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Why is Stakeholder Engagement Difficult?
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Almost anyone, regardless if you’re a business owner or not, knows that the success of any business is contingent on loyal customers and consistent investors – but little do most realize that stakeholder engagement is equally as important.
Stakeholder engagement, a term becoming increasingly known as companies seek to implement greater sustainability, is paramount to ensure your business operations continue to run smoothly. However, at times – it can be hard to facilitate stakeholder engagement for various reasons.
In this article, we’ll review what stakeholder engagement is, why it is important, and how your company can avoid the difficulties of stakeholder engagement.
What is stakeholder engagement?
Before we explain what stakeholder engagement is, it’s important to understand what a stakeholder is to begin with. In short, a stakeholder is any party that takes interest in a company's operations seeing as they may be affected by the company’s activities.
“ Essentially, a stakeholder is any third party that could be both beneficial and negatively affected by a company’s business endeavors. ”
👉 The importance of stakeholder engagement has risen dramatically as awareness on corporate social responsibility (CSR) has skyrocketed in the midst of climate change and more sustainable efforts on behalf of businesses.
Examples of stakeholders often include:
- Investors
- Employees
- Customers
- Suppliers
- Local Communities
- Local Governments
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Stakeholder engagement, on the other hand, refers to the process of identifying, analyzing, and improving your business ventures based on the feedback you receive from your stakeholders.
“ Think of someone taking guitar lessons after having self-taught themselves to play the instrument for many years – evidently, the self-taught guitar player may have picked up some bad habits that prevent them from improving their instrumental skills. The teacher is there to help identify those areas to be improved that the guitar player themselves may not realize. Stakeholder engagement works in a similar manner by enlightening companies on key issues most important to their stakeholders. ”
👉 As a result, stakeholder engagement allows businesses to identify key areas where improvements should be made before a problem gets out of control.
Why is stakeholder engagement important?
Stakeholder engagement is imperative, especially for companies looking to implement sustainability and ensure that all of their customers, employees, investors, and business partners remain satisfied.
“ One of the main reasons why stakeholder engagement is so important is because it humanizes the business experience, as it allows for honest and viable feedback that can help to prevent deleterious backlash and bad press. ”
Think of when you haven’t cleaned out your rain gutters in a while – this can result in damage to your roof tiles and leaks. However, if you seek to consistently clean your gutters – this wear and tear can be prevented. The same goes for stakeholder engagement, as it prevents a build up from issues and the need to tackle all of them at once.
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Benefits of stakeholder engagement include:
- Gaining Insight to Future Improvements – Stakeholder engagement can inspire companies to come up with new ideas to improve business efficiency and productivity that may not have come to life without insight from their stakeholders.
- Greater Trust Between Company & Stakeholders – Keeping the lines of communication consistently open between a company and its stakeholders will allow third parties to feel safer to voice their concerns regarding a company’s product or service. Therefore, stakeholder engagement will cultivate better business relationships.
- Improved Risk Management – Increased stakeholder engagement can allow companies to become more aware of issues that would have otherwise gone on noticed, and allow for course-corrective actions as opposed to reactive attempts to rectify the issue later on.
- Learning to Take Accountability – Stakeholder engagement will allow companies to get better at taking constructive criticism and responsibility for their previous actions, which will allow them to become more transparent and adhere to future expectations on behalf of upcoming climate disclosure rules such as the CSRD and the SEC Climate Disclosure Rule.
- Reduced Business Costs – Thanks to stakeholder engagement, companies can more easily voice their concerns regarding the cost-to-value ratio of a product or service – which could result in the company to seek ways to reduce their energy usage or materials used, and ultimately reduce their business expenditures in the long-run.
- Business Growth – From one stakeholder to another, one of the greatest benefits of implementing stakeholder engagement is that it can influence other stakeholders to speak well of your business and ultimately encourage others to take part in your product or service – leading to overall greater business success.
👉 Ultimately, stakeholder engagement can help a company to demonstrate their commitment to improvement, retain loyal customers and investors, indirectly aid in complying with environmental regulations, and even result in increased business revenue.
What could happen if your company ignores the importance of stakeholder engagement?
If your company fails to implement stakeholder engagement policies, it could have severe consequences for your company – as if one stakeholder decides to take a stand, many other stakeholders are likely to follow.
“ Think of a standing ovation at a concert – aren’t you more likely to stand up and join in on the clapping for applause if others already are? The same goes for stakeholder engagement – more stakeholders are likely to join in on a protest against a company if one takes the leap first. ”
As a result, stakeholder engagement ensures that companies with more than one stakeholder are continuously seeking to adhere to the needs of all the parties that could be impacted by their company.
Companies that fail to implement stakeholder engagement could suffer from the following:
- Bad Press – If one stakeholder is dissatisfied with your company’s behavior, it could turn into a virtual movement or even an in-person protest – which is likely to manifest itself in the media and create bad publicity for your company.
- Reactive Behavior – One of the greatest benefits of stakeholder engagement is that it allows for proactive action as opposed to reactive behavior. It is always best to get ahead of a potential problem rather than to course correct whatever went wrong according to your stakeholders.
- Lack of Emotional Connection – Failure to implement stakeholder engagement could illustrate to stakeholders an overall lack of empathy for local communities, vulnerable populations, and the environment – which wouldn’t be good to acquire new customers or investors in the future, especially in the midst of climate change.
- Potential Unethical Behavior – Think of when you were growing up, and had your parents or teachers telling you what was right and wrong – it would’ve been much harder to learn without their expertise, right? The same goes for stakeholder engagement, as it presents an opportunity for business to learn what is acceptable amongst their stakeholders and can influence them to proceed with any potentially unethical business decisions.
👉 At the end of the day, the consequences of failing to implement stakeholder engagement are not worth the potential “shortcuts” that can be made without it – seeing as the repercussions could result in serious challenges that could prevent your business from moving forward.
How can stakeholder engagement prove difficult?
Stakeholder engagement can be challenging, especially for larger companies that have many multiple stakeholders involved – often a part of different communities, governments, and businesses that will have various needs and demands to remain satisfied.
“ Think of trying to teach a class that will be effective for all of your students, who each are bound to have different preferences and learning styles. This is the same kind of difficulty found when trying to implement tactics to increase stakeholder engagement ”
Stakeholder engagement can also prove difficult when your stakeholders:
- Are difficult to get in contact with;
- Remain unclear about their expectations;
- Fail to respond to various surveys or join meetings;
- Only share negative feedback as opposed to positive elements the product or service currently provides;
- Demonstrate a lackadaisical approach to rectifying issues where the stakeholder and company currently disagree.
Luckily, there are many things that businesses can do to improve their stakeholder engagement – even when they have extremely uncommunicative and stubborn stakeholders.
How can your company improve stakeholder engagement?
We understand that maintaining reputable stakeholder engagement can prove difficult. That’s why we’ve rounded out some of our best ideas to ensure your company is doing its part to implement better practices for improved stakeholder engagement.
Here are just a few of our tips to increase stakeholder engagement:
Be Personable & Professional
Although this can prove difficult to maintain and equal balance – it is certainly possible and can prove extremely effective for improving stakeholder engagement. This is because demonstrating personable skills can allow stakeholders to feel more comfortable in sharing their opinions, while remaining professional allows for business boundaries and effective communication that doesn’t let emotions get in the way of finding a solution. Ultimately, seeking to be positive and solution-oriented can help to facilitate greater stakeholder engagement.
Consistent Communication
Especially in today’s society where everything is instantaneous, the opinions of stakeholders are subject to change at any given moment – meaning ensuring your company keeps up with consistent communication is key to prevent potential backlash from an unsatisfied stakeholder. This can be done by providing your stakeholders with monthly reports, meetings, and even conversations with individual stakeholders if necessary.
Send Out Surveys
Some people, especially in the age of social media where many hide behind a screen, are too scared to confront an issue – but that can easily be taken care of with anonymous surveys. By sending out a monthly or even weekly survey, your company can gain insight on how your stakeholders currently feel without feeling overexposed. In fact, it is up to 75% more likely for people to tell the truth when remaining anonymous under surveys – making this a great way to encourage honest communication and greater stakeholder engagement.
Ultimately, stakeholder engagement is not easy to implement – but it can prove beneficial for your company in the long run, especially in the midst of climate change where environmental regulations and sustainability practices are expected to become the new norm.
We understand that incorporating CSR practices such as stakeholder engagement can be challenging, but Greenly is here to help!
What about Greenly?
If reading this article about why stakeholder engagement can prove difficult has made you interested in reducing your carbon emissions to further fight against climate change – Greenly can help you!
It can be difficult to identify which areas, such as decreased stakeholder engagement, are slowing your company down in your climate journey, but don’t worry – Greenly is here to help! Click here to book a demo and get personalized expertise on how you can start to reduce your own emissions and decrease your environmental impact.
Greenly can help you make an environmental change for the better, starting with a carbon footprint assessment to know how much carbon emissions your company produces.
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