SETTING STRATEGIC OBJECTIVES FOR ENGAGEMENT

SETTING STRATEGIC ENGAGEMENT OBJECTIVES*
(This is partly fi lled in to match the example business objectives given above:)
P2: SETTING STRATEGIC OBJECTIVES FOR ENGAGEMENT
Analyse and Plan the Engagement
*electronic version downloadable at www.accountability.org.uk
STAGE 1
P3: IDENTIFYING ISSUES
BACKGROUND
Many issues you should consider engaging on will already be clear from the
strategic engagement objectives discussed above. However, there are issues
that may not be immediately strategically relevant, but nonetheless need to
be identifi ed and addressed, as they also have the potential to impede business
performance. In general, issues can be specifi c or general aspects of a companies
activities or decisions where:
– Th e organisation is perceived to have a positive or negative impact on
stakeholders.
AND
– Th ere is a gap between what the company is doing or perceived to be doing,
and what stakeholders expect the company to be doing in terms of
management of impacts, behaviour or outcomes.
Th is range of relevant issues goes beyond the limited defi nition of materiality
used in fi nancial accounting standards, which are often interpreted conservatively
to mean only those issues that are likely to have a measurable short-term
impact on the fi nancial health of an organisation. Th is defi nition of materiality
does not consider broader economic, social, environmental issues and leaves
the organisation open to unanticipated risks and unable to identify new
opportunities. On the other hand without some way of assessing the importance
of diff erent issues to corporate performance, stakeholder engagement risks getting
caught up by the short-term dynamics and moods of public opinion.
A key challenge then is to identify those issues which are material to the business’s
long-term sucess. Accountability’s approach to assesing materiality is described
below.
Issues that have direct short-term fi nancial impacts
Issues where the company has agreed policy statements of a strategic nature – these are
often in the form of commitments to key stakeholders.
Issues that comparable organisations consider within their sphere of materiality; i.e. peerbased
norms.
Issues that your stakeholders consider important enough to act on (now or in the future).
Issues which are considered social norms (as indicated by regulations, likely future
regulation or institutionalised norms and standards).
5-Part Materiality Test
AccountAbility has developed a fi ve-part materiality test as a framework for
considering the materiality of issues.5 Issues are considered material if they can
be identifi ed by one or more of the following tests:
A
B
C
D
E
5 For further explanation, please see AccountAbility & The UK Social Investment Forum: “Redefi ning Materiality”, London, 2003
THE PRACTITIONER’S HANDBOOK ON STAKEHOLDER ENGAGEMENT | 35
Relevant Sources of Information (see also ‘Links into Learning Networks’ p57)
Issues relating to business strategy and plans, risk assessments, accidents and penalties /
fi nes, areas of lobbying expenditure.
Corporate policies and existing commitments to stakeholders.
Policies and practices of competitor organisations. Issues highlighted by industry
associations and corporate responsibility organisations (such as the International Business
Leaders Forum, the World Business Council for Sustainable Development).
(See below for sources of stakeholder information)
Areas of regulation, proposed regulation and international agreement, voluntary codes and
multi-stakeholder frameworks / initiatives (such as the Global Reporting Initiative Guidelines
and the UN Global Compact principles). Emerging norms highlighted by governments,
intergovernmental bodies and NGOs.
Using this test entails many subjective judgements (for example whether
stakeholders are really going to translate their stated concerns into investment or
purchasing decisions). Th ere is also something of a ‘chicken and egg’ problem in
using test D, which depends on stakeholders expressing their concerns to identify
issues for stakeholder engagement. However in practice, the test is intended to
be used iteratively; it builds on a company’s existing Stage of development in
understanding stakeholder concerns, but you must also reconsider the answers
you give ‘now’ later on when you have had more contact with stakeholders.
SUGGESTED METHODOLOGY M3:
IDENTIFYING MATERIAL ISSUES
Th e purpose of this activity is to identify as comprehensively as possible the issues
associated with the organisation, project or decision in question and to build an
understanding of how they relate to specifi c stakeholders expectations or concerns.
This step can be done in a group/workshop setting or as a research process by the
team leading the engagement process (or by external contractors).
Use the the 5-part materiality test to identify relevant issues:
Materiality test
A. Short-term fi nancial
impacts
B. Policy commitment
C. Peer based norms
D. Stakeholder
behaviour and
concerns
E. Societal norms
Identify potential stakeholder concerns (test D) using existing organisational
knowledge, research and exploratory engagement with key stakeholders as
appropriate. Sources of information for identifying stakeholder concerns at
this Stage include:
P3: IDENTIFYING ISSUES
Think Strategically
Sources of information for materiality test
STAGE 1
Individuals within the organisation will already have some knowledge of stakeholder
concerns from their current contacts with stakeholders and understanding of the issues
affecting their part of the organisation. Stakeholders will already be raising issues through
existing feedback mechanisms from customer hotlines to investor relations meetings. This
existing knowledge could be brought together through a process of systematic review,
interviews or workshops with key managers and stakeholders close to the organisation.
In some cases it may be best to leave the identifi cation of issues open and set the agenda
with the stakeholders during the engagement process itself. However, while this does allow
for maximum stakeholder involvement in identifying issues, it may lead to unmanageable
dialogue which is diffi cult to feed into decision making processes, and leaves stakeholders
frustrated that the engagement is all talk and no action.
More passive monitoring of stakeholder viewpoints about the company and industry
impacts and performance can also be used to identify issues without raising stakeholders’
expectations at this Stage. This might include monitoring information sources such
as national, local, and relevant specialist and academic press, government and
intergovernmental organisations’ communications or reports, NGO campaigns, infl uential
public and opinion research and relevant internet discussion forums.
‘What we know’
‘What they tell us’
‘ What they say
about us’
Compare your strategic engagement objectives with the issues you have
highlighted through the materiality test. Each of your strategic engagement
objectives is likely to relate to a number of issues. E.g. satisfying your customers
demand for responsibly produced goods may require you to consider various
human rights, environmental and health and safety issues. If you feel that any
issue is missing, make sure you include it into your list of issues, and assess it
according to the fi ve-part test, too.
Using the above-mentioned sources of information, as appropriate, list
the issues in the matrix (T3). Th en insert the stakeholder groups or sub-groups
already identifi ed.
Apply the materiality test by considering each of the issues in relation to each
of the fi ve dimensions. Insert a colour-code as suggested in the matrix, and/or
provide descriptive assessments of the materiality of the issue to the individual
dimensions of the materiality test.
Consider the degree of concern amongst stakeholders regarding the issue
and again capture your results in the table, by using the scoring suggested in the
table, and/or by providing descriptive assessments of the stakeholders’ concerns.
Ensure a validation of the matrix. The issue/stakeholder matrix provides a
record of the identifi cation and analysis of stakeholders and issues at this Stage
and should be validated by relevant managers and departments, as well as any
other stakeholder groups or experts you are already working with.
The matrix provides a preliminary prioritisation of stakeholders, telling
you which ones are most concerned about which issues. Further steps for
prioritisation will follow. See also the ‘How to Use’ guide at the bottom of the
methodology.