Long-term stakeholder value creation requires accountability, monitoring, measuring and reporting progress and results. Accountability and transparency ensure that the relationship with the stakeholders becomes stronger. How to set up this monitoring in a structural way?
Saving the world is the ultimate goal when it comes to value creation or impact, but it is an illusion to think that you as an organization can do it alone. It is therefore important to look at realistic and achievable goals in order to create value and impact that do justice to your common starting points. In practice, the point is that you achieve results with concrete, manageable steps and thereby build up evidence. Make clear choices in line with your ambitions, get started and build it step by step. Making mistakes in that process is not a bad thing as long as you show that you take it seriously and take responsibility.
Structural monitoring as a basis for evaluation strategy
Monitoring is a fundamental function of the organization to monitor and measure whether the strategic policy is developing in the intended direction. Without monitoring, it is impossible to evaluate and thus see whether the agreed programs and actions are successfully implemented and lead to the intended social impact. This monitoring should focus not only on the stakeholder engagement policy, but also on the long-term value creation policy.
In practice, monitoring ideally takes place on the following aspects:
- Common points of departure: Actually securing, internalizing and anchoring the organization’s common starting points, such as mission, vision, strategy, purpose and values, in the organizational culture.
- Long-term value policy: The policy and intended goals and impact to create long-term value for the organization’s stakeholders.
- Stakeholder Engagement Policy: The Stakeholder Involvement Policy ie. building and protecting relationships with the relevant stakeholders in the organisation.
- Deployment of human resources: Deploying people, resources (including finances) and actions to realize the political programs.
The process of engagement with stakeholders
The process of involving stakeholders should be part of a learning culture in the organization. This often means a transition that you go through with trial and error. In that process, of course, you also have to deal with dilemmas and setbacks. In practice, for example, you cannot always represent and serve everyone’s interests, because they are sometimes contradictory. So you have to make choices where long-term value creation is leading for all stakeholders, but not always feasible. For example, it is currently unacceptable for the agricultural sector in the Netherlands to halve the number of livestock to help solve the nitrogen problem.
You must be transparent about the dilemmas and feasibility of value creation. Discuss this, also to manage the expectations of the various stakeholders. The stakeholder environment continues to evolve, and the environment’s expectations, values, and norms continue to evolve over time. Something that is still considered ‘acceptable’ today may lead to social outrage two years from now. Look, for example, at the discussion about Zwarte Piet in the Netherlands.
Reporting and Corporate Governance Code 2022
In 2022, the Corporate Governance Code Monitoring Committee published a proposal to update the Dutch Corporate Governance Code for consultation. This document allows, among other things, to include provisions on long-term value creation and ESG. For example, it is suggested that companies formulate an ESG strategy with specific objectives and explain this in the management report. In addition, organizations must consider the interests of the relevant stakeholders when determining the ESG strategy. Policies should be established for effective stakeholder dialogue facilitated by the board. In the management report, directors must explain the culture, values and encouraged behavior in the organization and how they contribute to long-term value creation. Among other things, by naming the measures implemented, as well as the intended and achieved results, including the effects in the production and value chain (quantified and monetized where possible).
In addition, the policy on inclusion and diversity is also more explicitly prescribed, as is the reporting on this. In addition, preliminary proposals are made for the integration of ESG goals in management compensation policies and formulation of the purpose as part of the organization’s strategy and statutes.
The new code is also aware of the importance of organizational culture and the extent to which it contributes to long-term value creation. The code states that the board is responsible for a culture and shared values aimed at long-term value creation and is also responsible for this in the board’s report. In addition, the culture must stimulate openness and accessibility.
The 2022 Corporate Governance Code therefore emphatically chooses a leading role for long-term value creation and the necessary culture, stakeholder dialogue and transparency.
This article was previously published on Boommanagement’s website.
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