What's at Stake? Stakeholder Engagement Strategy as the Key to Sustainable Growth

37 Pages Posted: 15 Feb 2011 Last revised: 24 Oct 2014

Date Written: February 14, 2011

Abstract

Charges of labor rights abuses and environmental harm are increasingly common for major brands sourcing in today’s globally expanded supply chains, often presenting major reputational risks at minimum. However, the standard response of attempting to police supply chains by emphasizing compliance standards is often unlikely to be a sufficient or effective long-term solution. Apparel retailer Gap Inc. went from a typical compliance-oriented approach to develop instead a genuine, comprehensive and much more effective stakeholder engagement strategy. Developing strategic stakeholder engagement involves five key steps: 1) stakeholder mapping to get internal engagement; 2) identifying the material issues; 3) defining objectives; 4) resolving issues collaboratively; and 5) embedding engagement. Our research with Gap Inc. management and its external stakeholders shows how this approach proved to be more effective by contrasting two comparable child labor incidents in the company’s supply chain. However, it took time to develop and required a different mindset, including a shift from risk aversion to partnership, from “quick fixes” to sustainable solutions, and an expanded conception of supply chain responsibility going beyond attention to first tier suppliers. As well as solving if not averting problems in the supply chain (and elsewhere), strategic stakeholder engagement helps management see the future, facilitates trust, and can improve the company’s public image. More fundamentally, it provides a deeper understanding of a company’s obligations to its stakeholders and thus is consistent with authentic commitment to corporate social responsibility.

Suggested Citation

Smith, N. Craig and Ansett, Sean and Erez, Lior, What's at Stake? Stakeholder Engagement Strategy as the Key to Sustainable Growth (February 14, 2011). INSEAD Working Paper No. 2011/25/AL/INSEAD Social Innovation Centre. Available at SSRN: https://ssrn.com/abstract=1761383 or http://dx.doi.org/10.2139/ssrn.1761383

N. Craig Smith (Contact Author)

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

Lior Erez

affiliation not provided to SSRN ( email )

No contact information is available for Sean Ansett

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