Stakeholder Relations – Invest in Them Before You Need to Rely on Them

Why engage your stakeholders?

As the world’s leading chemical company, BASF has products in all kinds of industries. It employs approximately 112,000 people globally, services numerous suppliers and customers, and has relationships with shareholders and a large number of societal stakeholders. Having a clear picture of a company’s relevant stakeholders in business, government, and civil society is essential for effective stakeholder engagement. However, a company’s set of relevant stakeholders will change with time. In order to ensure an ongoing stakeholder engagement, it is appropriate to have skilled people and organizational structures in place.

BASF has always interacted with its stakeholders, but in addition to rather “classical” forms of stakeholder interaction, which are still essential, new approaches have been developed. Engagement with stakeholders can improve a company’s decision-making and performance, since it helps in acquiring a broader view of
the market than what economic figures alone can provide. Stakeholders can offer a company insight into their perspectives on current and emerging issues, into how they perceive the company, and what they consider to be the company’s impact.

This does not mean delegating decisionmaking to external people; it is still a company’s management that decides on its business strategy. However, this strategy has a higher likelihood of meeting the market’s needs if it is based on a participatory approach that also includes stakeholders’ views.

BASF has given a clear answer as to the “why”: We have identified “responsible relations” as being one of the material aspects of our organization.

Different forms of stakeholder engagement at BASF

BASF has various forms of stakeholder engagement in place. Our stakeholder engagement comprises of onsite and local community-related forums, such as our community advisory panels at sites worldwide. On the business side, BASF is a founding member of Together for Sustainability, an initiative in which leading
chemical companies have joined forces to support sustainability in the supply chain and standardize supplier assessment methods. On an international level, BASF takes an active part in the United Nations 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. Different formats of stakeholder engagement serve different purposes: With local initiatives, you are close to the communities adjacent to your
sites; 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.

In 2013, in order to involve our stakeholders more intensively, BASF established the independent Stakeholder Advisory Council (SAC). The SAC consists of various renowned thinkers and leaders whose knowledge on material sustainability topics bring an important external perspective to the table in discussions with BASF’s Board of Executive Directors. The SAC meets annually with BASF’s Board of Executive Directors to offer critical evaluations and refine the sustainability management of BASF on the basis of a shared dialogue. The meetings are chaired by BASF’s Chairman of the Board.

Based on recommendations of the SAC, we continuously review and update our sustainability approach and positioning. BASF has been cooperating with the European Water Partnership (EWP) since 2008, an independent organization founded through the initiative of the European Commission in 2006. Working as partners, water experts from BASF as well as other representatives from industry, governments, and NGOs developed the European Water Stewardship (EWS) standard.

It enables companies from various sectors as well as agricultural operations to examine how sustainably they use water resources. The partnership with EWP highlights that a multistakeholder group can really achieve results beyond what is possible for a single institution. The EWS standard fulfills high-quality expectations, is widely accepted, and is thus a real tool for improving water management within the industry. BASF has set itself the goal of introducing sustainable water management at its production sites in water stress areas by
2020 on the basis of the EWS standard.

Success factors for effective and stakeholder engagement

In our experience, several factors contribute to successful stakeholder engagement.
• The issue taken up with stakeholders should be relevant and pressing, and it should be addressed at the right time.
• Furthermore, getting the right stakeholders to the table and identifying them is not an easy task.
• Depending on the subject and stakeholders, the right form of engagement should be chosen.
• Enough time and resources should be put into thorough preparation of any kind of activity.

Internal preparation also needs to address the mindset of participating management. Interacting with some of the stakeholders will possibly require managers to step out of their comfort zones and collaborate with individuals and types of organizations they might not be familiar with. In terms of time and research efforts, the
resources needed are often underestimated, but investments must be made.

Two thoughts on the evolution of stakeholder engagement

Everyone agrees that solid stakeholder relations helps a company to ensure its license to operate: They help to mitigate risks and retain and win customers and employees, including supporting solid public relations. This is a major motivation for stakeholder relations.

Considering the growing complexity of  the world we operate in – the “communication revolution” illustrated with key words such as social media and 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.

A second factor we see concerning the evolution of stakeholder engagement is the trend of operationalizing and measuring by metrics. We elaborated on a number of success factors, and you need to be prepared for general discussions on the quantification of the benefits of stakeholder engagement. But how do you measure success or impact on value? More precisely: How do you measure how hard a crisis – maybe reputation-wise – has affected you if you have not communicated with your stakeholders for years?

There are some approaches for assessing the value of stakeholder relations, but still there is no simple “metric answer” in sight – and a simple answer might not even be helpful. Not everything that counts can be counted.