Stakeholder Prioritization
Stakeholder analysis and effective management of the different, often conflicting interest is critical to the ultimate success or even success of the business. Through the engagement of the right stakeholders, it is possible to ensure that the resources are allocated properly, and to the advantage of the company. Once the stakeholder analysis, the business must set priorities among them, which would in turn form the basis for resource allocation. Every business has many interested parties that are affected in some way by the firm’s decisions, its results and the implementation. Among other things, it influences the corporate social responsibility, and the efficient attainment of the triple bottom line.
It is impossible for a firm to meet all the needs of all stakeholders, including those that it does not know do exist, and thus in order to provide for their varied interests, it is crucial to prioritize the most important players and allocating resources accordingly. The benefit corporations’ framework realizes the importance re-aligning the stakeholder priorities, to laying a greater emphasis on the long-term sustainability of businesses. The environment is a particularly important element of stakeholder prioritization, not least because its protection is central to the long-term sustainability of many businesses, and crucially, has a marketing advantage.
With the growing consumer awareness of climate change, pollution and sustainability issues, firms that protect the environment are likely to strike the right cod with the markets, hence have a better opportunity to do best relative to those that do not. As is evidenced in the article, prioritizing the environment and social issues in decision-making may render the firm’s management vulnerable to lawsuits when they make decisions that would promote environmental sustainability, while at once neglecting other stakeholders. With the promotion of the environment, the company also promotes the interest of other stakeholders. This is not least because promotion of the environment creates long-term value for the company, which effectively translates into stakeholder value, with the shareholders benefitting from the increased value of the organization, while customers, employees, regulatory authorities and local communities among others, benefitting from a stable, sustainable and prosperous organization.
However, there are problems with the artificial nature of the efforts to prioritize stakeholders, when the actual intention of the firm is to promote the interests of the shareholders, management and employees. The public relations value of seeming to be environmentally sustainable may be the main driver towards the benefit incorporation. This is especially so since as indicated in Loten (2012), it is possible to prioritize social and environmental issues by including them in the articles of association of the company, coupled with performance evaluations and certifications such as AA1000SES, which will ensure that the organization is responsible. However, attaining this is costly, and instead, they opt for “Benefit Corp” designation for PR purposes, without any substantial actual changes on the ground.
Competitiveness of Benefit Corporations
Benefit corporation designations provide crucial marketing value to businesses, besides ensuring that the firm’s actual decision-making is not hampered by the need to optimize the value to the shareholders and other immediate stakeholders. However, it does not obscure the fact that competitive advantages derive from multiple sources and in order to remain profitable firms must face up to competition in their own fields. To begin with, even among the Benefit corporations, there is a competition, and if firms believe that this is the best approach then they must face up to the fact that their competitors will also become benefit corporations. The sources of competitive advantages include diligent investment in research and development, human resources development and talent management, knowledge management, successful marketing, strategic planning and execution of strategies, helpful organizational culture and effective leadership among other factors. Benefit corporations realize the fact that “do-gooder” reputation is hardly a substitute for the creation and sustainability of actual competitive advantages, which are in turn crucial to surviving in the market.
Effectively, benefit corporation designation should not considerably harm the chances of the company competing in the marketplace. However, strategic decision-making, planning and execution of strategies is informed by both values and firm-specific priorities, which ultimately determine the nature and effectiveness of the strategies/policies implemented by the firm. In order to survive stern competition, it is crucial that firms are prepared to do whatever they can, and deploy their resources in the best way possible than they competitors can. This is not true for benefit corporations, which have to consider wider social and environmental implications of their decisions and resources allocation. This ultimately slows does the decision-making process, and crucially, limits the strategic options available to a firm, in competing against others in the industry. This represents a significant handicap, which conventional firms do not have to deal with, and may even capitalize on weaknesses of benefit firms to outcompete them. Effectively, benefit corporations cannot as efficiently compete against traditional firms.
References
Brusseau, J. The Business Ethics Workshop. New York: Flat World Knowledge, L.L.C.
Gibsons, K. (2007). Ethics and Business: An Introduction. Cambridge: Cambridge University Press.
Loten, A. (2012, Jan 12). With New Law, Profits Take a Back Seat. Retrieved Aug 28, 2012, from www.online.wsj.com: http://online.wsj.com/article/SB10001424052970203735304577168591470161630.html
