Session 6: Managing Stakeholder Relations

1. Session 6: Managing Stakeholder Relations

2. Approach to Sustainable Supply Chain Management (SSCM): Overarching Framework Framing the Issues Preparing for Implementation Assessing Impact Session 4: Sustainable Supply Chains as a Lever of Competitive Advantage Session 1: From Sustainable Development to Sustainable Supply Chains Session 5: Integrating Sustainability into the Supply Chain Session 8:Measuring and Communicating on Sustainable Supply Chain Performance Session 2: Governance of Supply Chains: From Compliance to Voluntary Standards Session 6: Managing Stakeholder Relations Session 7: Building Supply Chain Partnerships Session 3: Governance of Supply Chains: Introducing International Labour Standards

3. Session Objectives • Understand the importance of identifying supply chain stakeholders and their respective stakes; • Comprehend the stakeholder relations management process; • Discuss how to prioritize and manage conflicting stakeholder needs and expectations; • Understand how to effectively manage a specific stakeholder concern – human rights; and • Identify the benefits and challenges of stakeholder engagement.

4. Session Outline Unit 6.1: Introduction Unit 6.2: Identifying and prioritizing supply chain stakeholders. Unit 6.3: Managing human rights concerns in supply chains. Unit 6.4: Stakeholder engagement Unit 6.5: Conclusion

5. Unit 6.1: Introduction – Recap Seuring and Müller (2008): Triggers for SSCM

6. Class Discussions • Who is a stakeholder? • What is a stake?

7. Identifying Stakeholders • To whom does the organization have legal obligations? • Who might be positively or negatively affected by the organizations’s decisions or activities? • Who is likely to express concerns about the decisions and activities of the organization? • Who has been involved in the past when similar concerns needed to be addressed? • Who can help the organization address specific impacts? • Who can affect the organizations ability to meet its responsibilities? • Who would be disadvantagd if excluded from the engagement? • Who in the value chain is effected? Source: ISO 26000

8. Defining and understanding the stakeholder concept. • Confusion in defining a stakeholder – Friedman and Miles (2006, pp. 5-8) summarise fifty-five different definitions covering seventy-five texts. • A stakeholder is “any group or individual who can affect or is affected by the achievement of the organisation’s objectives” (Freeman, 1984, pp. 46). • A stake is “an interest in or a share in an undertaking or a claim – a demand for something due or believed to be due” (Buchholtz and Carroll, 2009, pp. 83).

9. Understanding Stakeholders (Freeman, 2008)

10. Understanding Stakeholders Widening of the stakeholder notion: trees, ecosystem processes, and future generations (Starik, 1995) Stakeholders may have simultaneous roles (e.g. employees as shareholders and community members) Multiplicity of other small stakeholder groups within a major stakeholder category (e.g. NGOs, investors). Important to define and contextualise notion of stakeholder (e.g. stakeholder network mapping).

11. Stakeholder initiatives may be designed to: Disclose wrong-doing (e.g. Shell in Niger Delta region in Nigeria). Spread negative images of the firm (e.g. Activists instigating consumer boycotts). Change company practices (e.g. working conditions). Demonstrate commitment to a particular standard (e.g. ILO; Fairtrade). Hinder the proper functioning of the firm (Maignan et al, 2006). Foster more social and environmental accountability and commitment of a firm. Both internal and external stakeholders advocate for SSCs.

12. Stakeholder relations management process (Preble, 2005) • Step 1. Stakeholder identification • Primary, Public, Secondary • Step 2. General nature of stakeholder claims and power implications • Equity, Economic, Influencers • Step 3. Determine performance gaps • Define stakeholder expectations • Conduct performance audits • Reveal gaps • Explore stakeholder influence strategies RESTART • Step 5. Develop organizational responses • Direct communication • Collaboration/partnering • Set performance goals • Develop policies/strategies/programs • Allocate resources • Revise "Statement of Purpose" • Step 4. Prioritize stakeholder demands • Determine stakeholder salience (power, legitimacy, urgency) • Assess the strategic importance of various stakeholders • Step 6. Monitoring and control • Continually check stakeholder positions • Evaluate strategic progress • Conduct social/environmental audits

13. Unit 6.2: Identifying and Prioritizing Supply Chain Stakeholders Contextual stakeholder reality: • Diverse SC stakeholders and stakes. • Stakeholders have interests in & claims on corporations. • Stakeholders might make their stakes known. • Stakeholders can influence SC behaviour. In reality, it is impossible to meet all stakeholder demands. What criteria should managers use to prioritise?

14. Stakeholder Salience Theory(Mitchell et al, 1997) 1) Power: Relationship in which one actor (A) can get another actor (B) to do something that B would not otherwise have done. 2) Legitimacy: Perception that the actions of an entity are desirable or proper within a system of norms, values or beliefs. 3) Urgency: Degree to which stakeholder claims call for immediate attention.

15. Prioritizing Stakeholder Claims (Mitchell et al, 1997)

16. Stakeholder Prioritisation All three attributes = high priority Two attributes = moderate priority One attribute = low priority.

17. Group Exercise and Class discussion Using Mitchell et al’s (1997) framework, identify and classify the stakeholders of Shell Oil Company in Nigeria. You are expected to establish a table classifying the stakeholders (under dormant; discretionary; demanding; dominant; dangerous; dependent; and definitive stakeholders; and nonstakeholders) and their respective stakes – and provide justification for your suggestions.

18. Unit 6.3: Managing Stakeholder Relations: Human Rights Concerns in SCs. An important subject facing businesses today is the need to effectively manage human rights expectations. Video: The Case Against Shell: Landmark Human Rights Trial (Wiwa v. Shell) http://www.youtube.com/watch?v=L9NAzoj7h9o&feature=related

19. Background: Corporations and Human Rights • Interference in political affairs (e.g. ITT in overthrow of elected Chilean president, Salvadore Allende, in 1970s) • Corporate human rights scandals (e.g. 1984 Bhopal chemical leak in India; Shell in Nigeria). • Poor working conditions in clothing and footwear supply chains (e.g. Nike, Adidas). • Pressure from NGOs (e.g. Amnesty International, Human Rights Watch). • U.S. Federal Law – The Alien Tort Statute.

20. The Ruggie Framework for Business and Human Rights: “Protect, Respect and Remedy” Rests on 3 pillars: 1) State Duty to Protect. 2) Corporate Responsibility to Respect. 3) Access to Remedy

21. State Duty to Protect • States have primary duty to protect individuals against non-state human rights abuses. • Governments uniquely placed to stimulate, regulate and sanction company behaviour (mandatory due diligence, reports, prosecution, etc). • Duty to establish appropriate policies, regulation and adjudication. • State has to investigate, punish and redress abuses.

22. Corporate Responsibility to Respect • Respect all internationally recognised human rights (UDHR, ICESCR, Freedom of Association, etc). • Due diligence required to identify, prevent and address human rights impacts. • Due diligence should consist of: • Statement of policy; • Periodic assessments; • Integration of human rights risk assessment into decision-making; • Tracking and reporting performance.

23. Access to Remedy • Victims must be able to seek redress when adverse human rights impacts occur. • Judicial and non-judicial grievance mechanisms important in state duty to protect and CR to respect. • Judicial mechanisms to investigate, punish and redress. • Non-judicial mechanisms: company level, state-based, multi-stakeholder or industry initiatives and financiers.

24. Group Exercise and Class Discussion Using the “Protect, Respect and Remedy” framework analyse how human rights violations could have been avoided and/ or better managed in the case of Shell’s operations in the Niger Delta region of Nigeria. Note: the Amnesty International report “Nigeria: Oil industry has brought poverty and pollution to Niger Delta”(of 30 June, 2009) should serve as a guide to some of the key human rights issues involved.

25. Unit 6.4: Stakeholder Engagement From managerialist theory standpoint, stakeholder engagement is “a means by which the organisation may glean contributions or manage risks posed by influential stakeholders” (Greenwood, 2007, pp. 319). Resource-dependence balance in stakeholder relationships determine the behaviour of stakeholders and their choice of strategy (Frooman, 1999). NGOs pursue several strategies at once (e.g. lobbying regulators, educating consumers, media, etc)

26. Drivers of Stakeholder Engagement • Desire to build trust. • Need to be accountable. • Relation and reputation building. • Drive for innovation and competitive advantage. • Quest for influence. • Moral or Normative motivations. • Legal requirements

27. Stakeholder Engagement Strategies (Friedman and Miles, 2006; Green and Hunton-Clark, 2003) One-way strategies: low level of engagement – motive is informative (e.g. briefing sessions, newsletters, corporate reports) Two-way strategies: medium level of engagement –motive is consultative (e.g. questionnaires, workshops, focus groups, interviews, task force, advisory panel) Multi-way strategies: high engagement levels –motive is decisional (e.g. bargaining, constructive dialogues, strategic alliances, partnerships)

28. Social dialogue and workplace cooperation • Social dialogue is defined by the ILO as including all types of negotiation, consultation or simply exchange of information between, or among, representatives of governments, employers and workers, on issues of common interest relating to economic and social policy . • May be tripartite (with government involvement) or bi-partite (employers, workers only). • May be informal or institutionalized or both. • Contributes to achieving more productive and effective enterprises.

29. Group Exercise and Class Discussion 1) Why are consumers and governments so rarely involved in sustainable supply chain solutions? 2) What strategies can a company use to better engage consumers, governments, suppliers and NGOs?

30. Stakeholder engagement: Critical success factors. • Regular and timely communication. • Honesty and completeness of information. • Empathy and equity of treatment. • Transparency of the benefits and risks. • Unbiased facilitation. • Inclusivity. • Early start to facilitate change if needed. • Communication and governance structures. (Strong et al, 2001; Zöller, 1999) • AA1000SES: AccountAbility Stakeholder Engagement Standard

31. Benefits of Stakeholder Engagement • Provides an important learning environment. • Enables corporations to build resources (knowledge, human capital and technologies) and capabilities. • Builds trust and understanding among stakeholders. • Can help avoid risk of damaging publicity. • Changes preconceived image about stakeholders. • Potentially increase the social capital of the firm.

32. Challenges of Stakeholder Engagement • Difficult to identify stakeholders and scope of responsibility. • Contextual complexities (global and local views, different geographic regions and cultures). • Divergent and often conflicting needs and expectations. • Difficult to identify what might be considered ‘best practice’ in stakeholder relations management. • Inadequate senior management commitment to integrate the views of other stakeholders.

33. Unit 6.5: Conclusion • Stakeholder engagement is a key vehicle for exchange between the firm and its stakeholders. • Important for companies and stakeholders to engage more often. • Mature industrial relations helps facilitate and strengthen company operations • Corporate-NGO relationships have evolved from hostile to constructive dialogues and partnerships. • Effective management of stakeholder relations is a necessity for success in today’s global SC environment.

34. References • Buchholtz, A. K. and Carroll, A. B. (2009), “Business and Society”, 7th Edition, South-Western Cengage Learning, Canada. • Freeman, R.E. (1984), “Strategic Management: A Stakeholder Approach”, Pitman, Boston. • Friedman, A. L. and Miles, S. (2006), “Stakeholders: Theory and Practice”, Oxford University Press, Oxford. • Frooman, J. (1999), “Stakeholder Influence Strategies”, Academy of Management Review, Vol. 24, Iss. 2, pp. 191-206. • Greenwood, M. (2007), “Stakeholder Engagement: Beyond the Myth of Corporate Responsibility”, Journal of Business Ethics, Vol. 74, pp. 315-327. • Green, A. O. and Hunton-Clark, L. (2003), “A Typology of Stakeholder Participation for Company Environmental Decision Making”, Business Strategy and Environment, Vol. 12, Iss. 5, pp. 292-299.

35. References • Ruggie, J. (2008), “Protect, Respect and Remedy: a Framework for Business and Human Rights”, UN Human Rights Council. 8th session. Available onhttp://www.reports-and-materials.org/Ruggie-report-7-Apr-2008.pdf • Starik, M. (1995), “Should Trees have Managerial Standing? Toward Stakeholder Status for non-human Nature”, Journal of Business Ethics, Vol. 14, Iss. 3, pp. 207-217 • Strong, K. C., Ringer, R. C. and Taylor, S. A. (2001), “THE* Rules of Stakeholder Satisfaction (*Timeliness, Honesty, Empathy)”, Journal of Business Ethics, Vol. 32, Iss. 3, pp. 219-230 • Zöller, K. (1999), “Growing Credibility Through Dialogue: Experiences in Germany and the USA”, in M. Charter and M. J. Polonsky (eds.), Greener Marketing: A Global Perspective on Greening Marketing Practice, Greenleaf Publishing, Sheffield, pp. 196-206.