Rethinking Corporate Stakeholder Engagement

The world is changing in ways that require companies to interact differently with their stakeholders. Across the globe, citizens are demanding more say over business decisions that might impact them, while possessing all the tools of the Information Age to turn local conflicts into global causes. At the same time, global demand for natural resources has never been higher, driving companies toward projects with increasing potential for social and environmental impacts — such as extracting energy from tar sands, hydraulic fracturing, biofuels, and mining minerals in conflict-torn countries.

These trends are setting many companies and communities on a collision course. An analysis by Environment Resources Management (ERM) of the 190 largest oil and gas projects found that more than 70% of project delays were due to “non-technical” risks. Communities and their advocates have the power to disrupt and derail natural resource projects, and are exercising it from Chile to Canada, Iraq to Indonesia. Gaining and maintaining a social license to operate has never been more important, or more difficult.

The global response to these challenges has been an unprecedented effort to codify corporate responsibility — a clear and consistent movement across business, governments, and civil society groups to recognize and define norms, commitments and requirements for business engagement with community and stakeholders. Yet amid the plethora of efforts, we continue to see a great deal of corporate-stakeholder conflict. Why?

We think too few companies have grasped the essence of the changing reality: if the goal is now a sustainable social license, the requirement is a negotiated partnership with impacted stakeholders — and one that creates mutual gains.

At CBI, we’ve sought to transform the challenge of creating negotiated partnerships into a practical framework for action. We call it the Mutual Gains Approach to Corporate Stakeholder Engagement, and it reflects our experience on the front lines in Nigeria’s Niger Delta, the highlands of Peru, coastal California, fishing villages in Thailand, First Nations lands in Canada, and corporate management meetings around the world. The approach assumes companies and their stakeholders are interdependent and have a shared interest in turning their collision course into a shared journey. It also recognizes deep and abiding conflicts in values, interests, and identities, and provides tools for acknowledging and working with those ten¬sions while pursuing mutual gains.

A Mutual Gains Alternative

Today, companies need a clear strategy, cross-functional capacity and proactive, sustained engagement to advance their interests while working constructively with stakeholders affected by their business. This requires a company-wide approach that recognizes the shifting global realities and supports actions and behaviors that maximize opportunities for shared benefits with stakeholders.

The core idea is twofold: to create value by leveraging collaborative opportunity where companies and their publics share overlapping interests; and to reduce and mitigate conflict where interests and concerns compete.

The four elements of the Mutual Gains Approach provide an overarching roadmap that applies to a range of stakeholder engagement contexts — such as assessing and mitigating impacts, managing grievances, negotiating community agreements, and implementing social investment plans:

• Prepare the organization for engagement
• Explore issues, options and ways to engage with stakeholders
• Construct solutions jointly
• Follow through on commitments

Underpinning this step-wise approach are several crosscutting assumptions about what makes stakeholder engagement meaningful and effective:

• Involving stakeholders in the design and implementation of engagement initiatives produces stronger outcomes. In other words, do it with them, not for or to them.
• Creating a shared understanding of the core needs and priorities of all parties provides the basis for effective engagement strategies, long-term agreements and sustainable relationships.
• Companies and their stakeholders can achieve mutual gains through a well-structured process that generates mutually beneficial options and enables wise trade-offs.
• Meaningful engagement requires deep commitment and alignment inside a company.

The Way Forward

The shift to more strategic and sustainable engagement approaches is underway in some companies. Yet this change must accelerate within and across companies in order to address the colliding trends of greater citizen empowerment and continuing demand for natural resources.

Mutual Gains in Practice

CBI designed and facilitated the re-negotiation of community agreements between Chevron Nigeria Ltd. and its stakeholders in the contentious Niger Delta.

The re-negotiation process started by bringing the parties together for joint training in the Mutual Gains Approach to negotiation, followed by joint identification of the issues for negotiation based on an earlier evaluation. CBI then facilitated separate preparation sessions in which parties confirmed core priorities, and considered potential packages to offer as solutions. Finally, the parties came back together for facilitated negotiation sessions.

The process allowed the parties to identify a range of issues, put multiple options in play, and find alternatives that maximized value to all parties. What could have been a major confrontation between the company and the community became a more efficient negotiation that strengthened relationships, a major achievement in the violent context of the Niger Delta.