As the world’s leading chemical company, BASF has products in all kinds of industries; it employs 112,000 employees globally, services a variety of customers, and has relationships with shareholders and a large numbers of societal stakeholders. Any company’s set of relevant stakeholders in business, government and civil society will change with time; a clear picture is essential for effective engagement. Rather than relying on inflexible stakeholder mapping tools, it might be more appropriate to have skilled people and organizational structures in place for ongoing stakeholder analysis and engagement.
Why engage your stakeholders
How could you measure how hard a crisis has affected you (and likely your reputation) if you have not related with your stakeholders for years? How would you tally the number of upcoming, business-relevant issues you if you had not come across them through exchange with stakeholders? Engagement with stakeholders can help a company get a broader view of its market than economic figures alone can provide, improving its decision-making and performance. Stakeholders can give a company insight into their perspectives on current and emerging issues, into how they perceive the company and how they consider its impacts.
There are however, more reasons why stakeholder engagement is important: we face societal changes like the erosion of traditional opinion and decision-making mechanisms. Societies are more and more characterized by discourse and at the same time systemic challenges such as climate change, cultural disintegration or financial crises. Aren’t we beyond the point where a couple of countries can realize something like a Bretton Woods system within less than a month? Another example: The UN’s path to new Sustainable Development Goals in 2015 required an elaborated global process of multi-stakeholder consultations, academic input and intergovernmental negations.
There is growing evidence that it is simply not possible for a single institution or company to act on its own. The key to address this is to partner, consult, involve and engage with stakeholders. This does not mean delegating decision-making to external people; a company’s management should still decide on its business strategy. However, said strategy has a higher likeliness to succeed and meet the market’s needs if it is based on a participatory approach that also includes stakeholders’ views. BASF has given a clear answer to the ‘why question’: we have identified ‘responsible relations’ as one of the material aspects to our organization.
Stakeholder engagement at BASF
United Nations (UN) Global Compact
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On an international level, BASF takes an active part in the United Nations (UN) Global Compact: BASF’s Chairman of the Board of Executive Directors is a member of the UN Global Compact Board, and BASF is an active member in many local networks. We use social media for stakeholder exchanges on, for example, new technologies – as demonstrated by our information and exchange platform on nanotechnology.
Different formats of stakeholder engagement serve different purposes: With local initiatives, you are close to the communities adjacent to your sites and international initiatives such as the UN Global Compact can give you a broader view on the world’s material topics and the company’s possible impact on them.
European Water Partnership (EWP)
BASF has been cooperating with the EWP, an independent organization founded by the European Commission in 2006 with the objective to promote sustainable water management, since 2008. Water experts from BASF partnered with other representatives from industry, governments and NGOs to develop a standard that sets out the fundamental principles and criteria for sustainable water management. The result is the European Water Stewardship (EWS) Standard, which enables companies from various sectors as well as agricultural operations to examine how sustainably they use water resources. The EWS Standard includes 50 indicators, addressing the four principles of sustainable water abstraction, ensuring good water status, protection of high conservation areas and equitable water governance. The partnership with EWP highlights that a multi-stakeholder group can really achieve results beyond what is possible for a single institution. The EWS Standard is widely accepted and thus a real tool for improving water management across industries. BASF has itself set the goal of introducing sustainable water management at its production sites in water-stressed areas by 2020 on the basis of the EWS Standard.
In Africa, BASF has established relationships with universities and science research organizations - for example, the Center for Scientific Industrial Research (CSIR) in South Africa. These are crucial in not only maintaining the company’s reputation and growing awareness of the brand in the region, but provide a mutual feedback and dialogue around various topics.
Keys for effective stakeholder engagement
In our experience, several factors contribute to successful stakeholder engagement:
- Addressing relevant and pertinent issues at the right time
- Identifying the relevant stakeholders and getting them to the table
- Choosing the right form of engagement, based on the subject and stakeholders
- Dedicating enough time and resources to thorough preparation
Internal preparation also needs to address the mindset of participating management. Interacting with some of the stakeholders may require managers to step out of their comfort zone and collaborate with unfamiliar individuals and organizations. Often resources in terms of time and research efforts are underestimated in this period but need to be invested.
When setting up and running any form of stakeholder engagement, we recommend being very clear and transparent regarding the rules of engagement. All parties should explicitly agree on the objectives, potential outcome and the way you want to interact: openly and with mutual respect. Although some engagement formats are short term, the majority of successful stakeholder interactions have a longer-term focus since building trust and reliable cooperation takes time.
Finally, a basic principle for successful stakeholder involvement is to invest in it before you need to rely on it.
The evolution of stakeholder engagement
Solid stakeholder relations helps a company to ensure its license to operate; it helps to mitigate risks, retain and win customers and employees, and build solid public relations.
Considering the growing complexity of the world we operate in - and the ‘communication revolution’ taking place thanks to social networks, big data – and with regard to a growing societal skepticism toward new technologies, we will talk about the license to innovate. This is especially crucial, as innovations are key to providing solutions for the various challenges to ensure (more) sustainable development.
Also necessary to consider is the trend to operationalize and measure by metrics - be prepared for general discussions on the quantification of benefit of stakeholder engagement. But how do you measure success or impact on value?
There are various approaches to quantifying the value of stakeholder relations, but still there is no simple, ‘metric answer’ in sight – and, unfortunately, a simple answer might not be even helpful. Not everything that counts can be counted.