Creating long-term stakeholder value requires accountability, monitoring, measurement and reporting of progress and results. Accountability and transparency ensure that the relationship with stakeholders becomes stronger. How do you set up this monitoring in a structural way?
Saving the world is the ultimate goal when it comes to creating value or impact, but it is an illusion to think that as an organization you can do it alone. It is therefore important to look at realistic and achievable goals 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 thus build evidence. Make clear choices that align with your ambitions, get to work and build it step by step. Making mistakes in the process isn’t a bad thing, as long as you show that you take it seriously and take responsibility.
Structural monitoring as the basis for the evaluation strategy
Monitoring is an essential function in an organization to monitor and measure whether the strategic policy is developing in the intended direction. Without monitoring, it is impossible to assess and therefore know whether agreed programs and actions have been successfully implemented and lead to the intended social impact. This monitoring should focus not only on stakeholder engagement policy but also on long term value creation policy.
In practice, monitoring is ideally done on the following aspects:
- common starting pointsTo secure, internalize, and embed the organization’s common starting points, such as mission, vision, strategy, purpose, and values, into the organizational culture.
- Long term value policyPolicy, intended objectives and their impact to create long-term value for stakeholders in the organization.
- Stakeholder Engagement PolicyStakeholder Engagement Policy, i.e. building and protecting relationships with relevant stakeholders in the organisation.
- Publication of human resourcesAllocation of personnel, resources (including financial resources) and actions necessary to achieve policy programmes.
Stakeholder engagement process
Stakeholder engagement should be part of the learning culture of the organization. This transition often means that you go through trial and error. Of course, in the process, you also have to deal with dilemmas and setbacks. In practice, for example, you cannot always represent and serve everyone’s interests, because sometimes they are contradictory. So you have to make choices in which long-term value creation is conducive to 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 in order to help solve the nitrogen problem.
You have to be transparent about the speculator and the feasibility of value creation. Discuss this also to manage the expectations of different stakeholders. The stakeholder environment continues to evolve and environmental expectations, values and standards continue to evolve over time. Something that is still considered “acceptable” today could lead to social outrage within a couple of years. See, for example, the debate over Zwarte Piet in the Netherlands.
Reporting and Corporate Governance Code 2022
In 2022, the Corporate Governance Law Oversight Committee published a proposal to update the Dutch Corporate Governance Code for consultation. This document provides, among other things, for the inclusion of provisions related to long-term value creation and environmental, social and corporate governance. For example, it is suggested that companies formulate an ESG strategy with specific objectives and record this in the management report. In addition, organizations must take into account the interests of relevant stakeholders when defining an ESG strategy. Policies should be put in place for effective stakeholder dialogue facilitated by the board. In the management report, managers must consider the culture, values, and behavior encouraged within the organization and how they contribute to long-term value creation. Among other things, by naming the actions taken, as well as the intended and achieved results, including effects in the production and value chain (quantified and monetized where possible).
In addition, the inclusion and diversity policy is described more clearly, as is reporting on it. In addition, initial suggestions are made about incorporating ESG goals into executive compensation policies and purpose formulation as part of the organization’s strategy and bylaws.
The new law is also concerned with 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 shared culture and values aimed at creating long-term value and is also accountable for this in the board report. Moreover, that culture must stimulate openness and accessibility.
Therefore, the Corporate Governance Act of 2022 categorically chooses to take a leading role in long-term value creation, the necessary culture, stakeholder dialogue and transparency.
This article was previously published on the Boommanagement website.
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