories we are unlikely to have access to all the facts to make fully informed judgements. Yet, we are consciously (or unconsciously) forming an opinion.
Responsible business calls for responsible leadership and responsible business practices. Responsible leaders increasingly appreciate the significance of their stakeholders. They realise they need trustworthy, high-quality actionable insights and data about an increasingly complex multistakeholder environment to help shape their strategic thinking and decision-making.
The communications function is well placed to be the catalyst and enabler of this KYS effort, taking a holistic company-wide view that is not constrained by competing interests or organisational silos. KYS can contribute to C-Suite decision-making by offering an expert understanding and interpretation of
the issues and trends in the fast-changing external political, economic, social and technological environment that are material to the business; and
the changing needs, interests and expectations of an increasingly diverse set of stakeholders.
For those who feel ready to begin a KYS conversation, we offer some starter questions and a process that can lead to more clarity and insight and on how the acquired stakeholder knowledge can be gathered and applied.
1. Who are our stakeholders?
Do we have an internal consensus about this? Who needs to be involved in defining them (we suggest it should be from the grassroots to the boardroom)? What are the interconnections and relationships between them? What weighting do the different categories have – based on what criteria?
If we think visually, it can be useful to consider a series of concentric circles.
Inner circle stakeholders are those who we have direct engagement with; they operate within our scope of business activity and we are likely to know them quite well (eg, employees, customers, investors, partners, primary suppliers).
Middle circle stakeholders are still within our ecosystem but perhaps not directly linked to us and our knowledge about them sometimes can be patchy (eg, end users if we are a B2B business, secondary and tertiary suppliers, industry/business associations, potential future employees/investors/partners, identified primary “influencers”).
Outer circle stakeholders are likely to be further away from our direct operations but can be impacted by them or can exert influence on them (eg media, activists, NGOs, politicians, government officials, academics, think tanks, rating agencies. And, of course, the general public).
2. What are their attitudes, beliefs, values, interests and expectations?
What topics or issues are material for them across the ‘ESG’ dimensions? How can we ensure that we cut out the noise from issues that may be interesting but are not material for the business?
What is changing in their views? How does this differ within a specific stakeholder group, eg, generational differences in current/future employees, new purpose-driven investors, geographical perspectives, gender or diversity dimensions? Who else could be influencing their perspectives, through which channels? What risks do these present?
3. How do we use stakeholder insights to make the right choices?
What guiding principles should we use in interpreting the insights, taking into account different stakeholder interests and priorities? For instance, at a country level, what is the impact of a country’s history, culture, values and economic, social and political circumstances?
How can we focus on likely futures (rather than just the present) and create possibilities to think ahead to anticipate and project future scenarios?
Are we separating rational/objective influencers from the extreme or ideological (with whom there is no discussion)? It takes strength not to react to who shouts the loudest.
What is the right balance between competing/conflicting interests? What is the process to arrive at a decision? Should it be entirely internal; or should it involve independent external advice; if so, how do we choose the advisors?
What other lenses do we need to apply to be relevant for our business strategy (eg, regulatory, governmental, think-tank, NGOs)?
4. What are the potential implications of these choices?
Have we been sufficiently holistic and discerning in our assessments to understand the interplay and interconnections between stakeholder sentiment and their potential effect on the business?
What other data points should we be using – what is their provenance, can they be trusted, are they independent?
If we are using ESG or integrated reporting mechanisms, are they relevant for our business and sufficiently understood by those who use/refer to them?
Are we testing our choices using proven risk management or scenario planning techniques?
5. How are we monitoring, measuring and adjusting and what is our ROI?
What is our level of readiness to adapt to make this a continuous KYS cycle of listening and learning? How will we embed this in the business? Do we have a sound business case including measurable performance criteria with the credibility equivalent to those of other functions competing for attention and resources?
This is a time of accelerating change, complexity and uncertainty in the stakeholder landscapes within which our businesses operate. Businesses that seek to understand and deal with these challenges proactively and effectively are more likely to be competitive, create opportunities and enjoy a positive reputation. And they are much more likely to be able to emerge from today’s tension territory to achieve sustained and responsible growth for the future.