August 2016

Stakeholder engagement: who are you, what do you stand for and why?

  • By Morrie Goodz FAusIMM(CP), Goodz & Associates GMC Pty Ltd and AusIMM Consultants’ Society Committee member; and Robin Lonsdale, Goodz & Associates GMC Pty Ltd

Stakeholders’ perceptions should be aligned with the organisation’s mission and vision to ensure that it maintains social licence to operate

With an increasingly dynamic business environment, successful stakeholder engagement is becoming more important to achieving desired outcomes in today’s mineral resource industries.

It is imperative to be proactive in correctly identifying all stakeholders and initiating early contact. This builds trust relationships, which are essential to ensure that future decision-making processes are streamlined.

A company’s obligation to select the correct team to represent its values and mission is often neglected. The company requires representation that demonstrates an understanding and commitment to its operations and people, respects the safety and health of the community and environment and, most importantly, represents the decision-makers. Stakeholders need to believe that the engagement process is genuine and that the company representatives are aligned towards targeted outcomes that will benefit all stakeholders in some way.

Amongst others, stakeholders include shareholders, staff, families, the community, service and supply providers, regulators, land managers and the political/financial framework. Depending on the mineral product, stakeholders may also include ports, international offtake clients and those along the route. New stakeholders continually evolve during mine life, and the engagement process requires an investor-community-public relations (IR/CR/PR) team to anticipate change and actively scan perception and chatter.

Successful communication is more than delivering a message; it is about engaging stakeholders and confirming the feedback loop to ensure that the correct message is communicated and the relationship is strengthened.

Recent developments in market volatility, information technology and globalisation have given voice to the members of society. These changes in communication and leadership have impacted on the relative level of influence and importance that society has in making decisions and defining acceptable behaviour and development. The introduction of many new players has changed the rules on the value of relationships and how mining companies must act.

The nature of the mining company’s branding and the public’s perception of company intentions will dictate whether there is a willingness to allow the company to follow its desired path. This, in turn, controls the company’s most scarce resource – time. Timing is fundamental to achieving targeted outcomes with minimal cost and delays, marketing in a peak cycle and acquiring critical capital for development and growth.

Branding and stakeholder engagement effectively control and extend to the company’s social licence to operate. This article reflects on the value of obtaining stakeholder ‘permissions’ to facilitate a project’s social licence to operate. Organisations’ outcomes are governed by their effort in understanding and committing to the following concepts:

  • stakeholder impact
  • shared value
  • planning process
  • team selection
  • core values
  • investment.

Stakeholder impact

In understanding the relative value and risks associated with different members of society, we need to understand the relative influence versus importance of a stakeholder. This translates to those who are critical to strategic alliances (key players) versus those who need to be managed to minimise risk (influencers). A stakeholder with high influence has the ability to organise groups of stakeholders that follow them along paths that may or may not be aligned with your plan. They need additional attention to minimise risk.

Once the stakeholders are assessed, they can be grouped into ‘focus centres’ where their input characteristics and needs are defined. Figure 1 represents a list of typical focus centres for a development project, with the key steps to achieving deliverables.

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In this example, eight input categories are identified (access, corporate, financial, community, people, services, innovation and political), but this will vary slightly for every project. The order is arbitrary, but in this case we have started with access as a fundamental step to securing authority to commence a project. The focus centres are described as:

  • Access – The first part of a project definition is its entitlement to assets, whether they are a mine, tenements, mineral resources, a process plant, storage facilities or infrastructure. These assets require tenure, licences, permits, ‘permissions’, etc. They may have layers of leases and claims (pastoral, forestry, native title, landowner, easement, etc). There may be several stakeholders who need to provide ‘permissions’ for each asset, including various regulatory authorities.
  • Corporate – The corporate structure of the organisation influences its ability to act and develop and maintain operations. Its structure allows for the management of risk and access to capital. This area is governed by many regulatory bodies, and good governance requires both internal and external audit practices. Auditing introduces new stakeholders that the organisation must engage and maintain to ensure its permission to operate. In this case, the vehicle (corporate structure) is equally as important as the driver (assets) and the passengers (community, people and services).
  • Financial – The nature of the corporate structure and the project will dictate what financial instruments are available to provide finance. Whether the organisation seeks equity (shareholders) or debt (institutions/individuals), in time, thousands of stakeholders are introduced. All have a vested interest and all have an expectation of shared value. Communicating with these stakeholders becomes the behemoth known as corporate marketing, of which some forms are regulated (eg ASX Listing Rules).
  • Community – Today, community represents any member or group in society that has direct (or indirect) interaction with the organisation and its operations. It includes onsite and local residential/industrial developments that would be home to staff, contractors, suppliers/service providers and government agencies. It may be distal, such as the FIFO centres supporting the organisation or the port city used for shipping or refining the mine’s products. Community need not be connected by road, rail or plane; it can be connected by the effect of water or wind and affected by process, emissions or discharge. It has local, regional, provincial (state), national and international context. It incorporates many indirect stakeholders.
  • People – A key resource to any successful business is people, both internal (staff and contractors) and external (support services). Leadership and communication are essential to harnessing their power, meaning that they are essential stakeholders. At all levels, there must be alignment with corporate targets. Having shared values and outcomes will drive the business to achieve its desired results.
  • Services – Services encompasses a variety of networks that, in part, would link into community. These networks include large supply chain and marketing processes, including the distribution of product. This focus centre also includes the infrastructure/logistics to deliver services and product both in and out of the operations. It may include remote energy suppliers or power stations, which can again require regulatory involvement and ‘permissions’.
  • Innovation – All businesses have input, cost, product and process challenges that vary through the life cycle of the project and have a need for continuous improvement. Driving business improvement and setting stretch targets for key performance indicators is part of the innovation challenge. Success in this area is enhanced by education and professional development of the organisation’s people and in engaging in research and development. Innovation brings in a new group of stakeholders that have an interest in supporting either the business or its people to improve. This process often involves collaboration with external parties to create new resources with a shared value.
  • Political – The political spectrum is much larger than just the regulatory authorities that provide licences, tenure, permits and ‘permissions’, and this all feeds back into the ‘access’ focus centre. The political spectrum also covers the evolution of policy and guidelines for future activities and these are impacted by perception and emotive social media. The focus centres identify members of society (individuals/groups) who have an interest in the project, and the degree to which the organisation needs to assign resources to each stakeholder depends upon their relative importance to the project. The stakeholder’s ability to influence others may cumulatively have a higher impact on the project outcome. In this manner, naturally passive stakeholders may become process drivers if they are persuaded into action.

New stakeholders continually evolve during mine life, and the engagement process requires an IR/CR/PR team to anticipate change, actively scan perception, be prepared to re-engage and act in a timely manner.

Shared value

Members of society are becoming more vocal in their belief that the outcomes of mining and the country’s mineral resource wealth should be to the benefit of the nation and society as a whole.

Porter and Kramer (2011) articulated three ways of creating shared value for all stakeholders:

  • redefining productivity (innovating) in the value chain by simultaneously enhancing process and the social, environmental and economic capabilities of supply chain members
  • enabling local cluster development so that various developmental goals can be achieved in cooperation with suppliers and local institutions (investing into alliance partners)
  • reconceiving products/markets to improve service to stakeholders (community/business networks) and contributing to the common good that can be achieved in parallel.

The central premise behind creating shared value is that the competitiveness of a company and the health of the communities around it are mutually dependent. Recognising and capitalising on these connections between societal and economic progress has the power to unleash the next wave of growth.

Figure 1 also defines an action loop to chart a plan to improve and build relationships. The key functions of the action plan are:

  • Focus – The starting point of each stage requires describing the project and understanding the corporate mission and vision. Once this is understood, identify the focus centres from where stakeholders are anticipated.
  • Determine – Determine the focus input requirements and list the priority areas where important and influential stakeholders need early engagement.
  • Identify – Document the objectives/outcomes to be achieved with the stakeholder groups and select the appropriate tools with which to engage them. Understand the difference between the stakeholders’ position (what they want) versus their interests (why they want them). Focus on aligning their interests with the project.
  • Develop – Set out the strategy (plan) to interact with the stakeholders and assign team members, resources and an achievable schedule to undertake the engagement. Define the plan to manage opportunities and risks. Review and adjust the plan.
  • Deliver – Initiate the plan, engage with stakeholders and introduce change as required. Manage the implementation. Early variation of team members is important if there is a need to improve communication and relationships with important or influential stakeholders.
  • Improve – Measure and monitor progress. Continually evaluate relationships. Determine where improvements can be made and implement them.

It is important to understand the chart as an action plan to deliver value/improvements that are sometimes non-monetary, such as societal, environmental and motivational benefits that influence future development outcomes and the organisation’s social licence to operate.

Planning process

There are various tools for stakeholder engagement, and it is important to understand the audience and what is needed in terms of information collection and distribution prior to selecting engagement tools.

The selection criteria will vary according to the:

  • project context (goals, objectives and anticipated outcomes)
  • community context (network profile – social and political context)
  • perceptions (varying external views from each stakeholder perspective)
  • inclusiveness (ensuring that all direct and indirect stakeholders are included)
  • project parameters (size, budget, timeline and resources allocated)
  • resources availability – current versus future growth needs (people, services and infrastructure)
  • project teams (skills of the team and availability of the members)
  • SWOC analysis (understanding context of internal versus external factors)
  • improvement quotient (degree of learning required to deliver outcomes).

The engagement team will need to employ varying types of engagement for the same stakeholder during the lifespan of the project. Similarly, the team will need to evolve, and different people/resources may be required to assist. Figure 2 represents a cyclic tool that we have adapted from the Victorian Government’s Department of Sustainability and Environment (2005). The tool includes a reminder that we need to continually stop and reflect on the outcomes to date, celebrate the successes and modify the process if required before moving on.

Fig2

Perceptions can be either a powerful motivator or a detractor within the process. These must be monitored and managed continuously. In this digital era, a team member should be engaged with social media networks. A motivator, both internally and externally, should celebrate successes and share the glory with all related parties. When this is done at each stage of the process, it reinforces shared values.

Team selection

It is imperative that the organisation select the correct team to represent its values and mission when meeting and negotiating with stakeholders. The team must demonstrate an understanding and commitment to the safety and health of its people, the community and the environment. The team must also represent the decision-makers, giving the stakeholders due respect and the confidence that their participation is important. The engagement team should include key leaders and communicators.

The team should be qualified and empowered to answer enquiries at meetings as deferring responses without a good explanation is judged negatively. When considering meetings with special interest groups, it is recommended that an area specialist is included in the team to answer topical questions or to engage in a relevant planning process.

Stakeholders must believe that the engagement process is genuine and that the company representatives are aligned towards targeted outcomes, which will benefit all stakeholders in some way.

Core values

An organisation’s strengths come from adhering to a culture of good core values. Delivering on its core values demonstrates that the business is strong and trustworthy, which are essential attributes for obtaining and maintaining a social licence to operate. Conversely, underperforming and non-delivery on promises causes an organisation to lose traction and respect.

Finally, this is a learning process. Engagement is unique to each stakeholder, and the process requires a modified unique selling proposition for each relationship. Establishing trust and building relationships is the key to successful engagement and negotiating win-win outcomes. Stakeholder engagement must not only build upon the organisation’s core values, but also on the values of all the participants.

In this manner, we highlight the values of public reporting; that is, ensuring transparency, materiality and competence:

  • transparency requires that the stakeholder is provided with sufficient and clear information and is not misled by this information or by omission of material information that is known to the organisation
  • materiality requires that the stakeholder is provided with the relevant information that they would reasonably require for the purpose of making a reasoned and balanced judgement on the purpose of the engagement and outcomes
  • competence requires that both written and verbal communications are prepared and presented by a suitably qualified and experienced team member(s) to the stakeholders.

Communications/media must be aligned to the targeted outcomes. There must be a process to ensure that the message intended is the one that is ultimately delivered, and there needs to be a feedback loop to ensure that all parties have a common understanding. As much of the engagement process can be verbal, it is important to follow up with written summaries to sign off on agreed ‘minutes’ of meetings.

Organisations need strong and clear leadership and communication mandates embedded into their cultures to achieve these outcomes. Practicing these core values will ensure that the stakeholder engagement process has the foundations to be successful.

Investment

A successful stakeholder engagement process invests time, people and resources into building and developing relationships. Strategic investment into stakeholder projects can deliver shared value beyond monetary investment. It also strengthens local community economies beyond being dependent on the mining industry.

Being involved in community projects as volunteers or financial supporters improves the quality of a community and provides improved services for the organisation’s people at the same time. This delivers a better work–life balance and motivates internal and external participants. Building alliance partnerships also drives perceptions in a positive and aligned direction across the stakeholder base.

Conclusions

Stakeholder engagement has become a critical part of the business life cycle on a number of focus centres beyond just local communities. Organisations need stakeholder approval to simplify access to projects, resources, infrastructure and finance. Organisations benefit from stakeholder support to maintain investor confidence. This provides the ‘stakeholder capital’ to continue to develop, innovate, become more productive and grow the business.

The organisation’s actions and messages become its branding and its past activities are what drive the perceptions of stakeholders when they judge future development proposals.

It is essential for corporate success in the 21st century that the perceptions of  all stakeholders are aligned with the organisation’s mission and vision to ensure that it maintains its social licence to operate. 

References

Department of Sustainability and Environment, 2005. Effective engagement: building relationships with community and other stakeholders, Book 2: the engagement planning workbook, version 3, 128 p, Victorian Government, Melbourne.

Porter M E and Kramer M R, 2011. Creating shared value, Harvard Business Review, 89(1/2):62–77.

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