There is an urgent call for action by all countries to adopt their national plans and strategies to the 2030 Agenda for Sustainable Development.
The United Nations Sustainable Development report of 2023 stated that “progress on more than 50% of targets of the sustainable development goals (SDGs) is weak and insufficient; 30% of the targets are stalled and gone in reverse. They include key targets on poverty, hunger and climate”. Collaborative partnerships between governments and businesses are required to achieve the SDGs. It is against this background that more businesses are under increasing pressure to act responsibly and sustainably, while making profit.
Organisations need to assess how their decisions affect people, as their long-term success can be attributed to the trust and mutually beneficial relationships fostered by a collaborative governance framework. This collaborative governance framework is known as stakeholder governance. Stakeholder governance ensures all key stakeholders are involved and their interests and viewpoints are considered during a company’s decision-making process.
This governance framework empowers businesses to strengthen their relationships, improve their brand resonance, and earn social licence to operate by actively interacting with stakeholders. It further assists companies to anticipate and respond to opportunities and threats that may develop because of changes in their external environment.
Businesses that adopt stakeholder governance in their corporate strategies, improve their ability to withstand changes in the market and societal expectations, by making decisions that take stakeholder views into account. Stakeholder governance positively impacts business sustainability by assisting in fostering long-term relationships with stakeholders, improving the brand reputation of the business, and providing insights to facilitate better understanding of stakeholders’ needs and concerns.
The scope of stakeholder governance also includes thinking about how companies’ actions may affect the planet. Responsible and sustainable business practices can be achieved when society and the environment are considered in the governance process. A business competitive position and chances of long-term success can be improved by striking a balance between the interests and concerns of all stakeholders and the environment.
Even though stakeholder governance has its benefits in encouraging openness and moral decision-making, this governance framework presents some challenges. One of the challenges is the unnecessary delays and inefficiency in decision-making, as many parties are required to be consulted. Businesses may find it difficult to make decisions needed to be competitive in the market, when there are many competing interests. Companies may also have trouble growing and competing in the industry, if they put stakeholder interests ahead of profit-making when allocating resources.
Opponents of stakeholder governance are concerned that this type of governance draws resources and focuses away from what a company does best—running the business—and that this would make it less sustainable in the long run. They further cite that taking everyone’s opinions into account could cause people to end up with competing priorities. Internal strife and stymied decision-making are possible outcomes when businesses struggle to satisfy the frequently competing interests and demands of their stakeholders. This internal strife makes it harder for the company to respond efficiently to shifts in the market and government regulations.
Considering the divergent opinions on stakeholder governance, it is critical for businesses and organisations to assess the pros and cons of this governance framework and find a sustainable middle ground that works for everyone involved.
*Morna Ikosa is a communications and stakeholder engagement consultant. With a specific affinity for sustainable development. Find her on LinkedIn or email her at micommunicationscc@gmail.com.
