Accounting Reporting
Recap
Corporations
Should Corporations be involved in social and environmental issues?
Sustainability and Accounting
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Overview
Stakeholders and stakeholder theory
Stakeholder management
Stakeholder engagement
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Stakeholders
Some definitions:
A stakeholder is any group or individuals who can affect or is affected by the achievement of the organization’s objectives
(Freeman, 1984, p. 46)
Stakeholders are persons or groups that have, or claim ownership, rights or interests in a corporation and its activities, past, present or future
(Clarkson, 1995, p. 106)
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Stakeholders of a corporation
Shareholders
Management and employees
Suppliers and Lenders
Consumers
Industry Associations
Rating Agencies
Regulators
Non-Governmental organizations
Media
Local community
General Public (society at large)
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Stakeholders
Move away from production and managerial views to encompass stakeholder views
Stakeholder networks have emerged to prominence recently
Stakeholder subdivisions
Internal versus External
Primary versus Secondary
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Stakeholder theory
The notion of stakeholder has its origins in stakeholder theory
“… in today’s society, successful companies are those that recognise that they have responsibility to a range of stakeholders that go beyond the mere compliance with the law or meeting fiduciary responsibility inherent in the phrase ‘maximising return to shareholders’.”
(Andriof, 2002, p. 9)
Stakeholder theory rejects the separation thesis
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Stakeholder Management
Definition
“..management practices that reflect awareness of and response to the legitimate concerns of multiple constituencies of the corporations”
Companies do not manage stakeholders on a individual basis; they deal with the simultaneous demand of multiple stakeholders
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Stakeholder Management
Stakeholder management involves:
Stakeholder identification
Stakeholder map
Management of stakeholder relationships
Assessment of opportunities and challenges presented by stakeholders, and responsibilities of organization to stakeholders.
Strategies and actions undertaken to meet the needs of the various stakeholders
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Stakeholder Management
Assessment of stakeholders involves prioritising the needs of major stakeholder groups
Could involve primary versus secondary classification
Attributes of power, legitimacy and urgency (stakeholder salience) could guide prioritisation of stakeholders
(Mitchell et al, 1997)
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Stakeholder Management
Corporate responsibilities to stakeholders – economic, legal, ethical and discretionary responsibilities
Strategies to manage stakeholders
Defend, monitor, involve and collaborate
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Stakeholder Engagement
Definition
... a process of relationship management that seeks to enhance an understanding and alignment between companies and their stakeholders
(Gable and Sheriman, 2005)
Trust-based collaboration between individuals and/or social institutions with different objectives that can only be achieved together ’
(Andriof & Waddock 2002)
A shift away from one sided management of stakeholders to a dynamic context of interaction, mutual respect, dialogue and change
“Trust me” and “Show me” are replaced by “involve me”, “join me” or “engage me”
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Stakeholder Engagement
Engagement can include passive communication, consultation, two way dialogue and proactive approaches
Engagement facilitated through direct contact, private and public meetings, surveys, interviews and focus groups, feedback mechanisms and formal approaches such as partnerships and environmental reporting / communication
Stakeholder engagement models - Arnstien’s Ladder of Participation, AccountAbility 1000, GRI, etc
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Stakeholder engagement
Difficulties
heterogeneous stakeholders’ views and expectations;
conflicting interests between the organisation and its stakeholders;
difficulty in stakeholder identification and prioritization; and
the impossibility of engagement with certain stakeholders such as the natural environment and future generations
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Summary
Stakeholder reasoning is one of the major reasons for companies undertaking corporate social responsibility
Every company has different set of stakeholders which aggregate into unique patterns of influence.
Stakeholder engagement is more prominent now than one sided management of stakeholders.
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Next
Accountability and theories of Sustainability Accounting
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