Stakeholder Engagement - Cranfield School of Management ...

Introduction
The terminology of stakeholder and stakeholder engagement has become increasingly common
parlance in international business circles in the last decade, particularly with regard to social and
environmental performance 2 .
Stakeholders can be defined as:
Stakeholders can be both local, having detailed information and
opinions on a specific issue or region, or global, engaging directly
with companies at pan-regional headquarters level.The
definitions above apply equally for both local and global
stakeholders.
2.1 The Benefits of Engaging with
Stakeholders
The development of meaningful relations should add value to
the organisation’s operations by: reducing constraints on business
and increasing the licence to operate; allowing it to plan for the
future, minimising risks and enhancing opportunities by better
understanding the fast-changing PESTE (Political, Economic,
Social,Technological, Environment) context; and, enabling it to
better understand critics and potentially refute, convince or
address criticisms. Furthermore it will enable organisations to
reassure stakeholders that they are on top of issues, and in some
cases, be essential for solving problems. It is, therefore, justifiable
in terms of time, money and effort expended in their
development and maintenance.
Box 2: Understanding Stakeholders
❖ Anyone who affects or is affected by your organization (R Edward Freeman)
❖ Those groups or persons who have a stake, a claim, or an interest in the operations and decisions of the firm...legal,
financial, or moral claim, explicit or implicit contract (Archie B Carroll)
❖ They supply resources that are critical to the success of the enterprise (e.g. licence to operate)
❖ They place something of value ‘at risk’: i.e. their own welfare is directly “affected by the fate of the enterprise”
(e.g. quality, environment)
❖ They have “sufficient power” to affect the performance of the enterprise, either favourably or unfavourably
(e.g. mobilise social forces, withdraw labour)
For a list of possible stakeholders see Section 3.5.
2.2 Basic Principles of Stakeholder
Participation
Articles by Coimbatore Krishnarao Prahalad, Michael Porter and
others have highlighted the growing consensus in business circles
that the relationship between business and society is now an
issue of significant commercial relevance to all organisations. Ian
Davis, the then Global Head of McKinsey & Co, writing in the
Economist emphasised the need for CEOs of modern large
corporations to take the opportunity to ‘restate and reinforce’
this relationship to help secure the billions invested by their
shareholders over the long term, arguing that there is a new
social contract 3 . Some commentators have described the social
contract as an additional and sixth force in Porter’s widely
recognised and utilised five forces model (see Figure 3) 4 .
2 Sequeira, Debra et al. 2007. Stakeholder Engagement: A Good Practice Handbook for Companies Doing Business in Emerging Markets. International
Finance Corporation
3 Davies, Ian. 2005. The biggest contract.The Economist
4 Jeffery, Neil. 2007. Towards a Customer Value Model for Stakeholder Engagement: Understanding the Added Value to Business. Cass Business School
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Introduction