Stakeholder engagement pays – indirect benefits

With the new year looming, smart companies are considering their development options for the coming year. The smartest will be looking to further develop their engagement capacity. In an earlier post, we looked at the direct benefits of engagement. Here is a sample of some of the indirect benefits of engagement for each of the main stakeholder groups.

I emphasise that this is just a sample of the increasing evidence of the efficacy of stakeholder engagement. These indirect benefits are those that aren’t immediately visible in the bottom line, but over time provide tangible benefits for the organisation and its stakeholders.

Indirect benefits – financiers

The seismic financial shocks that rocked the world in the latter years of the first decade of this century have been devastating for financiers. And it looks like they will continue for some time. According to the Daily Mail, in a week in August 2011, three trillion dollars was wiped off the value of global sharemarkets.

While engagement itself, will not remedy the volatility of investments, it has huge potential to soften future impacts – if you factor in the ethos underpinning engagement. For example, the U.S., banks that gorged on cheap finance, distributed it with insufficient due diligence and then on-sold them to other banks. Banks with an engagement ethos would balance their profit motive with the interests of all stakeholders. Our recent experience demonstrates how a singular focus on profit creates a series of compounding negative consequences.

New McMansions are demolished in Victorville, CA earlier this year to free the city from liability resulting from possible vandalism, crime and fire danger. (LA Times photo)from Sprawled Out.

Indirect benefits – employees

Rudy Karsen and Kevin Kruse’s book We, reveals strong links between effective employee engagement and benefits to employee health and family life. They cite a study from Iowa that found that job stresses on one partner in a relationship creates a similar level of stress for their spouse. Similar effects were found for children. The British medical journal found that dissatisfied workers were 2.4 times more likely to die from a cardiac event.

Indirect benefits – customers

The most obvious benefit from customer engagement is that engaged front line staff generate better ambiance and customer experience. And brand loyalty is built through engagement. According to Tom Peters, women don’t just buy brands, they join them. If a company is able to facilitate connections between female consumers it also connects them to the brand.  Tom claims that women tend to be more relational in their purchasing, and he stresses that the purchasing power of women continues to climb.

Indirect benefits – suppliers

Over the last few decades, the attention of consumers and NGOs has shone light into the dark places of the global supply chain, often revealing shocking abuses. Engagement has enabled consumers to learn more about the conditions people suffer when growing, harvesting or extracting resources and processing them for wealthier markets. Initiatives such as Fair Trade and Sustainability Standards have generated huge benefits for disadvantaged communities. Participating companies benefit from enhanced reputation. Technology such as the Internet and satellites makes it difficult to hide. Satellite images revealed the true extent of the gulf oil spill, debunking the claims of those who sought to minimise it.

Indirect benefits – community

All of the above impacts on the community.

Pepsico have recently partnered with USAID, the United Nations Food Programme and 10,000 Ethiopian farmers to grow chickpeas. They will be used for food supplements for the starving, for the local Ethiopian market and for Pepsico’s humus. Multiple community benefits will accrue. For example, the health of Pepsico’s range of brands will be improved with the greater use of chickpeas. This aligns with another initiative from the company to reduce levels of saturated fat, sugar and sodium in their food. There are anticipated flow on effects to the health of consumers.

I welcome any comments about indirect benefits of engagement that you have encountered.

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Pepsico, Ethiopia and chickpeas – a win-win-win

Pepsico are engaging with partners and the Ethiopian Government in an initiative to improve chickpea production. Chickpeas are an ideal crop – they grow well in Ethiopia, the have great nutritional values, including high protein and, being a legume, help build soil fertility.

Chickpeas – image credit and history of human use

The plight of the poor in Ethiopa rarely comes to our attention – it has to compete with our fixation on the economy and other more pressing news. Ethiopia is currently experiencing another drought and famine. And Ethopian resources are further stretched as refugees continue to flood in from its drought and war afflicted neighbour, Somalia,

Pepsico, in partnership with USAID, and the UN World Food Programme, will work with 10,000 farmers in Ethiopia to help them reap a twofold increase in sustainable chickpea production using irrigation and advanced agricultural practices. Other partners include the Stellenbosch University in South Africa. The increased volume of chickpeas will have three markets:

  • the World Food Programme will produce a locally sourced nutrient-rich, ready-to-use supplementary food to address malnutrition initially targeting 40,000 Ethiopian children
  • local commercial uses in Ethiopia
  • expansion of Pepsico’s hummus offerings.

This is a great example of the good that companies such as Pepsico can generate as they build their own internal awareness of the plight of the world and the interconnectedness of the systems that sustain us. The cynical might deny the element of altruism, that I believe, is undeniably manifest in Pepsico’s thinking. (This earlier post discusses altruism as a sustainability driver).

“With the ingenuity, power and reach of the private sector, we can make great strides in ending the malnutrition and hunger that is threatening the lives of millions,” said Josette Sheeran, Executive Director of WFP. “The world knows how to prevent malnutrition. The hunger we are witnessing today in the Horn of Africa is preventable with local solutions that support small farmers in being part of the solution. Enterprise EthioPEA will change the lives of tens of thousands of children and will chart the course for future partnerships to help stamp out hunger around the globe.” (from the Pepsico website)

Among the evidence of Pepsico’s intent is the partners it chooses to work with, and the people it employs to champion such projects. Here is a video featuring Derek Yach, the current the Senior Vice President, Global Health and Agricultural Policy, PepsiCo Inc. He was previously the Professor of Global Health at Yale School of Public Health, and Executive Director of the Noncommunicable Diseases and Mental Health cluster at the World Health Organization (WHO). In the video he elaborates on the project.

Pepsico are also aware of the health risks that many of their products pose back home. Their 2010 sustainability report includes goals to reduce the quantities of saturated fat, sugar and sodium in their products.

from the Pepsico Sustainability Report

Derek Yachs believes that the future of Africa depends initially on more effective and sustainable agriculture. This quality of thinking and effective engagement with partners will see corporates such as Pepsico transform the global economy and society.

Engaging stories: Fairtrade cotton

I mostly drink Fairtrade coffee, sometimes eat Fairtrade chocolate, but must confess, I don’t wear Fairtrade cotton. That will change now that I am reading Harriet Lamb’s Fighting the Banana Wars and Other Fairtrade Battles.

Struggling to stay above the poverty line

Harriet Lamb tells of cotton grower’s subsistence existence in Africa, where cotton supports about 10 million people. For countries such as Burkina Faso, cotton is the major export. Typically the growers live in villages that often don’t have direct access to drinking water, education and healthcare facilities – things we take for granted in the West.

African and other third-world cotton growers are enmeshed in the fabric of global trading dynamics. If they only had to contend with the vagaries of the weather and nature, and even the free market, they might be okay, but their problems are compounded by subsidies that wealthy countries pay their cotton growers. The U.S. Government subsidises their own cotton growers in response to falling cotton prices. When U.S. subsidies increased in 2001, U.S. growers responded by growing more cotton. Not, surprisingly, increased production saw the global price fall further. In 2005, the U.S. Government spent $4.7 billion on cotton subsidies, more than it spent on aid to Africa.

We also have spare a thought for the U.S. taxpayer here. The Government’s subsidies distort the market and impoverish parts of Africa, impelling Western governments to provide aid – so the U.S. taxpayer pays twice – through cotton subsidies and through aid. And it is even more crazy when the US subsidises Brazilian cotton farmers as part of a free trade deal. Unfortunately the Africans don’t have a free trade deal! The Fairtrade story, teaches us that aid is less necessary when factors influencing global markets are more carefully managed for all stakeholders.

Minimum prices

Fairtrade’s main mechanism for creating better returns for growers is a minimum price. This provides a buffer for growers and with the troughs in the market cycles eliminated, growers and their communities get the cash they need to raise living standards. Typically communities will invest additional income into clean and local water supplies and education.

As important as the material improvements, is the contribution the Fairtrade ethos brings to village life. For example, Fairtrade work to raise the status of women, through the agency of additional income and education. This video about Fairtrade cotton in Cameroon features the benefits to women. One of the women outlines the benefits:

The Fairtrade standards insist that women are in the group. The men had difficulty accepting this at first but slowly they realised that it could work. And now they own their own land… they are independent. They work their land, they go and receive their money alongside the men and this motivates others to get involved as well.

Commodity price increases

Recent spikes in commodity prices around the world have ameliorated the distortions created by subsidies. Demand for cotton has increased, as more people join the middle class, cotton production decreases and discerning consumers learn to favour natural textiles. This chart from the Index Mundi website, show the cotton price over the last fifteen years, revealing the sharp recent spike.

What I don’t know, is the impact this spike has had on third world growers. When commodity prices rise, growers don’t necessarily benefit. Has Fairtrade been able to ensure a fair share of the benefits get to those that need it most? And does it make you feel better about paying more money for a pair of jeans?

More engagement lessons from the Canterbury earthquakes

Recently, John Hamilton, the Director of Civil Defence Emergency Management, New Zealand, spoke about the Canterbury earthquakes at the National Board meeting of Neighbourhood Support.

Resilience and personal fortitude

John was effusive in his praise for the “personal fortitude” of Cantabrians and the resilience of their communities. Their response has negated the myth of weak neighbourhood spirit prevalent in pre-quake discourse. The tragic impacts of the earthquakes have strengthened community engagement and communication.

the Student Volunteer Army in action in Christchurch

In immediate response to the quakes, Christchurch citizens checked on their neighbours. In the following days and weeks, community groups such as the student army arose and self-organised to check on people’s well-being and remove the liquefaction flooding streets and properties (see an earlier post). Unlike many overseas disaster scenes, Christchurch people used emergency accommodation for just a few days and quickly returned to damaged homes (where that was safe). Most of the fatalities occurred in the CBD, but thankfully residential buildings performed well and no lives were lost in residential building collapses. And, according to John “schools did a fantastic job” – no school children lost their lives.

Situational awareness

But the people of Christchurch and Canterbury weren’t anticipating an earthquake, and may not have been as well prepared as they could have been. The authorities found it difficult to get timely and accurate intelligence about immediate impacts and particularly in suburban areas. Effective community networks established before any disaster help the authorities gain situational awareness and better target response actions.

John believes that Wellington, New Zealand’s capital city, has heeded lessons from Christchurch and is improving community preparedness. Wellington sits on a major fault line and people have been anticipating “the big one” for decades. Wellington civic leaders have engaged at community level to build emergency response capacity. Should a big earthquake occur, Wellington’s strong community infrastructure should  enable a good response.

Neighbourhood Support’s role

Community groups such as neighbourhood support play an important role in fostering community engagement. Neighbourhood Support was originally set up to improve security and reduce crime in neighbourhoods. This necessary, but reactive role, is dramatically enhanced by the more pro-active community engagement role – where people are encouraged to get to know their neighbours. Thus resilience is built into communities as people learn (or relearn) to engage with neighbours. Resilient communities are better placed to respond to destructive events, whether they be natural or man-made. And on the positive site, increased neighbourhood engagement opens up opportunities for an enriched social life and greater prosperity through community initiatives.

If you want more information about neighbourhood support, or would like to form a neighbourhood support group check out the Neighbourhood Support New Zealand website. Please comment – I would be interested to know about similar initiatives in other countries.

image credit: http://iprepared.blogspot.com/2011/02/helping-each-other.html

Stakeholder engagement drivers – Part 2: Self-interested organisations

In the first part of this series of posts we looked at three levels of commitment to stakeholder engagement, self-interest, enlightened self-interest and altruism. This, and the following posts will expand on these and illustrate them with examples.

The antithesis of engagement

Lets start by looking at an extreme level of disengagement – methamphetamine (P) production and distribution. This example shows how the core business impacts negatively on a range of stakeholders.

The classic approach to stakeholder engagement is to look at categories of stakeholder engagement – owners, employees, suppliers, customers and the community. If we consider P production from a suppliers perspective, raw ingredients are sourced either in bulk from unscrupulous suppliers, or from chemists (drug stores). Chemist shops (in New Zealand) have collaborated with Police to restrict this source. As a consequence, medicines, once readily available for genuine consumers are now difficult to access. Chemist shop staff have additional layers of security checking to cope with when selling the product.

People that rent houses that are used to “cook” P are another unwitting supplier and therefore stakeholder. These houses are left drenched in toxic chemicals and require detox processes to prepare them for the next tenant.

A high proportion of users get addicted to P and their behaviour and priorities change. This might include resorting to gambling, stealing from employers, family and others. The families of P addicts often despair at the changes that the drug induces in the addict. The increase in crime, generated by the need to secure funds for the continued supply of the drug, diverts police resources as does the activity required to counter the drug production and distribution. Other crime fighting initiatives may well be under-resourced exposing citizens to more crime.

Without expanding further, we can see that in this case, the “commercial activity” has negatives that cascade through the community. The stakeholders of the illegal drug industry are many and varied and the impacts can reach deep into our communities.

Other examples

Sadly, examples of organisations disregarding the well-being of stakeholders in their pursuit of profit are all too common. Here are some examples:

  • The tourist operators along the Gulf Coast became stakeholders of BP and Halliburton when oil washed on to their beaches.
  • Those of us that carelessly discard plastic waste may well cause marine life to be consumers of the waste, and therefore stakeholders. Albatrosses in the Pacific consume plastic, thinking it to be food. Their gut can fill with plastic, leading to certain death.
  • Alcohol companies and their marketing agents that target young people with promotions help to foster a binge-drinking culture with sometimes devastating social outcomes.

An unwitting stakeholder – a young albatross killed by plastic waste  

While the illegal drug industry is an extreme example, it illustrates that organisations that operate from self-interest, can generate significant unintended misfortune for stakeholders. We can expect that organisations that operate from higher motives can generate significant good, as we shall see in subsequent posts.

image credit: Science News for Kids

Engagement stories – back yard angels

Di Celliers was concerned about the increasing demand on food banks to feed the poor. She was also aware that a lot of fruit goes to waste in back yards. She drew on her social and church networks and workmates at the ASB bank to inspire and mobilise people to pick fruit in backyards.

In a little over a month, Di’s initiative has spread across Auckland and the idea has been picked up in other regions in New Zealand. Auckland City Mission now collect the fruit weekly and distributes the fruit to 70 foodbanks.

Community Fruit Harvesting now has a Facebook presence and a website is hopefully on its way.  The Facebook page is a great example of community engagement and social networking’s capability to connect people in a cause. You can hear Di talking about the initiative on National Radio. Here’s Di picking citrus.

Another Auckland initiative is ooooby.org, (Out of our own back yards). It has been set up as a social business that harvests produce grown in backyards, micro growers and from local farms. Customers sign up for a $27.90 weekly box of fruit and veges.

These initiatives are inspiring steps to a more sustainable means of food production and supply. The benefits include providing free or inexpensive, nutritious food, building community bonds through engagement and volunteering and providing micro-enterprise opportunities.

Here is Muhammad Yunus explaining the social business concept.

Images used by permission of Di Celliers

Engaging stories: rebuilding Christchurch

The City of Christchurch, New Zealand was devastated by a series of earthquakes. The largest, on the 4 September 2010 wrecked havoc in the central city, but the second quake on 22 February killed 181 people and all but destroyed the central city. The response of the people of Christchurch is an inspiring engagement story. On 11 August, the Christchurch City Council released it draft Central City Plan.  The plan was immediately received with acclaim.

From an engagement perspective, the plan embodies three foundational strengths:

  • inspirational leadership
  • inclusion of the indigenous Ngāi Tahu
  • comprehensive public participation and community engagement

 Inspirational Leadership

From the day of the first quake, the indefatigable Mayor, Bob Parker fronted up and communicated clearly, exuding a aura of compassion and hope. As in the image below, he was often seen on camera with a person translating his words into sign language, an unspoken symbol of inclusion. When the Council released the draft plan there appeared to be an evident sense of celebration and unity in the council – not that common in local body politics.

 Inclusion of the tangata whenua

The Mäori tribe Ngāi Tahu are the indigenous people of the Canterbury region. In formal occasions, it is common for Mäori to acknowledge tipuna (ancestors) and those who have died. The draft plan beautifully incorporates words authored by Ngai Tahu to set an appropriate context for the plan. Here is the English translation:

This mihi is given by the Ngāi Tahu Rūnanga – Te Ngāi Tūāhuriri- to acknowledge and respect the people who have been lost and those whose hearts are grieving them, and the sorrow of this .  It also acknowledges the losses and pain of all people in Christchurch and Canterbury who have suffered as a result of the earthquakes.  Ngāi Tahu recognise their atua/god Rūaumoko as having pulled his umbilical cord and caused so much to break, including land from the mountains to the sea.  While acknowledging the pain, Ngāi Tahu see us uniting us as one people – the survivors (morehu) of Christchurch and Canterbury.  The mihi is a call to Christchurch to rise up, and together to rebuild Christchurch brighter and better.

Public participation – share an idea

Following the second quake, the City Council launched Share an Idea, a public engagement campaign to lay the foundations for the rebuild. In six weeks, the website, www.shareanidea.org.nz generated over 58,000 visits. Ideas were also harvested through facebook and twitter. Virtual engagement was complimented by a two-day community expo (attended by over 10,000 residents) and a series of public workshops. These are two of the larger examples of over 100 stakeholder meetings. (See the draft plan for more detail of engagement).

A total of 106,000 ideas were shared during the six week campaign – that is one idea from every 2.2 residents. Share an Idea generated a level of community involvement that has never been seen before in New Zealand.

The fruit of the engagement process

The thousands of ideas clustered into 5 themes:

  • green city
  • market city
  • city life
  • distinctive city
  • transport choice

The plan includes contributor’s comments to directly link the ideas generated to the completed draft plan (click on the thumbnail for a larger image).

Mayor Bob Parker described the new Christchurch as “a safe, sustainable, green, hi-tech, low-rise city in a garden”.

Out of adversity comes an unprecedented opportunity. We are embarking together on one of the most exciting projects ever presented to a community in New Zealand, perhaps the world…This is our city, it will rise again

Bob Parker

This is just a taste of a truly inspirational document. Anyone interested in stakeholder engagement, community participation or organisational development will benefit from a closer look.