Stakeholder Engagement: A Canadian Perspective
Ann Svendsen
Accountability Quarterly, March 2000

While Canadian business leaders may not agree on how to manage interdependent relationships with employees, investors, communities, suppliers and customers, the idea that such relationships are strategically important has certainly penetrated most Canadian boardrooms.

In this article I offer a Canadian perspective on the current state of stakeholder engagement and promising future directions. I focus on a recent, high profile battle between a Canadian forest company MacMillan Bloedel and an informal coalition of environmental non-governmental organizations (ENGOs) concerned about clear-cutting old growth forests in Clayoquot Sound on Vancouver Island, British Columbia. Over a six-year period, the company went from being targeted by environmentalists in an international market campaign to working collaboratively with these groups to set up a joint venture, eco-friendly logging company.

I believe we can learn a lot from this case about how corporate-stakeholder relationships evolve and the individual, organisational and contextual factors that contribute to the formation of mutually beneficial, highly collaborative corporate-stakeholder relationships. Given that the process was not 'managed' by the company, but rather evolved as a result of uncontrolled interactions and catalytic events, it also raises the question about the viability of developing standards for stakeholder engagement processes.

A Continuum of Stakeholder Engagement in Canada

One-way information programs are becoming a rarity in Canada as elsewhere, perhaps because they are rarely successful. The recent attempt by the Canadian Bankers' Association to bolster the reputation of the big banks using an out-moded, one-way public relations campaign is a good case in point. Facing declining public support and increasing criticism about high service fees in the light of massive bank profits, the CBA went on the offensive with a million-dollar advertising campaign that included glitzy television ads, brochures and employee information sessions. Many experts, including pollsters with studies to back them up, suggest that the PR campaign was a spectacular failure, and merely served to reinforce the public's view that Canadian big banks don't listen and don't care.

A consultation program organised by companies to seek stakeholder input on new projects is probably the most common form of engagement. Because the Canadian economy is resource-based, many of our forestry, mining and energy companies have been forced to engage with their stakeholders for years. We have a long and colourful history in this field - Greenpeace was born in a small storefront in Vancouver, Canada (my hometown) more than two decades ago.

Most resource companies these days regularly hold informal 'open houses' and multi-stakeholder workshops during the planning phases of major new projects. However, participation by the public and non-governmental organizations has declined steadily over the past few years due to lack of time, cynicism and the sheer number of such consultation processes.

Community advisory committees are also a Canadian tradition. Almost two decades ago, the Canadian Chemical Producers Association established the much emulated Responsible Care program which required member companies to involve local communities in on-going advisory committees. Chemical companies in the US have since adopted this program.

Canada versus the United States

Stakeholder engagement in Canada has tended to be more collaborative, locally focused and less litigious compared with the United States. Most stakeholder engagement processes in Canada involve local citizens along with regional environmental and consumer organizations. We have fewer large, professionalised NGOs to move conflicts rapidly to a national stage. Relatively few corporate-stakeholder issues are decided in the courts.

In my view, the Canadian experience with more collaborative approaches such as the MacMillan Bloedel case discussed below may be instructive. The popularisation of Alternative Dispute Resolution (ADR) in the United States may have reinforced conflict-based approaches to stakeholder engagement. Some American business and government leaders disillusioned with ADR are now searching for more collaborative engagement approaches. (Thomas-Larmer, J.; 1999)

The Evolution of Corporate-Stakeholder Relationships in Clayoquot Sound

Synopsis

In the summer of 1993, 9,000 angry citizens blockaded the road into the town of Clayoquot on the West Coast of Vancouver Island to protest against Canadian forest company MacMillan Bloedel's intention to log old-growth forests.

This protest was one of the largest acts of civil disobedience ever seen in Canada. Soon afterwards, environmental groups from across North America and Europe joined forces to launch a bitter, high profile international market campaign. The campaign led to an international boycott of MB's products and contributed to a significant decline in share prices and low employee morale. In 1996, MB lost 5% of its sales when two of its customers in the UK, Scott Paper and Kimberly-Clark, cancelled contracts.

In June 1999, six years after the blockades began, MacMillan Bloedel signed a memorandum of understanding with a coalition of environmental groups including Greenpeace, Western Canada Wilderness Committee, and the Natural Resources Defence Council.

MacMillan Bloedel promised to stop clear-cutting and created a new eco-friendly joint venture logging company called "Iisaak" with Clayoquot First Nations. In an unprecedented gesture of cooperation, environmentalists agreed to stop the international campaign and play an active role in marketing Iisaak's forest products.
Also in 1999, the environmental journal Tomorrow Magazine named MB the "Company of the Year" and MB received an award from Home Depot for "Environmental Partner of the Year.

I believe this case is an example of 'good' stakeholder engagement despite the fact there have been negative economic consequences for local communities due to reduction in logging. In the next section, I will identify several critical individual, organisational and contextual factors that led to the evolution of the relationships from conflict to collaboration. But first, a comment on the way in which relationships between corporations and their stakeholders evolve.

Stages in the Evolution of Corporate-Stakeholder Relationships

Contrary to the prevailing management paradigm, MacMillan Bloedel did not 'manage' its relationships with the environmental groups in Clayoquot Sound, nor did it 'engage' them in a consultative or dialogic process. Rather, relationships were co-created by the leaders of organizations on both sides of the dispute. It was a self-organising, chaotic and unpredictable process that resulted in solutions and relationships that neither group could have envisaged in the beginning.

There were three stages in the evolution of the relationships: conflict, exploration and collaboration.

Conflict

During the conflict stage, MB and ENGO leaders were at war. Attitudes were polarised. As a MB manager noted "By the mid 1990's, the environmental movement and the BC forest industry were nose-to-nose in a zero-sum game. A zero sum game in which the only acceptable outcome is for one side to win at the expense of the other."

Exploration

As a result of forceful mediation by First Nation's leaders, a "truce" was called and the environmentalist and MB entered an exploratory phase of engagement. During this period, leaders from both sides met often to discuss and identify alternatives, despite high tensions and continued conflict over logging in other parts of the province. They met in restaurants, on the Greenpeace ship in Clayoquot Sound and in the First Nations village of Ahoushat, not in MB's corporate head office board rooms.

They didn't try to address all of the areas of conflict at once, nor did they discuss trade-offs. Instead, they found small projects they could work on together, and used those projects to built trust. MB for example, made a small but symbolic contribution to a trail-building project that had been initiated by one of the ENGOs to allow easier public access to the Clayoquot rainforest.

A report on sustainable forestry practises prepared by a group of respected First Nation's elders and scientists stimulated new ideas and created a new frame of reference for discussion. The Scientific Panel also developed a series of principles to govern how the members of the panel would work together. Mutual respect and a belief in the interconnectedness of all things were key elements. These principles and the substantive information provided by the Panel had a profound impact on the substance and quality of the dialogue between environmental leaders and MB.

Collaboration

Eventually, after months of discussion and technical studies by MacMillan Bloedel, the company announced it would phase out clear-cutting. ENGO leaders showed up at the news conference with a bottle of champagne for MB's CEO, Tom Stephens.

A small team of environmentalists, First Nations leaders and MB executives are now working to make the joint venture forest company, Iisaak a success. They are developing new regulations, ownership structures and decision-making processes.

The tables have turned in this saga of corporate-stakeholder engagement. Not only are there different people at the table (there are no government representatives on this working group) but the formal and informal relationships between the members are profoundly different. No one working on this project is quite sure who "us" and "them" are anymore.

Factors that Influence the Evolution of Corporate-Stakeholder Relationships

While a detailed account of the factors that influenced the evolution of relationships between MacMillan Bloedel and the ENGOs is beyond the scope of this article, the following are three of the most important. It is interesting to note, also, that the factors cut across domains from individual behaviour to organisational and contextual levels.

Bridge-Building by First Nations

Often in conflicts, an independent third party plays a crucial role in bringing opposing groups together. In this case, First Nation's elders from Clayoquot Sound played that vital role. First Nation's people found themselves caught in the middle of an environmental battle that threatened their land and timber resources. As Linda Coady, VP of Environment at MB explains:

"With a modern day Treaty process having begun in earnest in BC, the aboriginal peoples of Clayoquot Sound found themselves with the moral authority to cast the swing vote in the whole controversy. They had the effective political power to either discredit Greenpeace's international market campaign or blow MB's defences to smithereens."

"They opted to do neither. They called in the company and the environmental groups and they said in essence ... get your act together and find some solution that we can all live with, or we're going to intervene in a way that neither of you is going to like. What this led to was a journey in which both MB and the environmental groups were like two convicts escaped from the chain gang manacled together. Like it or not, [we] had to work out a solution both could live with."

A Crisis Forces Both Parties to the Table

Research [Logsdon, J; 1991)shows that organizations co-operate when the stakes are high and there is no opportunity for either organisation to take unilateral action. MB and the ENGO leaders recognized they were in a crisis that required them to come to the table to participate in a new, solutions-oriented conversation.

MB's new CEO, Tom Stephens spoke in meetings with employees and shareholders of the need for MB to regain its social license to operate. He told employees that it didn't matter if the company could continue to enforce its legal right to log if no one was going to buy its products. Environmentalists recognised that they would not succeed by continuing the blockade and the market campaign. Public pressure was mounting for solutions and environmental groups themselves wanted to help develop alternatives to industrial logging that would work in Clayoquot and elsewhere in the province.

Trust-Building Behaviour

Relationships are built on trust and trustworthiness is based on judgements about the benevolence, integrity and competence of organizations and the individuals who have been assigned responsibility for forging new relationships. To build strong, trust-based relationships, managers and stakeholder group leaders must have a deep personal commitment to finding workable solutions. They must also have a high level of emotional intelligence, as well as good interpersonal communication and conflict resolution skills. Finally, the leaders must have the opportunity to meet informally to learn more about each other and build trust. Trust building was a key factor in the evolution of relationships between MB managers and ENGO leaders.

For example, during the early stages of exploration, Linda Coady, the VP of Environment at MB and Adrienne Carr, the head of the Western Canada Wilderness Committee met repeatedly to try to understand each other's concerns and interests. This was despite the fact that members of the environmental coalition were carrying out massive protests, for example chaining themselves to the desks of senior executives in MB's corporate headquarters. Nevertheless, both women lived in the same neighbourhood and would meet for coffee at a local restaurant with their young children in tow. Slowly, after many such examples of "stroller diplomacy" the hostility on both sides began to thaw and personal trust and liking took its place.

As another example, Tom Stephens MB's CEO invited leaders of the environmental organizations to meet with him and several other senior managers. This turned out to be a critical meeting in terms of trust and relationship building. Stephens listened to a presentation by the ENGO leaders. In the same meeting he turned to the Chief Forester to announce he was allocating $1 million to create The Forest Project to be led by a small group of managers who were given 90 days to come up with a plan to end clearcutting while still remaining profitable. As the ENGO leaders noted, this was the first time any CEO had met with them. Over the next three months, ENGO leaders met several times with managers who were working on the Forest Project to share ideas and discuss alternative approaches.

What was learned at Clayoquot

• Ensure commitment from the top: a new CEO set the stage for changing stakeholder relationships.
• Identify urgent problems -high stakes and high interdependence brought MB and ENGOs to the table and kept them there.
• Dialogue - company executives and environmental group leaders spent a lot of time together, this helped build trust and forge strong interpersonal relationships.
• Clarify common ground - the parties identified something small they could agree on and started there; they did not try to address all areas of conflict at once, trade-offs were not considered.
• Common base of information- a report by a group of respected scientists and First Nations elders stimulated new ideas and created a new frame of reference
• Principles -First Nations established protocols that were grounded in two key principles - mutual respect and the interconnectedness of all things. These principles had a profound impact on the substance and quality of the dialogue.
• Don't try to control the process. The earlier multi-stakeholder process failed after 2 ½ years. The government tried to control the scope of the dialogue and ENGO and First Nations leaders refused to participate.
• Avoid taking unilateral action -ENGO leaders consulted with their partners before taking major action, they also were in close contact with MB and First Nation's leaders during all stages of the process.
• Go to their space -meetings were held in First Nations communities, on the Greenpeace boat, and in restaurants - not in corporate board rooms.

What does this case tell us about standards for stakeholder engagement?

This case reminds me why it may not be possible or desirable to set process standards for stakeholder engagement. First, developing standards may not be possible given the fact that engagement is really about building mutually beneficial and therefore sustainable relationships. If relationships are co-created, and cannot be controlled or managed by companies, how can we set standards?

Second, standards may not be feasible given that situations in which stakeholders and corporations interact are so different. As was the case in Clayoquot, relationships develop as a result of a complex constellation of individual, organisational and contextual factors that vary across situations and time. In my view, trying to set standards for stakeholder engagement processes would be like trying to set standards for how people raise their children. Obviously, the right parenting strategy depends on the personality of the parent and the child, the dynamics of the family system and all of the other societal forces that shape parent-child interactions.

Perhaps what we should be aiming for is outcome goals or standards. Sustained, collaborative relationships based on high levels of trust and commitment are good indicators that the stakeholder engagement process has been positive for both corporations and their stakeholders. Let's start there.

References

Thomas-Larmer, Jennifer. "Practitioners Look Down the Professional Road". Consensus, October 1999, p 8.

Logsdon, Jeanne, M., "Interests and Interdependence in the Formation of Social Problem-Solving Collaborations." Journal of Applied Behavioral Science, Vol. 27 No.1, March 1991, p. 23-37.

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