Are Evolving Stakeholder Expectations Affecting Your Business, Its Products, and Its Leadership?

In January, Raj Aseervatham published a thought-provoking book entitled Leading Tomorrow: How Effective Leaders Change Paradigms, Build Responsible Brands, and Transform Employees, which addresses the evolving expectations of the stakeholders -- such as, customers, investors, society, governments, and employees -- regarding businesses and their products and how leadership must respond.  These stakeholders are increasingly making choices about if or how they support businesses – through the purchase of their products and services, shareholdings and financing, regulatory approvals, and even experiences working for them – based on not just what a business does, but how it does it.

Raj's book considers how the emerging generation of leaders must change paradigms and transform their employees to do more than just operate a business. It examines how to effect culture shifts that are necessary to innovate businesses so that they simultaneously meet market needs while meeting stakeholder expectations on concerns as varied as ethical business conduct, labor practices, climate change, responsible use of diminishing natural resources, and contribution to socio-economic challenges in their market catchments.

When I spoke with Raj this month, I asked him: "How are stakeholder expectations changing regarding supporting businesses? What paradigms must leaders change to meet these new expectations?" 

Here is his complete answer:

The three most significant support groups for successful businesses are customers, investors, and employees. These stakeholder groups are part of a larger ecosystem; our increasingly interconnected, increasingly knowledgeable society, and the communities of which we are a part. 

Societal awareness of the environmental, social and governance (ESG) problems that society faces grows daily. As the world’s population increases, these problems grow and exacerbate each other. Climate change, ecological breakdown, water contamination, air pollution, pandemics, corruption, infractions of human rights in the supply chain, gender and cultural discrimination, and many others take a compounding toll on society. 

Unsurprisingly, an increasing proportion of stakeholders demand to know what businesses are doing to diminish these problems. They disassociate from those businesses that worsen the problems and migrate to better-performing competitors. Their insights improve continually. Greenwashing and PR are more easily seen through. 

As this awareness extends across and deepens within society, customers, investors and employees are making more informed choices about who they will buy from, who they will invest in, and who they will purposefully work for. These trends amplify as older generations give way to younger generations and new values supersede old ones. Commodity markets, money markets, and human resource markets adapt to these inexorable trends. 

Business leaders are seeing these ESG issues as the new frontier of strategic management. Responsible businesses are more likely to sustainably prosper. 

Leaders must now understand the myriad issues and own the most important ones in the context of their business stakeholders and business strategy. Then they must authentically lead their employees to meet or exceed rapidly changing stakeholder expectations of responsible business practice. Growing and harnessing such societally attuned business cultures will increasingly define successful business leaders. 

Like any journey of authentic and transformative leadership, the first steps are taken within the leader. This book provides illumination to guide those first critical steps to leading tomorrow.

What do you think of Raj's perspective? Have you seen a shift in your customers' and stakeholders' expectations? What steps are you taking to address these new expectations? 

Will Environmental Sustainability Drive Social Sustainability?

Although environmental sustainability has entered many strategic corporate business plans -- due to either the pressures to comply with stringent legislation or to satisfy the demands of the growing numbers of ecologically minded consumers and investors -- one must wonder if social sustainability will be part of the package. It appears that corporations are finally publicly recognizing their failings in this area. This article commenting on Nike’s recently published fiscal 2007 to 2009 Corporate Responsibility report raised some interesting points.

Many of Nike’s environmental goals seem decidedly lean, such as “to achieve zero waste in the supply chain and have products and materials that can be continuously reused – no pre- or post-consumer waste” and produce products “using the fewest possible materials and designed for easy disassembly, while allowing them to be recycled into new product or safely returned to nature at the end of their life.” But, social sustainability might be the larger issue for companies such as these that have had controversial track records during the past 20 years in regard to the exploitation of unsafe working conditions, employee wages, and child labor most notably in factories in Southeast Asia.

One of the original guiding principles of the Toyota Production System was “respect for humanity,” and Nike appears to be openly addressing the employee problems within the more than 600 contract factories the company uses. Can large corporations that outsource manufacturing to so many different factories – in various developing countries with different laws and reporting standards – ever really manage and influence the systemic mindset and culture throughout these plants? Do you think that corporations whose supply chain is composed of factories working on a strictly defined contract basis (that also produce products for many other organizations as well as competitors) can ever fully partner with them in the Toyota tradition?