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How Executives Can Work with Stakeholders to Improve Sustainability

How Can Executives Work with Stakeholders to Improve Sustainability?

Corporate executives increasingly seek ways to improve sustainability, often because stakeholders such as investors and customers demand it. But the two sides do not have to be in opposition and only make changes when one side wins, such as through proxy voting.

Instead, executives can work with stakeholders to find common ground to improve sustainability. Doing so requires strong communication so that both executives and stakeholders can focus resources on solutions that add value to the company.

Be Receptive to Stakeholder Communication Efforts

In certain instances, stakeholders try to engage directly with executives, such as at annual general meetings for shareholders. In other cases, stakeholders reach out directly to boards and management to request meetings to create a more constructive dialogue, rather than only trying to make changes through voting.

“Voting by its nature reduces sometimes complex issues to a binary choice—”for” or “against” a particular proposal—making it a rather blunt instrument,” notes Vanguard in its statement on investment stewardship. “In contrast, our engagement with the directors and managers of the companies in which we invest provides us with the opportunity to target nuanced feedback and messaging more precisely than does voting alone.”

While executives may not have time to listen to all direct engagement requests, they can pick a sampling to try to comprehend issues that matter to stakeholders, similar to how a politician may look at a handful of letters daily from constituents in order to gain a deeper understanding and wider view of the issues they care about.

Transparency Matters

In addition to being open to stakeholder communication, executives can elicit ideas from stakeholders and get on the same page as them by offering more transparency. For example, companies can report on sustainability efforts in corporate filings as well as on their own websites. That way, stakeholders can clearly see what the company is working on and do not have to put resources into trying to advance an issue that the company already has a handle on.

On the flip side, waiting until stakeholders force a company’s hand on transparency can create negative publicity. Investors are putting more pressure on companies to report on sustainability efforts. At ExxonMobil, for instance, this recently resulted in an article from The Washington Post with the headline of “Financial firms lead shareholder rebellion against ExxonMobil climate change policies.”

Rather than receiving this type of press coverage, executives can be more open and even discuss with the media how they are working with stakeholders to improve sustainability.

Executives can also use social media to put out unfiltered messages and create conversations with customers and other stakeholders.

Benefiting from Two-Way Dialogue

By being open with stakeholders and engaging them on sustainability initiatives, companies can gain deeper support and improve corporate performance.

And with the right tools in place to properly analyze sustainability performance, executives can more clearly share those results with stakeholders, who can then help find additional areas for operational improvement. With such actions from executives sustainability becomes can become integrated into the corporate culture.

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