Stakeholder engagement: All or nothing?

by Emily Trevorrow, BITC 

Dialogue has helped us make the right kinds of improvements to existing activities… It has shown us things we might not have otherwise realised and has helped us connect with stakeholders who are helping us do the right things well

Stakeholder engagement is a ‘must do’ for corporate responsibility. But is it another tick box exercise or can it be usefully employed to inform responsible business practice? By looking at the remarkable experience of a company implementing AA1000 to the letter, it is possible to explore the potential value of stakeholder engagement to business. 

British American Tobacco is the world's second largest quoted tobacco group by global market share, with brands sold in 180 markets.  The nature and impact of BAT’s products has resulted in an active and sophisticated tobacco control lobby. Recognising their products pose risks to health, in 2001 BAT became the first company in the tobacco industry to report on non financial aspects of its business.

BAT selected AA1000 as the process to develop its social reporting across the business.  Engaging with stakeholders is integral to AA1000 and BAT decided that it needed to place stakeholder dialogue at the heart of its social reporting. This is no mean feat, AA1000 is a big undertaking for any company, BAT has used it to deliver social reports in 32 countries and stakeholder issues reports from a further 11 countries  across the globe. From Bangladesh to Venezuela BAT offers opportunities for their stakeholders to engage with the business. 

The rewards of effective engagement are varied and far reaching.  BAT has grown in confidence opening up its business to its stakeholders, discussing health impacts, supply chains and management processes in open forums. Listening to, and understanding, stakeholders has led BAT to invest in new potentially harm reducing smokeless products, and to work with competitors to reduce child labour in the tobacco industry. It also led to the development of their Statement of Business Principles and Framework for Corporate Social Responsibility which covers all aspects of the business.

Paul Adams, BAT chief executive says: "Dialogue has helped us make the right kinds of improvements to existing activities… It has shown us things we might not have otherwise realised and has helped us connect with stakeholders who are helping us do the right things well."

But BAT says that stakeholder engagement has also contributed to fundamental changes in the decision making process of the business.  By feeding stakeholder issues up to their Board, BAT has experienced a shift from taking decisions and defending the consequences to understanding a range of perspectives and impacts to inform decisions before they are taken.

Understanding stakeholder perceptions and opinion is a valuable output of engagement. David Kingma, International CSR Manager at BAT, says: "stakeholder engagement is not about people telling us how to do business, but it allows us to run the business with our eyes wide open." Engagement does not come without risk. The issues around tobacco are difficult ones. Consequently, BAT has some of the most outspoken stakeholders from the tobacco control lobby and health campaigning groups.  There have been occasions where stakeholders have opted, consciously or coincidentally, (and sometimes very publicly) not to engage - an embarrassing outcome for the company.  BAT acknowledges that it can be risky to engage but considers the benefits to outweigh the risks because engagement helps them to build trust in how the business operates. 

David Kingma says: "Using a process like AA1000 enables us to develop trust in our business practices through the credibility of the standard to which we comply."

So should all businesses likewise be following AA1000 to the letter? Many sectors, with less vociferous stakeholders, will feel they don’t need to go that far. Achieving AA1000 standard can provide credibility, but to most businesses the importance of engagement is less about the precision of process and more about understanding the views of stakeholders and enabling their business to respond accordingly.

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