INSIGHT ISSUE 01 | 2021

13 Definition of stakeholders, classification of issues and approaches to materiality will evolve as the business and its context evolves, and so developing a well-structured framework that allows this evolution is a critical support to maintaining consistent and cohesive communications over time. The rate of change can be dramatic -- like for example investor interest in climate change, or consumer interest in plastics -- and so stakeholder engagement should be set up as a dynamic, value creating approach and system rather than an annual desk exercise. All these refinements require resources; the business case is clearer if the stakeholder assessment is seen as a critical process for engaging with and educating stakeholders rather than, at the other end of the spectrum, an internal, compliance based, risk orientated exercise. There’s lots of say about this, and perhaps easiest to see where companies are getting it wrong! Sustainability has historically been too focused on company operations and supply chains. But, perhaps in every case, the impact of products and services is wider reaching and of more impact than operations. Too many companies simply fail to account for the impact of their products and services. This is particularly serious when they don’t assess, and address, negative impacts. A second, general criticism is the way performance against sustainability is communicated. Demonstrating positive world impact is hard, and requires plenty of collaboration with others. It’s a domain that lends itself to self-enquiry, to learning, and to constant improvement rather than too many celebrations of success. A final criticism is the struggle to clarify purpose and explain how it is integrated in the business model and strategy, as I have noted. On the positive side, we are seeing a huge effort by companies to bring sustainability into the heart of their businesses. And there is a growing awareness that the greatest and most existential challenge we face, global warming, can only be achieved through collaboration. of innovation and new business models e.g., the multiple businesses and initiatives currently looking at ways of creating a market for farmers to be rewarded for improving their soil quality and its CO2 sequestration capacity. Stakeholder listening should be designed in the context of the company’s overall goals and its corporate purpose, keeping the end use of the product or service at the forefront. Close attention should be paid to the definition of “stakeholders”: the traditional groupings of for example customers and investors may be too broad to be useful when they are typically heterogeneous populations. The classification of issues, and how they are framed, again needs deep thinking. I would always advocate starting with the SDGs, and then applying a clear and transparent approach to ascertaining what’s deemed material in the longer term to both stakeholders and to management. INSIGHT | Focus On A lot of companies have stakeholder dialogue. Any ideas guidelines or tips on how to make this listening process better? What are companies getting right? What are they getting wrong? SAM BAKER [email protected] Partner at Deloitte