The opinions expressed here by Trellis expert contributors are their own, not those of Trellis.
When your company says it practices “stakeholder engagement,” what does it actually mean? Sending the chief sustainability officer along to shadow the CEO at Davos? Forming a partnership with a prominent NGO to provide reputational cover? Obsessively monitoring the social media campaigns of a hostile, activist organization? Getting influencers to tout the benefits of your new product?
Or, perhaps, actually exercising some practical curiosity over the impact of your business decisions on real human beings?
It’s well past time that we retired the term “stakeholder engagement.” It had its purpose, but at this point it’s part of a wider crisis of direction and credibility in sustainability today. Ditching the term won’t solve all our problems, but it would certainly be a great start.
There are good reasons why “stakeholder engagement” became so pervasive. The dominant approach, especially in business schools, was used to frame debates over the purpose of business as a choice between shareholders and stakeholders to ensure a business wasn’t only maximizing profits for its owners, but also creating value for the greater community. Considering the impact of your business, not just shareholder returns, is a key distinction, so the concept is foundational to any credible approach to sustainability and human rights.
But the core argument of the ESG movement is that this choice was a false binary. Many sustainability thought leaders, especially in the late 2010s, argued that the distinction was fading as we entered a new era of “stakeholder capitalism,” one marked by commitments on climate change, supply chain oversight and so on. Because sustainability now feels so besieged and under threat, it’s easy to miss just how much the term “stakeholder” has entered the wider discourse. It’s deployed frequently by public officials, venture capitalists and management consultants. And while this might feel like an achievement, the term’s dominance is more problematic than it looks.
Stakeholder ambiguity
Aspen Institute vice president Judy Samuelson once commented that the stakeholder term is too generic and “the concept is both too facile and hard to grasp as a starting point for real change.” I concur. While the shareholder vs. stakeholder debates are perennial in the classroom, actual organizations trying to understand their stakeholders will quickly become overwhelmed by clear, practical challenges. Any large company has tens of thousands, if not millions, of stakeholders, ranging from customers to government agencies, all with different and conflicting interests. You can’t put them all in a spreadsheet and come up with anything but the most shallow, flattened conclusions.
If pretty much everyone is deemed a “stakeholder,” how are we supposed to make difficult decisions about whose interests to prioritize and whose to ignore? Deploying the term is a good way to suggest that any difficult questions about power, conflicts and tradeoffs don’t really exist, because all stakeholders want the same thing. They don’t, and they certainly aren’t all on board with corporate sustainability efforts. These kinds of sweeping, generic claims, have contributed to our diminishing credibility.
Plus, no company is equally effective with all stakeholders. Food and apparel companies tend to be good at supplier oversight. Mining companies have to work with local communities, so they deploy experts with PhDs in anthropology to work on “social performance.” All these critical distinctions about what stakeholders want, their influence and how much your business impacts their daily lives get flattened into a generic, meaningless term that stops us from learning what actually works with distinct interest groups.
Engagement, if anything, is worse. You “engage” to give the appearance of doing something without actually changing anything at all. So, what are you actually doing when you “engage?” Are you publishing a report, deploying some PR, having a conversation, asking for (usually unpaid) input, seeking legitimacy, holding a meeting? When people don’t know what the point is, but don’t want to admit it, they use this term. I can’t tell you how many communities around mining sites have complained to me about endless visits from well-meaning consultants, seeking to “engage” but never following up or doing anything differently.
So, what “stakeholder engagement” actually does is allow an organization to make vague, virtuous-sounding claims about consultation and inclusion, without any specific description of what they really did and how it changed decisions. This is great for the company, but terrible for the humans it impacts. In the process, it also compounds problems with jargon and perceived elitism.
Reinforcing powerlessness
It’s very common to give the sustainability team formal responsibility for “engaging stakeholders,” which is quite absurd the more you think about it. Unless you’re a sustainability consultant, an ESG ratings agency, or an activist nonprofit, you’re unlikely to pay much attention to the sustainability team’s claims and efforts. Suppliers interact with procurement. Customers interact with the sales team. Employees interact with their bosses, colleagues and HR. All these interactions trump sustainability efforts. What often opens up is a yawning gulf between aspirations and reality, which fuels the hypocrisy and credibility sustainability problems we see unfolding.
Even worse, by assigning responsibility for “stakeholder engagement” to a small, relatively powerless team, the organization is implicitly saying that everyone else can focus on business as usual, and doesn’t need to worry about those pesky stakeholders.
Perhaps weirdest of all, it’s common (for example, in materiality assessments) to say that employees are stakeholders along with an array of external voices. Meanwhile, investor/business interests are deemed identical. In other words, investors are the company, and employees have distinct, possibly hostile interests. This isn’t a challenge to the shareholder value model. It implicitly reinforces it, while sprinkling a little distracting fairy dust around.
Humans are idiosyncratic, maddening creatures. Their demands and perceptions are varied and inconvenient, and can’t be flattened into a single interest group. The term stakeholder engagement illustrates how we wound up being seen as the “paramilitary wing of the marketing department.”
We need to stop talking about stakeholders in generic, handwaving terms. We need to think much harder about when we’re driving internal change and speaking truth to power, and where we’re complicit in giving top cover for business as usual.
We need to do less “engaging” and more responding and doing. And we need to learn to talk in plain language as we proceed.
