The importance of stakeholder engagement to Lafarge was established in 2003, when reference was made to it in its core values, the Principles of Action.
Of course, stakeholder engagement was present in the group before this: as an international group, Lafarge SA had operations around the world manufacturing cement, aggregates and ready-mixed concrete.
At such a scale, there were many opportunities to interact with stakeholders. However, 2003 marked the moment when the group recognised the importance of developing a common approach to the topic, starting with its cement division.
This product line was chosen due to its larger operational footprints and proximity to the necessary mineral raw materials, usually in more rural areas. The group also recognised that many of the challenges related to the licence to operate involved cement plants. These could be related to environmental performance, although social issues such as local employment and leveraging local development were becoming increasingly linked with the licence. Engagement by operations in other product-lines increased as well, usually through more local initiatives.
Building on this progress, the group established its first corporate team on stakeholder engagement in 2009 to support aligned engagement across countries and product lines. Objectives and indicators of performance were included within the company’s then-sustainability roadmap (Ambitions 2012).
Founded in 1833 by Joseph- Auguste Pavin de Lafarge to exploit limestone quarries, Lafarge is a French industrial company specialising in cement, construction aggregates, and concrete. Its first international contract came in 1864 for the delivery of 110,000 tonnes of lime to the construction of the Suez Canal. On July 10 2015, Lafarge merged with Holcim, a Swiss cement company. On July 15 2015 the new company was officially launched around the globe under the name of LafargeHolcim.
A comprehensive programme of workshops and webinars were organised with operational teams around the world to ensure engagement was integrated within their businesses through the use of a systematic methodology with dedicated tools (to provide a context of scale, at the beginning of 2015, Lafarge had around 2,000 operations in 63 countries).
Lafarge’s bespoke approach to engagement focused on a four-step methodology, to be deployed by operations on an annual basis:
- Organisation (stakeholder mapping, remarks management and risk analysis)
- Action (Annual engagement plan, including dialogue vehicles, community programmes and media relations)
- Anticipation (risk mitigation and crisis preparedness)
- Capitalisation (collection, analysis and reporting of data, including socio-economic footprint measurement for public reporting as well as developing learnings and objective-setting for next cycle)
Annual reporting demonstrated sustained progress from this aligned approach: the number of sites deploying key elements of the methodology (including stakeholder mapping, implementing an annual engagement plan and formalising community programmes) increased year-on-year; external verification by the Dow Jones Sustainability Index awarded the Lafarge 90 per cent in 2014 and 100 per cent in 2015.
In this context, this article highlights some of the learnings generated during this process. For the purposes of this article, the term ‘stakeholder’ broadly refers to members of the local community. The importance of engaging effectively with key stakeholders such as elected representatives, government officials and regulators is fully recognised.
However, in many cases, specific engagement strategies are required for these types of stakeholders.
“The most compelling business cases extended beyond maintaining the licence to operate.”
The broad definition adopted includes employees, who remain of fundamental importance as natural ambassadors of the organisation as well as key opinion formers, such as doctors and teachers, who can have an important influence on local perceptions of an organisation or site and whose significance is not always identified during mapping processes.
Stakeholder engagement is a business-orientated, operational topic: When we started to focus our engagement efforts, the initial network was made up of people based in a wide number of functions. Although this reflects the range of skills required for effective engagement, we recognised early on the importance of fully involving senior leaders/managers (operations or business line) in the topic.
Without their involvement, progress could become limited through, for example, delays in decision-making or placing a perimeter around the extent and ambition to which programmes could be developed.
As a result, a priority was placed on integrating engagement as an operational priority by including it in the annual objectives of business or operational managers, with specific KPIs. Depending on the maturity of the locality, such KPIs could focus on inputs (implementing methodology, balancing financial and non-financial contributions, for example) or outputs (increasing numbers of beneficiaries from company programmes).
Integrating it into an operational topic was not easy, with business leaders already managing multiple priorities. As a result, the business case for stakeholder engagement had to be well prepared and articulated, to persuade leaders to assume additional responsibilities.
We found that the most compelling business cases extended beyond maintaining the licence to operate. Although part of it, we found that the most successful arguments also needed to include analysing the available opportunities for value creation as well as the potential opportunity costs if engagement did not take place.
This analysis also drew from data within the business (such as mechanisms that could measure the effectiveness of consultation as part of an operational application) as well as incorporating publicly available data (Edelman’s annual Trust Barometer and the Wharton School’s work in this field, including Spinning Gold: The Financial Returns to External Stakeholder Engagement by Henisz, Dorobantu and Nartey, June 2011, being two notable external sources of data).
Once established, it may not be necessary to evolve these business cases. In the majority of cases, we typically found that managers’ readiness to engage increased once they had developed some experience in the field and observed the value-creation at first hand. Some of the most reticent on engagement became our strongest advocates once they had seen the merits for themselves.
Integrating engagement with operational priorities also provided a platform to increase engagement by extending work in other areas. Health and safety is probably the strongest example of this, given that, by its nature, its importance can be shared across a wide constituency.
By integrating engagement alongside health and safety, additional opportunities for value creation can be generated. This was especially the case during recognition periods (Health and Safety Month for example) with sites enlarging events, such as training on road safety, to involve members of the local community as well as employees.
This approach was particularly helpful to smaller sites whose previous interactions with communities may have been limited; the broad platform of health and safety allowing contact between the site and its communities to be established.
It also became apparent that engagement provides many opportunities for managers to develop their own communication skills. The most effective managers in this field were those who had regularly involved themselves with local communities and practised their skills. This can be especially evident in business-critical situations, where communication and engagement skills are under more pressure. This led to situations where stakeholder engagement could appear in both operational managers’ objectives and their Individual Development Plans.
Effective identification of risk can be used to leverage activity (initially): Having initially partnered with a number of countries developing very ambitious initiatives, we incorporated risk into our methodology. We felt that risk would provide a point of focus to teams when developing their plans, around which they can begin to develop their skills and experience more autonomously.
We had to recognise that, as a small corporate team we had to focus our effort on empowering operations around the world.
As a result, tools on risk analysis and many other engagement actions were added to our methodology. For units new to engagement, risk mitigation was used as an initial focus for engagement and we found that this approach led to the development of engagement mechanisms similar to those established for units in our parts of the value chain (by mechanisms, I’m referring to actions such as dialogue vehicles and focused community programme policies).
We’ve debated a lot whether this risk-mitigation approach has limited the extent of our work in some areas . To be transparent, I believe it has merits. I understand that for other stakeholders, it can appear as if the business is only engaging for its own ends. In my experience, however, this was very rare.
Rather, it provided some inexperienced units with a robust platform on which to build, alongside other units that were already established in other areas of the value chain. Although engagement can be at its most effective when organisations and stakeholders are working together and co-creating programmes to tackle common issues, such programmes can be very challenging to establish, requiring considerable expertise and resource.
“Engagement provides many opportunities for managers to develop their own communication skills.”
And this principle can count on both sides, as co-creation requires a degree of mutual understanding and willingness to work together in order to develop sustainable solutions to such issues.
A risk-mitigation approach doesn’t preclude activities in other parts of the value chain, and we frequently saw businesses working in a number of areas – from creating economic activities around materials and fuels required to manufacture products, to creating a market for the company’s products through affordable housing programmes – alongside risk mitigation.
Analysing the data Lafarge collected over the years and the positive trends noted in the introduction suggests that integrating risks within engagement can positively contribute, particularly in early days.
A flexible approach: We faced an issue when we started to roll out our methodology into other product lines. Put simply, sites in some product-lines tended to be smaller than cement plants and they could become quickly submerged by the actions expected by our methodology. As a result, we refined our methodology to be more flexible. All sites were still expected to work systematically in the area: however, an ability to scale allowed sites to progress according to their size and locality.
This flexible approach was maintained for the tools supporting the methodology. Units had latitude to develop their own materials, but an adjustable toolkit was provided to all sites so that a site with no resources already had all the templates and examples it would need to start work in this area.
Some sophisticated business-wide tools were developed for countries to use, and they added value. At the same time, we learnt the importance of evaluating the availability of expertise and resource to support the use of these tools. For example, there are many very good stakeholder mapping tools, which help answer some of the challenging complexities in this area, such as compliance with data protection legislation. However, without the adequate resource to administrate the systems, the effectiveness of these systems becomes limited.
A similar principle relates to engagement itself. Engagement can be high when there are critical topics to manage. At Lafarge, we worked hard to ensure that consistent engagement was maintained, even when there were no specific issues to tackle.
In some critical scenarios, the nature of the issue can influence the nature of relations between the organisation and its stakeholders. Engaging when there are no specific stakes to hand can generate the most value, with all participants allowed the time and space to develop a fuller understanding with more opportunities for co-creation. Of course, such an approach seems quite logical, yet we can see organisations around the world that don’t adopt this approach.
These lessons do not represent all of our learnings and there were other areas on which we could have built. The role of employees as ambassadors was not always fully leveraged. Empowering employees to contribute to the area of engagement remained a constant focus for us, particularly as many of them are likely to have lived in the local area for many years and understand its dynamics. Involving a range of employees on mapping exercises added considerable value to the work.
As well as maintaining an ability to reflect and evaluate opportunities to further improve approaches, organisations are challenged by the fast-evolving trends in this field and changing expectations and engagement mechanisms used by stakeholders. This is likely to continue to take this topic beyond the licence to operate and more towards the role business can play in driving economic and social change.
Although developing effective engagement is a challenging process whose outputs cannot always be predicted in advance, Lafarge found considerable value from engagement which can be unlocked for both the business and its stakeholders.