The Role of Business in Society Stakeholders Perspectives
The Role of Business in Society: Stakeholders & Perspectives
Part 1 Introduction to the Topic
Business and Society Business Society The collection of private, commercially oriented organizations A broad group of people and other organizations, interest groups, a community, a nation. 3
Defining Business Objectives There are five+ one major types of business objectives: • Survival, • Profit Maximization, • Growth, • Managerial Objectives, • Sales Revenue Maximization, & Image and Social responsibility.
Growing Influence of Companies Country/Company 1. 2. 3. 4. . GDP/Revenues ($ bil) Global 500 Rank United States Japan Germany China 22. Exxon Mobil 23. Poland 24. Austria 25. Wal-Mart 26. Norway 27. Saudi Arabia 28. Royal Dutch Shell 29, Denmark 30. BP $13, 202 4, 340 2, 907 2, 668 N/A N/A 486 339 322 315 310 307 275 268 1 N/A 2 N/A 3 N/A 4
Present Business Environment Increasing Demand from the Government + Increasing sophistication of general public + Increased Advocacy groups and watch Dogs + Regulatory regimes and Media TRPs = Costly and Challenging operating Environment
Why Interface between Business and Society on Social Issues Contd…. • • • India ranked at 119 in Global HDI index More than 500 million poor 62% literacy Rate 250 million do not have access to basic health services 450 million to not have access to Sanitation In contrast • India has one of the highest mobile penetration • Some of the low cost business solutions have worked This proves that business has the ability to be more effective in market led solutions in some situations
Contd………Why Interface between Business and Society on Social Issues • Both are living organisms and have symbiotic relationship – As seller of goods – As buyer of goods and services – As employer and employee – As individuals and pressure groups – As Govt and regulator • Issues that matter – Prices – Safety – Well Being/ Trust – Income – Opportunities – Transparency
Societal Aspirations and Expectations • Demonstrate a commitment to society through action. • Insulate society from any negative impacts of company operations, products and services. • Share benefits of company activities with key stakeholders. • Increase revenues of company through innovative approach. • Wealth creation and equitable distribution
Understanding Stakeholders
Stakeholders- Who? Government • “Are you exploiting my national resource to make profits? ” Communities around operational areas • “What have they done for me while they make their millions on my soil? ” JV Partners Media • “Am I getting maximum leverage from my association? ” • “I am concerned about my circulation / TRPs” Investors Peers – National & International • “Will I get sustained value from my investment? ” • “How is it affecting my markets? ”/ “Should I look at India? ” Common Man NGOs/Advocacies group • “While I pay more for different products, companies are reaping more profits!” • “You are ruining the environment and exploiting people”
Business: Immediate Sphere of Influence Who – is to be influenced?
Understanding Business Impacts What groups will be affected? What is the timing of initial and later effects? 13 How will they be affected? What is the duration of the impact? What is magnitude of the effect? To what extent will the impact be diffused in the community?
Evolution of Stakeholder Expectations Community Economic Environment Activists Govt Social Media Groups NGOs Sustainability Peers
Complexity of Stakeholder Expectations Community Trust Me Tell Me Activists Govt Show Me Media Groups NGOs Involve Me Peers
STAKEHOLDER INTERFACE WITH DIRECT AND IMMEDIATE BUSINESS IMPACT • Legal license to operate: – Land title – Permits – Environmental approvals • Social license to operate: – Access to land: perceived legitimacy of title – Community permission: ‘If you don’t listen when we have a small problem, we’ll make a big one” – Social acceptance: ability to remain, expand, and operate uninterrupted 16
Examples of Unmatched Expectations and Its Consequences • • • Koodankulam- Atomic power plant Nigeria – Niger Delta Peru – Minera Yanacocha Gulf of Mexico- BP Oil spill Singrur- Tata Nano
FAILED ENGAGEMENT COSTS • Security • Project modification • Risk management • Material damage • Lost productivity • Capital • Personnel • Reputation • Redress 18
Section 3 Towards Solutions
Mapping Stakeholder Expectations- Illustration Stakeholder Significance to Business/ Risk Linkage/ Opinion Influencing Expectation National level Politicians High - Fluctuates Large physically visible project Regional Politicians High- Fluctuates -do- Policy makers/ Compliance Depts. Medium - Sustained Adherence to best standards Local Govt. stakeholders High- Sustained. Influenced by above 3 Supplement local development effort Advocacy groups High- Fluctuating Local development. Disclosures/ transparency, participation in development process Local stakeholders/ influencers Medium- Sustained Creating platform for their visibility through opportunities of local development Community (in project affected areas) High- Sustained Participation in progress Public Low Seen to be doing good
Perceptions, Facts and Challenges Issue Essar Community Challenges Employment Cant employ Employment is my locals. They don’t right. have required skills Not everyone can be employed. Safety at site Contracts Technical jobs cant be given We are given only low value contracts. Company has no serious intent to develop us Developing contractors and entrepreneurs requires much more than just training Development Infrastructure “If I have water- am I Infrastructure is developed” visible immediately and development is not CSR To keep the community engaged Superficial. No vision Requires significant on “change” or investment and long “solution” term plan
COST OF CONFLICT Some survey’s suggest: • >30% of cases involve a fatality/injuries, damage to property and/or suspension or abandonment • 50% involve physical blockade • Environmental/community health & safety issues are the most common proximate cause of conflict • Most common underlying issues are economic and social – distribution of benefits, communication, consultation processes – that affect the quality of the relationship 22
Engagement Models with inclusions Economic Development, Health, Education, Infrastructure Development Local Cooperatives Best R&R policies Local Employment Policy Best HR Policies Training & development Employee volunteer programme Internal moves
Business Issues (Core Sector) and CSR Business Issue Where CSR can help Community expectations Help manage expectations through continuous engagement. CSR will enable engagement on developmental issues hence open a neutral engagement front Contracts Help in developing small time contractors from community to offset pressure from big daddies Employment Provide skills for enabling employment elsewhere Political influence Create forums where community leaders can stand besides Essar
Translating Perceptions, Facts and Challenges into Business Solutions- Core Sector Issue Business Community Challenges Employment Cant employ locals. They don’t have required skills Employment is my right. Not everyone can be Prepare people with employed. skills before the start Safety at site of the project. Provide multi skills to align with changing needs during project cycle Contracts Technical jobs cant be given We are given only low value contracts. Company has no serious intent to develop us Developing contractors and entrepreneurs requires much more than just training Have a long term vendor development policy that enables vendors to evolve at an early stage Development Infrastructure “If I have water- am I Infrastructure is developed” visible immediately and development is not Minimize gap between “your” and “their” infrastructure. Leverage their resources and participation CSR To keep the community engaged Superficial. No vision on “change” or “solution” Participatory planning Requires significant investment and long term plan Potential Solution
Case Studies Where Business Models have Impacted Society • Financial Sector– Awareness on Financial Tools has helped increase savings – Micro finance has triggered rural economy and consumption – Mahindra rural home finance • FMCG – Project Shakti and E- Choupal are globally acknowledged examples • Kisan Kendra/ Agri Information and Services – Tata, Mahindra, Rallis • NSDC – Created training modules with private sector particpation and sponsorship
Thank You
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