Stakeholder‐centricity a Precondition to Managing Sustainability Successfully
| Author | CB Bhattacharya |
| DOI | http://doi.org/10.1111/1758-5899.12197 |
| Published date | 01 November 2015 |
| Date | 01 November 2015 |
Stakeholder-centricity a Precondition to
Managing Sustainability Successfully
CB Bhattacharya
European School of Management and Technology
Successful management of sustainability can greatly
enhance company performance. Some of this perfor-
mance is driven by the direct savings provided by sustain-
ability activities themselves. For example, reductions in
carbon emissions may lead to savings on energy bills.
Similarly, decreasing and recycling waste from production
may lessen the need to purchase materials from suppliers.
These savings may be thought of as the direct route
through which sustainability provides value for a com-
pany. The direct route is often tangible and measurable.
But there is a second and complementary route
through which sustainability can generate value for com-
panies. In this route –which we call the indirect or stake-
holder route –the value from sustainability stems not
from cost savings inherent in the initiative, but rather
from the reactions of stakeholders when they learn about
the sustainability initiative(s). Research conducted with
coauthors Sankar Sen and Daniel Korschun and described
in more detail in our book Leveraging Corporate Responsi-
bility: The Stakeholder Route to Maximizing Business and
Social Value (2011) examines this alternative pathway to
corporate performance, a pathway that is complex, often
quite intangible and sometimes challenging to measure.
Companies that are able to unlock potential value
from this indirect route and build strong stakeholder
relationships stand to benefit greatly in both the near
and long term. Surveys of senior executives and sustain-
ability professionals indicate that this route can generate
corporate value in a number of ways such as, building
reputation, enhancing employee morale and strengthen-
ing competitive positions (Bonini, Koller and Mirvis,
2009). A company’s positive record of sustainability fos-
ters consumer loyalty and, in some cases, can turn cus-
tomers into brand ambassadors and advocates who may
be willing to even pay a price premium to support the
company’s social policies (Sen and Bhattacharya, 2001).
Sustainability may offer a competitive advantage in
attracting, motivating and retaining talented employees
(Greening and Turban, 2000) and socially responsible
investors (Sen, Bhattacharya and Korschun, 2006; Hill
et al., 2007).
It is hardly surprising that benefits that stem from the
stakeholder route depend on a company’s ability to
understand and respond to the needs and wants of its
stakeholder base. We call this stakeholder centricity. Com-
panies that remain attuned to customers, employees,
investors, local communities and others stand to gain
substantial rewards from their sustainability initiatives; in
contrast, companies that ignore potential stakeholder
reactions to sustainability may suffer substantial repercus-
sions if those activities damage stakeholder relationships.
Co-creating sustainability strategy and
communication
I advocate a co-creation approach to sustainability strat-
egy. In fact, it is hard to imagine a truly stakeholder-cen-
tric organization that does not seek engagement from
stakeholders as it creates its sustainability strategy. Prop-
erly involving stakeholders in formulating corporate
responsibility programs results in more focus and suc-
cess. Co-creation allows stakeholders to become part of
the solution and reduces the gap between their expecta-
tions and the firm’s response. To do this, companies
must first understand the overarching factors that make
co-creation of sustainability successful, and then go
through a process by which stakeholders can fully
co-create sustainability.
Stakeholder-centricity also involves making sure that
stakeholders have a thorough understanding of the com-
pany’s sustainability efforts so that they derive benefits
and reward the company in kind. Successful strategies
address the why, what and where of communication, as
well as take into account the particular circumstances of
the company and its stakeholders. Communication needs
to be a critical component of sustainability strategy
because it is often the primary means through which
stakeholders develop an understanding of sustainability
programs. This understanding becomes the starting point
for stakeholders to interpret sustainability activities and
to determine whether they wish to deepen or sever ties
with the company. Since few stakeholders are able to
participate directly in all sustainability initiatives, the role
of communication is to ensure that stakeholders are at
least able to learn about those initiatives which are most
likely to produce value for the company. Managers
Global Policy (2015) 6:4 doi: 10.1111/1758-5899.12197 ©2015 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 6 . Issue 4 . November 2015 483
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