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Many companies striving to be good corporate citizens today face an internal tug of war between giving attention to community initiatives that address social problems and the growing demand to make environmental issues paramount.
2010 Conference: Leveraging stakeholder activism
By Vesela Veleva, Research Manager, Boston College Center
This 2010 conference session looked at how stakeholder activism has changed over the past decade from antagonistic to more collaborative, and how smart companies use it strategically today to identify emerging business risks or opportunities.
Steve Lydenberg, chief investment officer at Domini Social Investments LLC, talked about the different ways socially responsible investors are engaging with companies:
- Proxy voting: this is the most direct way of engagement by voting on different company and stakeholder proposals at the annual meeting.
- ESG screening: using information from third-party providers like KLD (acquired by RiskMetrics in 2009), socially responsible investors (SRI) conduct evaluation/screening of environmental, social and governance performance (ESG) of companies before they decide whether or not to invest in them. SRI investors are always looking for long-term value versus short-term, quarterly dividends growth.
- Filing resolutions: Working in collaboration with other SRI investors and groups, Domini files resolutions at companies that it owns to encourage improvement in particular ESG areas such as climate change disclosure, transparency and toxics and human health. The Carbon Disclosure Project, for example, included over 200 investors with over $18 billion assets under management.
On the business side Lynette McIntire, director of Corporate Reputation Management at UPS, talked about how over the past two years an “avalanche” of stakeholder questions, surveys and requests for information has emerged. The main challenge for UPS was: should the company respond to all of them or just pick and choose the most significant ones? And why should it pay attention at all? As a company with strong values and commitments to social responsibility, UPS has not only responded to these numerous requests but also became proactive in looking for engagement. Lynette outlined several key benefits from stakeholder engagement:
- Such engagements can be “tremendously powerful drivers for change”, especially rankings and scorecards, particulary when a company finds itself at the bottom of a list;
- Stakeholder engagement is a good way to educate people internally – a company may not always see all emerging risks and opportunities but anticipating these and taking action early is critical for business;
- Such engagement builds trust – one of the most critical factors for building a brand name.
UPS does not look at stakeholders as a threat but as a way to “forecast the future”, identify emerging risks and opportunities and build its brand value. Any “smart” company can move from being “reactive” in engaging with stakeholders to developing a “proactive” strategy and seeking stakeholder input in decision-making as a critical factor for success in the 21st century business environment.
