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The Voice of the Stakeholder

Is sustainability sustainable? Twelve works argue there is value in “corporate values.”

Photograph by Opto
In 1996, Monsanto Company hired U.K. consultant John Elkington to help its executives better understand how to run a sustainable corporation — that is, a company that seeks to preserve the environment for future generations. But by 1998, Mr. Elkington, chairman and founder of SustainAbility, a pioneering consultancy that advises corporations on environmental strategy, had terminated the relationship. In his 2001 book, The Chrysalis Economy: How Citizen CEOs and Corporations Can Fuse Values and Value Creation, Mr. Elkington complained that Monsanto was “constitutionally deaf.”

What he meant was that in the mid-1990s, Monsanto managers weren’t listening to outsiders who had strong views and a definite stake in the sustainability debate. Environmental groups such as Greenpeace vilified the company for its programs to develop genetically modified crops, and many farmers, especially Europeans, shunned its seed. Mr. Elkington introduced Monsanto executives to concerned farmers, food processors, retailers, and nongovernmental organizations (NGOs). But Monsanto seemingly dismissed their concerns, and sold its genetically modified seed anyway.

For his book, Mr. Elkington interviewed former Monsanto CEO Robert Shapiro, who led the company during its diversification into biotech agriculture, and who bore the brunt of the criticism from concerned stakeholders. Mr. Shapiro admitted that Monsanto had a tin ear at the time, and said if the company had listened better and been better prepared for the criticism when it entered this controversial market, it would be in a better position today. “If there was a next time, I’d have much earlier dialogue with a wide range of interested parties in the scientific, academic, governmental, and NGO communities,” he said. “It would have taken unusually candid and innovative discussions between ourselves and Greenpeace to create a win/win, but that might not have been impossible.”

In the 1980s, Total Quality Management experts told companies to listen closely to customers. Market power was then just beginning to shift away from producers to customers, and insular companies were quickly becoming less competitive. Market power is still shifting, but it is not just toward customers; communities, employees, regulators, politicians, suppliers, investors, and even the media are also gaining influence over corporations. A raft of new books, articles, and Web sites exploring the roles of business in society affirm what executives like Mr. Shapiro have learned on the job: The ability to listen to corporate stakeholders is not merely a useful management skill; it is a competitive necessity.

Listening to stakeholders, as Mr. Elkington shows in The Chrysalis Economy, is a critical component of a larger trend: companies’ taking more responsibility for the ways their business decisions affect the quality of people’s lives. Although discussions about competitive positioning and cost reduction are routine, until recently, it hasn’t been common to find executives analyzing the implications of their actions for employees, the surrounding community, or other constituencies.

How corporations address societal welfare issues has been variously called corporate citizenship, corporate social responsibility, and corporate sustainable development. The Aspen Institute’s Business and Society Program — of which one of this review’s authors is executive director — prefers social impact management to corporate social responsibility, because the term more deliberately positions social matters within the business domains where strategic, operational, and investment decisions are made. For corporations, listening, understanding, and responding to the interests of different stakeholders is not just about being charitable or responsible; it is part of thinking about business activities in a way that recognizes the interdependence of commercial and social objectives, and it encourages executives to address them together.

Consider how a lack of understanding of this reality blindsided Royal Dutch/Shell Group of Companies two years in a row in the 1990s. In 1995, when Shell sought to dispose of its Brent Spar oil storage buoy by sinking it in deep water in the North Atlantic, it certainly did not anticipate the public outrage that ensued. A year later, Shell executives again did not see how external stakeholders perceived Shell’s actions when it failed to intercede as the government of Nigeria, where Shell operates, executed Nigerian human-rights activist Ken Saro-Wiwa and eight other Ogoni people. The chorus of disapproval was global.

 
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Corporate Citizenship Resources

  1. Works mentioned in this review.James E. Austin, The Collaboration Challenge: How Nonprofits and Businesses Succeed Through Strategic Alliances (Jossey-Bass, 2000), 203 pages, $25.
  2. John Elkington, The Chrysalis Economy: How Citizen CEOs and Corporations Can Fuse Values and Value Creation (John Wiley & Sons, 2001), 284 pages, $29.95.
  3. Charles O. Holliday, Jr., Stephan Schmidheiny, and Philip Watts, Walking the Talk: The Business Case for Sustainable Development (Greenleaf Publishing/Berrett-Koehler, 2002), 288 pages, $29.95.
  4. Joshua Daniel Margolis and James Patrick Walsh, People and Profits? The Search for a Link Between a Company’s Social and Financial Performance (Lawrence Erlbaum Associates, 2001), 154 pages, $19.95.
  5. Lynn Sharp Paine, Value Shift: Why Companies Must Merge Social and Financial Imperatives to Achieve Superior Performance (McGraw-Hill, 2003), 302 pages, $27.95.
  6. James E. Post, Lee E. Preston, and Sybille Sachs, Redefining the Corporation: Stakeholder Management and Organizational Wealth (Stanford University Press, 2002), 320 pages, $27.95.
  7. Jane Wei-Skillern, “Sustainable Development at Shell (A)” (Harvard Business School Publishing, 2003), 20 pages, $6.50. (available from Click here.)
  8. Simon Zadek, The Civil Corporation: The New Economy of Corporate Citizenship (Earthscan, 2001), 257 pages, $29.95.
  9. Designing a CSR Structure: A Step-by-Step Guide Including Leadership Examples and Decision-Making Tools (Business for Social Responsibility, 2002), nonmember price: $100. (available from Click here.)
  10. Guide to Engaging with NGOs (Business for Social Responsibility, 2001), nonmember price: $90. (available from Click here.)  
  11. Hidden Agendas: Stereotypes and Cultural Barriers to Corporate-Community Partnerships (Laufer Green Isaac, 2003), $45. (available from Click here.)
  12. Responding to the Leadership Challenge: Findings of a CEO Survey on Global Corporate Citizenship (World Economic Forum, 2003), 28 pages, free. (pdf available from  Click here.)
 
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