Insight & Analysis

Lessons and case studies in engaging stakeholders successfully

25 August, 2015


By Wayne Dunn

Wayne Dunn

Wayne Dunn is an award-winning global CSR expert with extensive teaching, writing, lecturing and Advisory Service experience. He is supported by an extensive faculty and advisory team.

I’ve known and worked with Wayne Dunn for many years. I’ve mentioned his work before in several posts.

He’s got some interesting new programmes coming up and given his work in what we used to call ’emerging markets’ in agribusiness, forestry and the extractive sector, I thought I’d do another Q&A with him. He always has something interesting to say.

Here’s a few questions I posed him recently, and his responses, which are as always, extremely practical in nature.

Toby Webb: You’ve spent decades helping companies engage stakeholders under difficult circumstances. And you’ve been a CEO of an extractive business working in a tricky environment. Which are the biggest mistakes you see companies making when faced with communities and NGOs concerned with high impact operations?

Wayne Dunn:

Too slow to engage. Too much reaction. Not enough value.

Workers in fields

Early constructive engagement and a focus on creating and communicating meaningful value alignment with local stakeholders is as important as a project’s technical and economic viability.

Too slow to engage – often these confrontations develop because companies were slow to engage at the start, thinking it could wait until the project was further along, or they had more budget to work with.

Lack of early and strategic engagement creates vacuums that opponents, wild assumptions (disguised as facts) and other problems will enter.

Women and children

Too much reaction – often communities and NGOs take aggressive public stances and have ‘facts’ that are skewed or just plain wrong. Or companies have screwed up and invited the confrontation. Or both.

Too often the corporate response is too defensive, ending up in ‘positional’ situations that prevent rather than help them to bridge gaps and find alignment. Engage constructively, not defensively.

Not enough value – developing meaningful alignment between corporate/shareholder interests and those of the community is critical. This should be a concurrent priority, equal in importance and focus with determining the technical and economic feasibility of a project.

Community action

Too often an angry community, supported by external interests can trump a project’s technical and economic feasibility.

Toby Webb: Africa has been a particular area of focus for your work, alongside Canada. Where have you seen companies get things right, and briefly, how, when it comes to running a successful and well regarded high impact business or operation?

Wayne Dunn: No company or project ever gets it all right. But, quite a few get it mostly right. I’ll talk about a couple projects I was involved in. Not because they were better than others, but, because I ran one and worked closely with the other, I am more familiar with them.

In the late 1990s Canadian mining company Placer Dome (since acquired by Barrick) was the first major international investor in the South African gold mining industry post-apartheid. They were also the first major mining company to adopt a corporate-wide sustainability policy.

The industry was going through a decade of labour force retrenchment, shrinking by about 100,000 jobs. Placer’s operation was no exception. But, Placer didn’t accept the norm in terms of severance payments, payouts and process.

Guided by their Sustainability Policy they were committed to working with the retrenched miners and their families to help them mitigate the economic impact of retrenchment at the family and community level. This approach was vehemently opposed by the National Union of Mineworkers, who took Placer to court.

After Placer won in court, with costs, the Union named Placer Dome as the worst employer in South Africa. The South African government basically stood back and nodded in agreement.

Two years later, after proving the value of their economic/community approach, Placer Dome was hailed as an Exemplar who, according to the Minister at the time, ‘had changed the social face of the South African mining industry’.

Stanford case study cover

In the process Placer became the first private sector winner of a World Bank Development Innovation Award and had the project turned into a Stanford Business School Case Study. You can read a detailed analysis of the project (from Pariah to Exemplar) and the Stanford Case Study here.

The other involved a venture that I co-founded and led. We secured a concession to harvest old-growth tropical timber that had been flooded with the development of Akosombo Dam and the creation of Ghana’s Volta Lake.

This timber, three billion dollar valuation based on our assessment, was still standing, albeit underwater, and waiting to be harvested. We raised capital in New York and London and started to develop the venture.

We prioritized community engagement and local value creation/value alignment right up with developing the technical solutions to harvesting and processing submerged timber.

We established and maintained engagement with local communities and spent a lot of time thinking about how our venture could be a catalyst to support socio-economic development in one of Ghana’s most impoverished regions.

We also worked with local NGOs, including with an indigenous Ghanaian NGO on an exciting habitat and conservation project for Manatee that had been stranded behind the dam when it was built.

This paid big dividends. Here are two specific examples.

In July 2007, just as we were getting close to closing on our first major financing, the Wall Street Journal sent an investigative reporter to do a story on our project. We found out why later.

No project is without adversaries and one of ours had a connection with the WSJ and brought them over to (they expected) ‘blow us out of the water’.

The expectation was the article would be an exposé that would position us very badly on social and environmental issues.

After the reporter spent few days meeting with communities, government and NGOs we ended up on the front page of the WSJ (and I have the pencil sketch drawing to prove it!).

Wall Street Journal cover

The article was balanced, discussing the social and environmental challenges, but also recognizing all the work we had done and the approach we were taking.

Remember, this was before we had even raised any substantial financing. We had every excuse to put off engaging with stakeholders and developing value-alignment strategies.

But, had we waited, a negative article would have made financing the project so difficult we probably would never have closed our round. As it was, we used the article in our communications and it helped potential investors to know us.

Fast forward to 2008. We had closed two rounds of financing, raising $20 million and the project was going great. We were on the verge of closing a further $35 million in financing, enough to take us to fully operational.

Unfortunately, before we could close the 2008 sub-prime crisis and market meltdown hit and markets dried up. We couldn’t raise money and suddenly we were technically insolvent.

We managed to wind things down so we could mothball the project and hope for better times. We spent nearly two years in a state of technical insolvency and were way behind on commitments on all fronts, including to local communities and stakeholders and to creditors.

Throughout this time we stayed in open and direct dialogue, keeping communities, government, creditors and other stakeholders appraised of our position and what we were doing. Finally, after nearly two years we found a company willing to invest in the project.

Because we had kept our social license and local relationships intact we had enough goodwill to allow us the space to close on that deal and the project relaunched.

We had every reason to not engage and invest in stakeholders early, and to not continue to invest time and energy in the relationships when we were down and nearly dead. But, because we did, we were able to survive.

Toby Webb: We’ve worked together training cabinet ministers from nations such as Ghana on how CSR and stakeholder engagement should look and be encouraged. Are you optimistic in your engagements with politicians in nations such as Ghana when it comes to understanding long term thinking?

Wayne Dunn: Yes. And no. It is often too tempting for politicians to look at CSR like it is another type of ‘tax’ and to quietly support communities as they try to ‘get’ more from companies.

Investing in policies, structures and mechanisms that can facilitate improved societal benefits from business and, simultaneously enhance shareholder value is not easy and not a quick political win.

Yet, you see some that are open to the idea, and many more who recognize that there is something in CSR that can be valuable for the country, the communities and for investors.

Just today I have a very encouraging discussion with an African Finance Minister on how to use the tax system to encourage and facilitate better impacts from the development and social license spending that companies are already doing.

Not to encourage more of it necessarily, but to facilitate synergy with other spending and thus improved impact on education, on health, poverty and on community infrastructure.

Often what is needed is to help leaders and managers to see things from a different perspective; to enable them to understand how a value creation, rather than a value distribution approach can produce real benefits, for society, for shareholders and for governments.

Our programs focus on giving executives, managers and front-line people from industry, government and the international community the theory, strategy and pragmatic tools that enable them to see and develop value creation approaches to CSR. 

Tags: Stakeholder engagement

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