The importance of stakeholders and society in a business

Stakeholders and society play an important role in today’s business environment, and so only focusing on organisational objectives is not sufficient to be successful (Matuleviciene and Stravinskiene 2015). In this essay, the concept of corporate social responsibility and the license to operate will be used in order to gain a better understanding of stakeholder’s and society’s importance within a business.

Corporate social responsibility, also knowns as CSR, “is the voluntary actions that a corporation implements as it pursues its mission and fulfills its perceived obligations to stakeholders […] and society as a whole.”(Coombs and Holladay 2011, p.8). This includes for example thinking about sustainable development, creating a shared value for all stakeholders, or creating a corporate philanthropy by promoting the welfare of others by for example donating to charities (Idrees et al. 2021). Integrating CSR shows a level of concern towards the environment, society and the future, making stakeholders feel a deeper connection on a trustworthy level, creating a positive brand image and high reputation in their minds (Timothy and Holladay 2011). Furthermore, including CSR is an effective way for brand differentiation, acting as a unique selling proposition over the competition and helping attract new customers who value CSR (Jagyasi 2019). For example, “The Body Shop was the first cosmetics company of its kind in the UK using all-natural ingredients in its products.” (Workspace 2021), which helped positively grow its reputation. In addition, employees are more prone to be attracted by and to continue working for a business who implements CSR policies (Timothy and Holladay 2011). It is an evolving concept that stakeholders increasingly value over time, which is why implementing it is necessary in maintaining stakeholder relationships. If CSR is undertaken in an ethical way with true concern towards society and the environment, then it is beneficial for both the business and society (Andrew et al. 2019). The business will maintain trustworthy stakeholder relationships without whom it cannot thrive (Dubach and Machado 2012), and society will benefit from the business’s contribution.

The license to operate is a “Grant of permission to undertake a trade or carry out a business activity, subject to regulation or supervision by the licensing authority.” (Nielsen 2013). Furthermore, the social license to operate (SLO) is “the ongoing acceptance and approval of a [project] by local community members and other stakeholders that can affect its profitability” (Moffat and Zhang 2014, p.61). Gaining the SLO is made through a three-step process: acquiring legitimacy, then credibility through the acceptance of the community, and lastly gaining trust through the community’s approval (Thompson and Boutilier 2020). Reaching the last level can only be beneficial for a business. Consumers who trust a brand are more likely to re-purchase, thus enhancing brand loyalty and the decision-making process (Huang et al. 2020). Therefore, trusted businesses have strong consumer buyers and are more likely to retain consumers. Trust also helps maintain healthy relationships with employees and within the workplace, and improves efficiency, engagement, and productivity (Bonnafous-Boucher and Rendtorff 2016). In fact, 96% of engaged employees trust management, whilst only 46% of disengaged employees trust it (Martic 2020). In addition, the SLO helps to manage stakeholder expectations as the community’s opinion is considered. This helps to create mutual relationships where local communities are treated like partners, where the environment is improved, and where the business is socially accepted, providing more sustainability and reducing its economic risk and failure (Moffat and Zhang 2014). Therefore, the SLO helps develop Freeman’s Relational View, “[a model based] on research on partnerships, joint-projects and alliances that can improve performance by reducing costs and risks, as well as by increasing value for clients” (Bonnafous-Boucher and Rendtorff 2016, p.37). This is both beneficial for stakeholders and society, as well as for the business itself. On the other hand, obtaining the license to operate acts as a form of protection for the business, its employees, and customers, in case of injuries, incidents or lawsuits for example. It also ensures a level of privacy and develops trust as a licensed company proves that it is stable and dedicated to its success (Business Matters 2017).

To conclude, companies need to operate in accordance with accountabilities to stakeholders and society in order to develop valuable relationships, earn trust, develop a positive brand image, loyalty and reputation, and to successfully manage stakeholder expectations. Companies can achieve these goals by implementing CSR, the license to operate and the SLO, leading them to an overall successful business.

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