IB - Module 11

stakeholder

any group or individual who can affect or is affected by the achievement of the organisation's objectives

equity stakes

direct ownership; shareholders, directors, minority interest owners

economic or market stakes

economic interest; employees, customers, suppliers

influencer stakes

have interests; trade organisations, government agencies

Economic theory of the firm

Organisation is supplied with materials by employees, investors, suppliers and provides products to customers

Stakeholder theory

economic theory and governments, political groups, communities, trade associations; you must aim for building mutually reinforcing relationships with each of these groups and do it this way that does not trade off the interest of other group

externalities

any of these transactions between two parties may have negative consequences to the third party

stakeholder management

fragmented among various departments; focus on managing relationships; emphasis on buffering the organisation from stakeholders interfering with intend operations

stakeholder collaboration

new approach; integrated management approach; focus on building relationships; emphasis on bridging and creating opportunities & mutual benefits; long-term goals; coherent approach driven by mission, values & corporate strategies

CSR

Corporate Social Responsibility; economic, legal, social and environmental responsibilities of an organisation towards society

Sustainable development

adapting business strategies and activities that meet the needs of the enterprise and its stakeholders today while protecting, sustaining and enhancing the human and natural resources that will be needed in the future

integrated reporting

companies who choose stakeholder management use it as a tool to report on their company's progress

What to report? 4 principles defining content

materiality, stakeholder inclusiveness, context, completeness

1st principal of integrated reporting: Materiality

topics & indicators reflecting the organisations economic, social impact

2nd principal of integrated reporting: Stakeholder inclusiveness

identify stakeholders

3rd principal of integrated reporting: Context

Organization's performance in wider sustainability context

4th principal of integrated reporting: completeness

report contains significant material topics & boundaries to reflect the significant economic, social and environmental impact ts enabling stakeholders to assess the organisations performance

Issue - 1st definition

a matter of concern related to the organisations decision and operations

Issue - 2nd definition

Issue - 2nd definition point of conflict in opinions and judgements regarding company's decisions and operations

How to deal with sustainability issues?

1. Diagnosis - issue identification and analysis; 2. Strategic options (Reactive and Proactive)

Reactive strategic options

1. Buffering - stonewalling the issue, denying there is an issue (defensive); 2. Bridging - accommodating stakeholder concerns, often after pressure

Proactive strategic options

thought leadership - staking a positive leadership position on an issue that benefits stakeholders (also a form of bridging)

Choice of strategy depends on

the intensity of the issue; the importance of an issue to the organisations stakeholder groups; values and beliefs of managers in an organization; increasingly growing perceptions of industry responsibility

Why CSR activities are pursued?

They are pursued not only in order to improve profits, but to address important concerns of the wider society

Sustainability - definition

the ability to meet the needs of the present without compromising the ability of future generations to meet their needs

triple bottom line

economic, social, environmental performance that simultaneously satisfies the demands of the stakeholder groups

primary stakeholder groups

the constituents on which the firm relies for its continuous survival and prosperity - shareholders, employees, customers, suppliers, governments, communities

secondary stakeholder groups

those who are affected or affect the corporation, but are not part of the transaction - trade unions, social groups, i.e. Greenpeace

2 anpporaches to why stakeholders matter

1. Instrumental view - treating stakeholders well may indirectly help financial performance; 2. Normative view - firms ought to be self-motivated to do it right cuz they have societal obligations

Shared Value Creations

CSR that focuses on activities that are good for both the firm and its stakeholders; can be done in 3 ways

Ways of creating Shared Value

1. Company can look for unmet social needs in the community; 2. Modifying their business practices to increase benefits for external stakeholders; 3. Initiatives can be launched that create value for a local community but indirectly benefit the company

hypernorms

norms considered valid anywhere in the world - i.e. respect for human dignity