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September 16, 2005
AccountAbility Cooks Up a New Recipe with Stakeholder Engagement Standards
    by William Baue

An exposure draft of new AA1000 Stakeholder Engagement Standards to be released next week may prove useful to the socially responsible investment community of shareholder activists.


If the advent of standards ushers in a new era for any activity--foremost by acknowledging its legitimacy and also setting the rules of the game for all players to follow--then stakeholder engagement is now coming of age. Next week, the Institute of Social and Ethical Accountability (better known as AccountAbility, an organization promoting accountability for sustainable development) will release an exposure draft describing a new component of its AA1000 Series: the Stakeholder Engagement Standards. The new standard, replete with the acronym AA1000SES, provides a "generally applicable, open-source framework for designing, implementing, assessing, communicating, and assuring the quality of stakeholder engagement" with organizations such as corporations.

"This standard raises the bar on stakeholder engagement," Simon Zadek, founding CEO of AccountAbility, told SocialFunds.com. "It moves it from a nice-to-have conversation to an integral part of how organizations do business, subject to the same disciplines and quality checks that would be applied to any other aspect of learning and development, or governance and accountability."

The draft establishes the need for such standards, pointing out that the increasing awareness of the impacts organizations such as corporations can have on communities (particularly "voiceless" ones) and the environment has led to "widespread experimentation" in engagement strategies.

"Stakeholder engagement has been floating around like the spice of good cooking from next door, and the sense has been that if we all could share some of that spice, everything would be better," said Mark Lee, director of the US arm of the UK-based consultancy SustainAbility. Mr. Lee sits on the AccountAbility Technical Committee responsible for developing AA1000 standards. "But there's been no recipe for doing it and doing it well--which has allowed for experimentation leading to effective and fair results, but mostly by large institutional investors who have established very formal and recognized channels of engagement with companies for a long time."

AccountAbility divides AA1000SES requirements into three subcategories.

"Thinking & Planning" includes identification of stakeholders and material issues, determination and definition of engagement strategy, objective, and scope, and establishment of an engagement plan and implementation schedule.

"Preparing & Engaging" means identifying effective means of engagement, building and strengthening engagement capacity and resources, and engaging in ways that promote mutual understanding, learning and improvement.

"Responding & Measuring" calls for the doing what needs doing within the organization's internal operations to implement what is learned from stakeholder engagement in ways that promote sustainable development. It also calls for measuring and assessing performance, as well as re-mapping and re-defining stakeholder engagement as a constantly evolving process.

In assessing the quality of stakeholder engagement, the standard recognizes three levels of achievement: emergent organizations, strategic organizations, and civil organizations. The standards were also designed to be consistent with existing sustainability frameworks, such as the AccountAbility's own AA1000 Assurance Standard, the Global Reporting Initiative (GRI), the new International Organisation for Standardization (ISO) 26000 Social Responsibility standard, and Social Accountability International (SAI) SA8000 standards.

Mr. Lee points out that the standard promises to be of particular importance to the socially responsible investment (SRI) community due to its in-between status. On the one side, social investors are often shareholder activists engaging with corporations as stakeholders themselves, thus the standards can guide their advocacy for social and environmental improvements. On the other side, social investors often assess companies' responsiveness to various stakeholders, such as human right advocates or environmentalists, so the standards give SRI researchers a yardstick by which to gauge responsible stakeholder engagement.

Social investors also exist in the space between large, influential institutional investors and stakeholders who have been excluded previously because they are less powerful--those AccountAbility particularly intends the standards to serve. Mr. Lee cites the Interfaith Center on Corporate Responsibility (ICCR), a coalition of 275 faith-based institutional investors who practice shareholder activism, as an example of social investors who have used their voice as shareholders for those less engaged, less powerful communities or individuals.

As of yet, such shareholder activists have not helped shape the standards, according to Alan Knight, AccountAbility's head of standards.

"While we received comments from major CSR and SRI groups--for whom this is an important issue--we did not receive comments from any of the organizations focused on shareholder activism," Mr. Knight told SocialFunds.com. "Of course the standard is being published as an exposure draft, so we are still looking for comments and will be piloting it to seek feedback over the next 12 or more months."

 

 
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