Stakeholders: engagement alone is not enough
Complete 100 coming soon
With only a day to go to the launch of the 12th Complete 100 – Black Sun’s flagship annual research into corporate reporting among the FTSE 100 – we round up our blog miniseries with a look at ‘stakeholders’, the third key theme of “The Real Drivers of Value: Lost and Found”.
In focus: Stakeholders
We have seen lots of debate over the past six months around stakeholder voice and the degree to which stakeholder needs and expectations are being considered by corporates, ranging from the UK Government’s Green Paper and BEIS Select Committee Inquiry into governance to the Modern Slavery Act.
Perhaps most notably, the 2017 Edelman Trust Barometer shows that while corporate trust is at an all-time low, stakeholders are placing ever increasing demands on business. Additionally, a focus on Section 172 of the Companies Act and increased reporting on the Sustainable Development Goals has further pressured companies to demonstrate their care for wider stakeholder groups in an effort to remain viable over the long term.
So with the onus falling on corporates to define their purpose and deliver positive outcomes for stakeholders, what’s the state of play in terms of reporting on this?
What we are seeing…
Most companies (67%) describe how they engage with their key stakeholder groups (typically through surveys). Employees (64%) and customers (39%) are the most frequently-engaged groups, which is unsurprising, however it is intriguing that the ‘customers’ number isn’t significantly higher.
Reading the reports indicates that these discussions tend to be “owned” by different internal teams, as engagement approaches often appear unsystematic and dispersed. Usually, stakeholder discussions feature towards the end of the Strategic Report in the ‘sustainability’ or ‘people’ chapters, and are not always contextual to strategy.
In other sections of the Annual Report, just under half of companies integrate stakeholders into their business model discussion. A healthy selection also publish KPIs that relate to stakeholder satisfaction; 53% for employees and 29% for customers.
…and what we are not
Despite many companies providing a top-line overview of their engagements, only a handful (11%) outline the specific expectations certain stakeholder groups have of the company. This indicates that corporates aren’t following the trend towards showing how stakeholder concerns inform strategy.
A similar number provide materiality narrative that links stakeholders’ concerns to the company, but more often than not, the focus of these discussions is delivered in the context of ‘sustainability’ and does not encompass the whole organisation or all key stakeholders.
Existing levels of disclosure in the Corporate Governance report do not appear to reflect the prominence of the current stakeholder debate either; few evidence stakeholder representation at board level or the board’s regard for key groups in any kind of detail.
Where this leads
Our findings indicate that momentum around the stakeholder debate is gathering and we are confident in seeing incremental progress over time in terms of reporting quality. This will be driven further as companies feel the pressure from regulators and other external stakeholders, and as they begin realising the benefits of a stakeholder-inclusive approach.
How to improve reporting on stakeholders
- To a level appropriate to the organisation, use stakeholder feedback in the market review to contextualise strategy
- Outline stakeholder expectations for each group alongside engagement activities
- Provide information on the reports and presentations the board has received that enables it to have regard for stakeholders
If you are interested in requesting a copy of the Complete 100 research, please contact Sarah Myles