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CORPORATE SOCIAL RESPONSIBILITY & BUSINESS ETHICS

Session 2 : The companyand the stakeholders

François MANGIN2015-2016

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The company and the stakeholders

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Session 2 Learning objectivesBy the end of the session, each student is able to: Explain what a stakeholder is and the role stakeholders play in the Sustainable

Development agenda; In a given situation, identify, qualify and map stakeholders Present and explain the configurations of stakeholder management a

company can engage in, and list the specific stakes of each one, Present and explain the method and the tools for engaging stakeholders in

strategy design and in the projects to be implemented by the company; Explain and use the concepts that allow to identify the way a controversial

situation is structured, and to predict its developments; Present the stakes of stakeholder engagement in the public decision-making

processes ; Explain and identify the main techniques of lobbying that stakeholders use, as

well as the way for a more responsible lobbying; Critically assess companies’ stakeholder engagement and lobbying practices.

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Session 2 outline

1. Stakeholders: concept, definition et roles2. The company and its stakeholders3. Dealing with the stakeholders: configurations, strategies and

tools– Designing the strategy– Implementing a project– Facing a controversy

4. The State and its stakeholders: – Public decision-making and private interests– Lobbying: stakeholders in action

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1

StakeholdersConcept,

Definition & Roles

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Stakeholder

Person, group, organization:• Whose interests are

impacted by the operations or by a project

• That has an influence on the operations or on the project

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Impacts & reactions

OperationsProject

Impacts

Affected interests

Reactions

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Activity or Project: X

Stakeholder InterestsImpacts of

the activity or project Stance / activity or

projectPositive Negative

Vedanta

Orissa State

…

Analysis grid

Generic stakes:• Eliminating/minimizing negative impacts

• Increase/maximizing positive impacts

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Rolesof the stakeholders

• Representing interests• Increasing the perception and understanding of the

impact of the operations or of the project Adding decision criteria Improving decisions

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Interests& representation• Non represented interests

– Shareholders– Suppliers

• Collectively represented interests– « Ad-hoc » associations – Consumers associations, NGOs…– Business associations, unions…

• Commons (e.g.: biodiversity)– NGOs…

• Who represents the general interest ? (to be continued…)

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Areas of actionfor stakeholders

• Entering into dialogue with:– Public bodies – Companies

• Seeking information for assessing impacts• Advocating and creating public awareness

– Campaigns– Involvement in controversies

• Legal representation and lawsuit– Standing (locus standi)– Class action – Implementing soft law through lawsuits

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Class action

A procedural device that permits:• one or more plaintiffs to file and prosecute a

lawsuit on behalf of a larger group, or "class"

• to claim damages that will be paid to each member of the class, even if they were not personally party to the proceedings.

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Synthesis:

• A stakeholder represents an interest that is affected by the operations or a project and/or can influence it.

• Stakeholder engagement is a key component of SD and CSR by giving to the public and corporate decision-makers the means to take more sustainable and responsible decisions.

• An important stake: giving voice (including by lawsuit) to some up-to-now neglected stakeholders.

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2

The company and its stakeholders

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One concept, 3 perspectives

Dealing with

demands

•The manager must deal with other demands than those of shareholdersProcuring

Resources

•The company depends of external resources to pursue its strategyContributi

ng to the socialgood

•The company must take into account its externalities

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Typical stakeholders

Company

ShareholdersExternal auditors

Standards Setters

Banks & Creditors

Investors

Prescriptors

Customers

Users

CompetitorsSuppliers

Sub-contractors

Funders

Experts

Medias & social

networks

Lobbies

Working population

Employees

Unions

Local authorities

Side residents

Legislators Regulatory bodies

Courts

Citizens

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3 major categories

Stakeholders to whom the company has legal, financial or operational

responsibilities

Stakeholders who are affected by the

company’s decisions and

activities

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Closeness & Frequency

• Members of the company• Employees• Managers• Works Council,

Health & Safety Committee

InternalStakehold.

Close and frequent relationships:

• Customers• Suppliers…

ExternalStakehold.

Infrequent and loose relationships

• Nearby residents• Local government• Medias

DistantStakehold.

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Company’s dependency

SecondaryStakeholder

Low or moderate dependencyNGOs, consumers associations, communities, government, medias…

PrimaryStakeholder

Critical dependencyShareholders, managers, employees, suppliers and customers, et clients, providers of licenses to operate, creditors…

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Stakeholders

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Engagingstakeholders

• Who? – stakeholder selection• Why? – objectives of the relationship• How? – means and medias• Which level of involvement in the decision-making

process?• Which level of influence on the decisions?

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Stakeholder engagement

Employés

•Dialogue avec Rep. du personnel•Forums libre expression•Enquêtes de satisfaction•Formation

Patients

•Panels de patients•Panels d’assoc. de patients

Prof. de santé

•Groupes de travail•Réunions scientifiques•Études cliniques•Enquêtes de satisfaction

Régulateurs

•Études cliniques•Négociation des prix et des remboursements

Fournisseurs

•Sensibilisation aux droits de l’homme, conditions de travail et environnement•Évaluation

Concurrents

•Participation aux instances professionnelles du secteur

Agences de notation

•Réponses aux enquêtes et aux questions

Investisseurs

•Réunions d’analystes•Réponse aux questionnaires•Roadshows•Interactions avec agences proxy et agences d’évaluation ESG

Actionnaires individuels

•Conseil consultatif•Réunions spécifiques (F)•Assemblée générale•Salons (F, USA)

ONG•Initiatives mixtes•Réponse aux questionnaires•Participation à des forums•Enquêtes de satisfaction

Citoyens

•Forums de consultation

Communautés locales

•Panels de riverains•Dialogue avec autorités locales

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Types of relationship

InformationConsultation Dialogue

Negotiation Association

IntegrationMandatory Further Readings on MoodleCritical Friends: Engaging stakeholders

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Compliance or Commitment?

Rational CommitmentRegular and deep relationships

with internal and external stakeholders

Dialogue with critical stakeholders

Radical activismEmployees are members

of the BoardPartnerships with some

critical stakeholders

Social MimetismInfrequent consultation with some non critical external

stakeholders

Legal ComplianceInformation of stakeholders to whom the company has legal,

financial or operational responsibilities

Riskmanagement

Commitment

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Synthesis:

• Stakeholders engagement is a fundamental part of CSR/SD, to prevent externalities and making better decisions.

• Beyond the principle of “dialogue”, the way stakeholder engagement is implemented is a key indicator of a strong and genuine commitment in CSR/SD.

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3

Contexts of interaction

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3 configurations

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3.1Stakeholders and the design of the strategy

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Aligning CSR strategy with the strategy

Stakes and Impacts Assessment

Choice of areas for action

ProjectsObjectivesIndicators

Implementation

Control and Outcomes’

Measurement

Communication and CSR Reporting

Stake-holders

Stake- holders

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Selecting the stakeholders

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MaterialityAnalysis

Method that compares the importance of CSR/DD issues:• to the stakeholders’ eyes• to the company’s eyes

and represents the positions in a materiality matrix.

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Positioning then selecting the issues

Responsible Critical

Not pertinent Strategic

Stakeholders’ opinion on

the importance of

the issues

Company’s assessment on the importance of the issues

• Stakeholder Consultation• Benchmarking international companies• Media Review• Analyzing external questionnaires from

extra-financial agencies and investors

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The company’s view:

5 criteria for selecting the CSR/SD issues: A. Issues with short-term financial consequencesB. Issues in alignment with the strategic commitments of

the companyC. Issues generally considered as pertinent by the industryD. Issues sufficiently important to the stakeholders’ eyes

for creating their present or future involvementE. Issues that will be subject to standards in the future

D’après: Zadek & Merme: Redfining materiality - Accountability, 2003

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Compliance or Commitment?

Rational CommitmentEnlarged sphere of influenceCSR issues with some impact

from/on the core business

Radical activismLarge sphere of Influence

CSR issues that will request major changes of the core

business

Social MimetismLimited sphere of influence

Anecdotal CSR issues with no impact from/on the core

business

Legal ComplianceMinimalist CSR Reporting

(if mandatory)

Riskmanagement

Commitment

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3.2 Implementinga project

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Specific stakes

• Technical issues• Assessing the impacts of the project• Reducing/Compensating the negative impacts

• Political stakes• Finding allies• Defusing oppositions

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Impacts, reactions… & influence

Project

Impacts

Affected interests

Reactions

Resources

Allies

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Stakeholder InterestsImpacts

Resources InfluenceStance

Positive Negative Present Required

Side residents

Local authorities

Political opponentsChamber of Commerce

Environmental Activists

…

Stances analysis

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Stakeholder mapping

Using two differentiation criteria and drawing a matrix to :• identify high priority stakeholders• define the relationship to establish

• Objectives• Means

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Typical matrix

SH SHSH

SH

SH

SH

SH

DifferentiationCriteria #1

High

Low

Differentiation Criteria #2

HighLow

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Power/Dynamism matrix

Low risk stakeholders

Unpredictable but manageable stakeholders

Predictable riskstakeholders

High risk &hardly manageable

stakeholdersPower onthe decision-maker/theproject

Aptitude for action

HighLow

High

Low

D’après Gardner, Rachlin and Sweeney (1986) Handbook of Strategic Planning, Wiley

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Power/Interest matrix

Marginal stakeholders:no effort needed

Stakeholdersto keep informed

Stakeholdersto keep satisfied

Critical stakeholders: establish continuous and

satisfying relationships

Interest for the issue

HighLow

High

Low

Power onthe decision-maker/theproject

D’après Mendelow, A. (1991) ‘Stakeholder Mapping’, Proceedings of the 2nd Int’l Conference on Information Systems, Cambridge, MA

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Influence/Support matrix

Silent OpponentsMonitor the influence

SupportersKeep satisfied, try to

enlarge their audience

Negative LeadersTry to convince, but

not reinforce

PromotersSupport and empower

Influence on otherstakeholders

Stance on the project

SupportOpposition

High

Low

D’après Anderson, Brsyson & Crosby (1999): Leadership for the Commun Good, University of Minnesota, Saint Paul ,MN

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Risks

• Purely political approach, without reassessing the impacts or/and improving the compensations

• Perceptions of the project leader vs reality– Biased stakeholder selection– Low understanding of the prevailing stakes– Deficient assessment of the power and influence of

allies and opponents• Fast changing stances of stakeholders• New stakeholders involved

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Compliance or Commitment?

Rational CommitmentImplementation of tailored

compensation programs and changes in the project to

reduce impacts

Radical activismReassessment and even

withdrawal of the project after extensive impact reassessment

Social MimetismImplementation of ready-

made compensation actions with no change in the project

Legal ComplianceFormal compliance with

consultation regulations… and no taking into accounts of its

results

Riskmanagement

Commitment

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Mondavi Case

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3.3Facing a controversy

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Specific stakes

• Context:– Project becoming highly controversial– Industrial accident, scandal…

• Political stakes• Defusing criticism and opposition• Controlling the escalation risks• Containing or deflecting attacks

• Communication stakes• Dealing with media and social network involvement• Crisis communication

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Medias & publics

OpponentSH

Criticizing SH

SupportiveSH

PartnerSH

General public

Medias & Social

Networks

Attentive public

Interested public

Identifiyingpublic

NeutralSH

Neutral SH

D’après Padiloleau: La lutte politique quotidienne, in l’Etat au concret, 1982

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Respondingto controversies

• Mobilizing• New stakeholders• Medias & Social networks• Alliances and Coalitions

• (Re)defining the situation– Providing an interpretative framework

• Sense giving & sense making– Scaling up by repositioning the situation in more global (and

often pre-existing) debates, that will help to mobilizing new allies

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Mondavi’s project:Job creation?Promotion of Aniane’s terroir and wines?Economic developmentTourism?

Small winegrowers andyoung applicants eviction?

Victory of the branded wineover the terroir wine?

Submission to the US big business?Loss of national sovereignty?

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Synthesis:

Configuration:

•Objective:•Stakes:

•Stakeholder selection

•Method

•Level of control

•Tools

Strategic Design

•Designing a CSR strategy•Creating consensus and involvement•By the decision- maker•Rational and open•Predictable High

•Materiality matrix

Project• Implementing the

project• Anticipating &

involving opinion leaders

• By the decision -maker depending on the situation

• Prospective and political

• PredictableHigh but can decrease

• Mapping & Public relations

Controversy• Getting out of a

controversy• Defending oneself

against chargesFinding allies

• Depending on the situation

• Reactive & Defensive

• UnpredictableVery low

• Mapping & Lobbying

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4

The State andthe stakeholders

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4.1

Public decision-making and individual interests

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2 perspectives on the general interest

• The general interest is greater than the sum of individual interests. It is of a different nature.

• Higher Civil Servants are the protectors of the general interest

• They have the expertise to assess and make decisions

• Civil society and intermediate bodies are kept away from public decision

• Symbol: the “Grands Corps de l'Etat” and the rejection of “lobbies”

• The general interest is, at some point, a compromise between the interests.

• Civil servants did not have a monopoly on the expertise nor the definition of the public interest

• They solicit civil society and intermediate bodies for information and to take account of all the consequences

• Symbol: the parliamentary committee hearings and lobbies

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Grenelle de l’environnementa political innovation in France

5 stakeholder groupsState, local authorities, Business, Unions, NGOs

Steps and means• Public & stakeholders consultations• Negotiations of the agendas• Legal implementation

– Grenelle 1 Bill (Aug 2009)– Grenelle 2 Bill (July 2010)

• Voluntary commitments

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Engaging stakeholders

• Call for contributions and inquiries before launching a legislative process or a project

• Steering consultative committees

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4.2

Lobbying Stakeholders in action

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Lobbying

Contribution of specific interests to the elaboration of public policies and to the legislative process, aiming:• to improve public understanding, visibility and

the legitimacy of their activities and interests;• to provide policy-makers and stakeholders with

information to advise them of the consequences and the effective scope of legislative proposals and policies.

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Lobby

Representative of interests who informs and influences the public

decision-makers, in order to have them taking into account

these interests

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Tools & techniques

DocumentationImpact studiesExpertise

ArgumentsScale up!

CommunicationOpinion makersMedias & social networksPublics

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Arguing• Putting forward the general interest • Overstating

– the impact magnitude (e.g. implementation issues, costs)– the number of affected stakeholders

• Scaling up– Will ease the identification and mobilization of other

stakeholders, yet not involved• Hiding vested interests behind the general

interest or specific but more legitimate interests– Staying behind larger interests– Putting the smallest and weakest in the forefront

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At what step?

• Early (pre-law/decision) phases– Preparatory works/Hearings– Law proposals/projects– Commissions– Amendments

• Post-law/decision phases– Constitutional review (for a law)– Implementation regulation (time for entry to force, detailed

provisions): executive decrees, transposition of European directives…

– Legal remedies…

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Triggeringthe public decision-making process

Initiate a debate for getting the legislature or the government to change the law

• Campaigns• Legal action

– Voluntary offence– Lawsuit– Remedy of unconstitutionality, of non-compliance with the

European Union rules…• Controversies

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For a democraticlobbyingTransparencyTraceability of the legislative process

Integrity in the relationshipcontrolling conflict or interests & influence pedding

Fair accessMandatory Further Readings on MoodleDossier: Lobbying landscape in France & AXA policy.

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Synthesis:• Companies and business are legitimate stakeholders for the

public-decision making.• All stakeholders (including NGOs) are using lobbying techniques in

order to defend and promote the interests they are representing.• The real stake is to establish a level playing field for all

stakeholders.• Two issues are remaining:

• What is the representativeness threshold? • What is the general interest, who defines it and how?

Mandatory Further Readings on MoodleEmilien Matter et Xavier Schmitt. « La société civile, entre devoir d’alerte et droit au chantage ». Slate.fr, 3 avril 2012