When companies write their statement of purpose, they need to ensure that all key stakeholders are clearly mentioned and measurably committed. Too many people still focus on just one set of stakeholders, usually investors, and others who broaden the scope of their purpose often do not explicitly acknowledge other key stakeholders, let alone track key stakeholders that apply to non-financial stakeholders. performance indicators.
Identify your key stakeholders.
Businesses are expanding the range of stakeholders they consider “critical” as they drive corporate goals. These used to be narrowly defined as customers, employees and shareholders. Now, that list more frequently includes suppliers who are habitually overlooked by businesses, but in most industries they are key. To be sure, the scope of the statement of purpose has expanded over the past few years. Take Australia’s largest supermarket chain, Woolworths, for example, with more than 200,000 employees and more than 3,000 stores. A few years ago, it said: “We’re focused on shareholder returns.” It now says, “Co-create better experiences for a better tomorrow.” But inclusivity is often accompanied by a certain ambiguity. Ideally, the statement of purpose will identify all key stakeholders. Take Rio Tinto, the world’s third-largest mining company, with operations in about 35 countries and more than 60,000 employees. New Chairman Dominic Barton explicitly recognized all five groups of stakeholders in his contribution to the latest annual report:
Through our products, people, partnerships and technology, we aim to help achieve a decarbonized world, while maintaining our focus on capital discipline, pursuing growth and delivering attractive returns to shareholders…forging stronger relationships with our customers, partners and local communities Will be a big part of this journey and something I’m particularly passionate about. I am also passionate about ensuring we create a safe, respectful and inclusive work environment.
Of course you will have your own industry language for stakeholders, and you should stick to that, e.g. “client” or “patient” or “student” “Instead of customers. Furthermore, not all five categories of stakeholders from the Business Roundtable are relevant. For example, if you’re a nonprofit or volunteer organization, you probably won’t have shareholders. If you’re a professional services firm, the vendor may only provide incidental fees, so it’s not critical.
Make sure your impact metrics are aligned with stakeholder categories.
It is not enough to recognize that you depend on your stakeholders. You have to keep track of what you give them. Many companies, even when they explicitly acknowledge all key stakeholders, don’t actually have metrics against them. Rio Tinto itself admits that “the needs of our customers are at the heart of our operating decisions” and “quality relationships with suppliers are essential to ensure that we remain at the forefront of technological and market developments.” However, the company’s commitment to customers and supplier impact is not monitored by any of the “key performance indicators” listed by the company. Of the company’s nine key performance indicators, one “greenhouse gas emissions” is related to the stakeholder community, and safety and gender diversity measures are in place for employees. The other six are financial. In fact, of the eight major Australian companies I looked at, only one, Woolworths, offered a full stakeholder measure. As shown below, they tracked three for each of the Business Roundtable’s five stakeholder groups. For example, customer metrics include Net Promoter Score, employee metrics include diversity ratings, and community metrics include carbon emissions and recycling measures.
Exhibit: Woolworths’ stakeholder measures
in its 2021 annual In the report, the Australian supermarket chain identified three measures for each stakeholder in the US Business Roundtable, as shown in the table below.
Annual Dividend Amount
Total Community Contribution
. . .
Employees and other stakeholders are looking to organizations to address outcomes beyond narrow corporate finances. This trend is a modern and always present phenomenon. The corporate world, represented by the BRT, has realigned to take this into account. It’s time to test your goal statement and company metrics with the questions I’ve asked here.