The Role of Business in Society: Stakeholders & Perspectives

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The Role of Business in

Society: Stakeholders &

Perspectives

Part 1

Introduction to the Topic

Business and Society

Business

The collection of private, commercially oriented organizations

Society

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 GDP/Revenues ($ bil) Global 500 Rank

1.

United States

2.

Japan

3.

Germany

.

4.

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

486

339

322

315

310

310

307

275

268

N/A

N/A

N/A

N/A

1

N/A

N/A

2

N/A

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?”

JV Partners

• “Am I getting maximum leverage from my association?”

Investors

• “Will I get sustained value from my investment?”

Common Man

• “While I pay more for different products, companies are reaping more profits!”

Communities around operational areas

• “What have they done for me while they make their millions on my soil?”

Media

• “I am concerned about my circulation /

TRPs ”

Peers – National &

International

• “How is it affecting my markets?”/

“Should I look at India?”

NGOs/Advocacies group

• “You are ruining the environment and exploiting people”

Business: Immediate Sphere of Influence

Who – is to be influenced?

Understanding Business Impacts

13

Evolution of Stakeholder Expectations

Economic

Community

Govt

Environment Social

NGOs

Sustainability

Activists Media Groups

Peers

Complexity of Stakeholder Expectations

Trust Me

Community

Tell Me

Activists

Govt

Show Me

NGOs

Involve Me

Media Groups

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 Expectation

National level Politicians

Significance to Business/

Risk Linkage/ Opinion

Influencing

High - Fluctuates

Regional Politicians

Policy makers/ Compliance

Depts.

Local Govt. stakeholders

High- Fluctuates

Medium - Sustained

Large physically visible project

-do-

Adherence to best standards

Advocacy groups

Local stakeholders/ influencers

High- Sustained. Influenced by above 3

High- Fluctuating

Medium- Sustained

High- Sustained

Supplement local development effort

Local development.

Disclosures/ transparency, participation in development process

Creating platform for their visibility through opportunities of local development

Participation in progress Community (in project affected areas)

Public Low Seen to be doing good

Perceptions, Facts and Challenges

Issue Essar Community Challenges

Employment Cant employ locals. They don’t have required skills

Employment is my right.

Contracts

Development

CSR

Technical jobs cant be given

Infrastructure

To keep the community engaged

We are given only low value contracts.

Company has no serious intent to develop us

“If I have water- am I developed”

Not everyone can be employed.

Safety at site

Developing contractors and entrepreneurs requires much more than just training

Infrastructure is visible immediately and development is not

Superficial. No vision on “change” or

“solution”

Requires significant investment and long 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

Local

Community

Supply

Chain

Economic Development,

Health,

Education,

Infrastructure Development

Local Cooperatives

Best R&R policies

Local Employment Policy

Staff and

Employees

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

Employment

Political influence

Help in developing small time contractors from community to offset pressure from big daddies

Provide skills for enabling employment elsewhere

Create forums where community leaders can stand besides Essar

Translating Perceptions, Facts and Challenges into Business Solutions- Core Sector

Issue

Contracts

Development

CSR

Business

Employment Cant employ locals. They don’t have required skills

Technical jobs cant be given

Infrastructure

To keep the community engaged

Community Challenges Potential Solution

Employment is my right.

We are given only low value contracts.

Company has no serious intent to develop us

“If I have water- am I developed”

Superficial. No vision on “change” or “solution”

Not everyone can be employed.

Safety at site

Prepare people with skills before the start of the project.

Provide multi skills to align with changing needs during project cycle

Developing contractors and entrepreneurs requires much more than just training

Infrastructure is visible immediately and development is not

Requires significant investment and long term plan

Have a long term vendor development policy that enables vendors to evolve at an early stage

Minimize gap between “your” and

“their” infrastructure.

Leverage their resources and participation

Participatory planning

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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