Nowadays, with mounting pressure on businesses to be accountable for their environmental and social impact, it is no longer optional but expected for them to develop and implement sustainable business strategies that play out across three key areas: Environment, Social, and Governance (ESG). This pressure comes from rising public awareness, tightening regulations, and increased expectations from customers, employees, and investors.
Stakeholder engagement plays a significant role in the successful implementation of ESG strategies. In this article, let’s explore its functions and effects on ESG strategies.
The power of stakeholder engagement
Stakeholders are individuals, groups, or organizations that can influence or are affected by a company’s strategy from within and outside the organization. They can either drive change or resist it. Therefore, it is critical to identify stakeholders and understand their needs and expectations to ensure the ESG agenda reflects the priorities of those who matter and support the strategy’s long-term success.
Pay Governance LLC, a firm that provides independent advice on executive compensation matters, has developed the Stakeholder Value Creation Chain model (See Figure 1) to better understand the effects of stakeholder engagement on the economic success of a business. It demonstrates how ESG strategy, the stakeholder model, and the generation of corporate value all intersect to provide various advantages for corporations.
Engaging with stakeholders during the strategy execution phase allows companies to foster collaboration, build trust and confidence, encourage support for ESG actions, evaluate how the actions are perceived, mitigate potential risks, and improve decision-making.
To know more about ESG strategy and how it exactly boosts stakeholder engagement based on a report, read the full article in the PERFORMANCE Magazine Issue No. 25 – Sustainability Edition. You can download a free digital copy through the TKI Marketplace. Printed copies are also available on Amazon. But the price may vary depending on location.
Over the past few years, companies faced volatile business environments all while keeping up with sustainability requirements, workforce and customer behavioral changes, and market trends.Because of the turbulence of the business environment, the role of strategic planning becomes even more essential to the survival and growth of any business.
As John Child defines it, business volatility is “the degree of change which characterizes environmental activities relevant to an organization’s operations.” According to the 2023 Global Trends Brief, these are some of the components that caused disruptions and unpredictabilityin the business environment:
Rising prioritization for mental health and work-life balance
The traditional strategic planning process, according to Jean Dieudonne, strategic planning lead at ANZ, includes a three-to-five-year plan with actionable steps to achieve long-term goals. However, businesses must rethink this to adapt and deal with turbulent times.
One of the leading providers of energy solutions worldwide, bp is currently investing in low-carbon solutions. The 2023 edition of the bp Energy Outlook, as outlined in this year’s annual report, has identified two turbulent factors: the Russia-Ukraine war and the US Inflation Reduction Act. Given the unpredictable nature and potential enduring impact of these events on the trajectory of the national and global energy systems, the organization’s strategic planning process becomes even more essential.
Accordingly, bp proactively monitors the external environment and regularly updates its strategic plans in response to these external signals. They employ scenarios from the World Business Council for Sustainable Development’s “Climate Analysis Reference Approach for Companies in the Energy System” to assess and validate their strategy. This proactive approach enables them to seize opportunities and navigate challenges in turbulent times. The leadership team and board review the strategy, capital allocation, risks, and opportunities, making regular updates as needed. Also, to successfully go through the fast-changing business landscape, they monitor key indicators and metrics, including policy developments, renewables capacity, electric vehicle sales, and low carbon technology costs.
Another company that had to deal withturbulence in the business environment isSaudi Aramco Power Company,which has incorporated risk assessment into its strategic planning process. Projects go one by one through a structured decision process that includes rigorous risk assessments and value assurance evaluations, and each strategic scenario is stress-tested to ensure positive results in any business environment.
Strategic planning will always stay relevant, and the selection process for strategists should be of critical importance. Also, choosing the right resources to strategize and execute plans with is like choosing friends to accompany one in a dynamic environment—an escape room, for instance. Choose those that can be effectively utilized or leveraged for a specific purpose.
Survival in today’s constantly shifting business world depends on a company’s ability to anticipate and adapt to external factors. One way to do so is by using the PESTEL analysis—a framework used to identify and monitor the macro-environmental factors impacting an organization. By analyzing these factors, companies can gain insights into existing opportunities and threats and use these insights to formulate their strategy to better align with the external environment.
Figure 1. PESTEL analysis framework | Adapted from slideteam.net
Recent global events have significantly impacted companies worldwide. Russia’s invasion of Ukraine led to worldwide food shortages, supply chain disruptions, and an energy crisis in Europe. The ongoing disruption in the supply chain coupled with geopolitical tensions have led to concerns about an upcoming recession, as evidenced by slow growth in the global GDP.
Persistent high energy prices have also contributed to inflation, which has resulted in central banks raising interest rates and causing currency devaluation worldwide.
The prolonged COVID-19 lockdown in China also caused a severe strain on the global economy due to China’s prevalence as a global supplier. Moreover, tensions between the US and China continue to add uncertainty.
Another external factor is climate change, which is posing new threats to businesses. Thus, regulations for climate protection are becoming increasingly stringent.
Meanwhile, technology is becoming increasingly integrated into a wider number of industries, leading to increased digital transformation around the world.
In the face of these fast-paced and unpredictable external conditions, the PESTEL analysis is now more valuable than ever for businesses to navigate the challenges that arise.
The PESTEL analysis is a simple framework that encourages businesses to consider the external environment in which they operate, prompting them to consider external factors that affect their operations and evaluate their potential impact. Furthermore, it provides valuable insights for decision-making, empowering organizations to make informed choices and adjust their strategies to better match the broader external landscape.
To sum it up, the PESTEL analysis enables businesses to foresee potential threats and proactively mitigate their impact while spotting emerging opportunities and capitalizing on them.
Mapping the food industry’s PESTEL landscape
The food industry is a complex network of businesses engaged in the production, processing, packaging, distribution, marketing, and selling of food and beverages.
Given their crucial role in feeding the world’s population, food businesses must ensure they are prepared to handle any external factors that may impact their operations. To illustrate briefly, a PESTEL analysis for the food industry may cover several factors (See Figure 2).
Figure 2. PESTEL analysis of the food industry | Adapted from slideteam.net
The aforementioned recent global events have led to reduced purchasing power and food price inflation. Sociocultural changes and a growing focus on wellness are also expected to shape the industry’s future. Moreover, technological advancements and environmental efforts are significant factors that will influence its outlook. Hence, conducting regular PESTEL analysis is vital for companies in the food industry to be future-ready.
Ultimately, the PESTEL analysis is an indispensable tool for businesses, regardless of industry. Current global developments have demonstrated the importance of monitoring macro-environmental factors. Companies that prioritize PESTEL analysis are more likely to thrive in the face of external challenges and emerging trends, and it is high time that all businesses recognize its value and incorporate it into their strategy formulation.
Like a captain steering a ship through a stormy sea, leadership plays a crucial role in shaping the organizational climate, which in turn affects the individual’s level of commitment to the organization, job satisfaction, and productivity (Oktem, 2022). Creating a positive organizational climate requires management to focus on promoting autonomy, freedom, and support. Organizations can use internal environment scanning methods such as employee surveys, focus groups, and organizational culture analysis to gain insights into how leadership affects the work environment—knowledge that can then be used to create a positive climate to enhance employee knowledge, behavior, and effectiveness.
Critical factors such as interaction with team members, behavioral patterns, and the quality of the leader’s information—which covers updates, decisions, and strategic plans that they need to communicate to their team—all shape the organizational climate. Leadership behavior can significantly influence employee attitude and behavior. Studies have shown that managers who acknowledge their team members’ accomplishments can improve the perception of the organizational climate and leadership quality.
Conducting an internal environment scan can help assess the current state of the organizational climate and identify opportunities for improvement. Theorganizational culture analysis, a method of internal environment scanning, involves reviewing the values, beliefs, and behaviors of employees and aims to gain insights into how leadership is perceived and how it is influencing the culture of the organization.
One company that values itsorganizational culture and recognizes the significant role of leadership in shaping the work environment is Netflix. The company empowers employee decision-making by widely sharing internal documents, such as memos on title performance, strategy decisions, and product features.
Additionally, Netflix prioritizes open and direct communication by investing in coaching and modeling behaviors. To promote good decision-making, the company emphasizes the need for highly effective people and fewer management layers. The company encourages a “context not control” culture where leaders are expected to coach, set context, and provide feedback instead of micromanaging while employees make their own decisions. To foster this culture, Netflix values certain behaviors and skills in its employees, such as good judgment, selflessness, courage, communication, inclusion, integrity, passion, innovation, and curiosity.
The company employs a feedback system that includes surveys and focus groups to continuously improve its operations. A recentinitiative to promote work-life balance involved the implementation of an unlimited vacation policy, which was contingent on fulfilling job responsibilities and goals. To set a precedent, leaders take vacations themselves and urge their teams to do likewise.
As we can clearly see from Netflix’s example, leadership has a significant impact on the organizational climate. This highlights the importance of internal environment scanning to identify opportunities for improvement.
Improve your organizational climate by enrolling in ourCertified Strategy and Business Planning course. Gain valuable insights into the process of internal environment scanning and learn how to identify areas for improvement within your organization.
In 2016, President Abdel Fattah El Sisi exhibited tremendous support for Sustainable Development Strategy: Egypt Vision 2030. Since then, Egypt has undergone a major digital transition to modernize its economy, improve public services, and boost digital literacy. To attain such goals, the country has invested heavily in education, research, and technical infrastructure. This article will analyze Egypt’s recent technological developments across three main pillars.
Infrastructure development
The Egyptian government has invested considerably in the development of its digital infrastructure to provide reliable and high-speed internet connectivity across the country, such as expanding its fiber optic network to connect more households and businesses to the internet. As of 2020, more than 70% of the country’s population had access to the internet. Egypt has allocated more than $1.1 billion for the development of 5G technology and infrastructure. Adopting new technologies, such as 5G, will provide faster internet speed and improve connectivity across the country.
E-government services
According to the ICT 2030 strategy, Egypt has made significant progress in digitizing its government services, which has made it easier for citizens to access essential services online. In 2020, the Egyptian E-Government Services Portal was launched, providing a one-stop-shop for government services such as applying for passports and IDs. The portal offers more than 100 services, and as of 2021, more than 6 million citizens have registered for the service.
Financial inclusion & e-commerce
Meeza card, a national electronic payment card launched in 2019, allows citizens to receive their salaries, pensions, and other government payments electronically.
Egypt’s digital transformation has paved the way for private companies to launch several mobile payment applications, such as Fawry, Instapay, and Vodafone Cash, allowing citizens to pay bills, transfer money, and make purchases using their mobile phones.
The following explains why Egypt’s case should serve as a model based on two main motives:
Economic growth
The digital sector has been one of the fastest-growing sectors in Egypt, contributing significantly to the country’s GDP. According to a report by the governmental statistics, the ICT sector contributed 5% to Egypt’s GDP in 2021, and digital exports reached $4.9 billion by 2022.
Financial inclusion
The digitization of financial services has increased financial inclusion among Egyptians. According to a report by the MCIT, 56% of Egyptian adults have a bank account. Moreover, the money wallet accounts are expected to reach 57.9 million in 2025, which is higher than the average for countries in the Middle East and North Africa. In conclusion, Egypt’s digital transformation has advanced due to government investments in infrastructure, education, and innovation.
Digitizing government services, increasing digital literacy, and the government is pursuing digital transformation to meet its long-term aims. Last but not least, a valuable resource for those seeking to enhance their knowledge and skills in strategy planning is The KPI Institute’s Certified Strategy and Business Planning Professional course. It is recommended to sign up for this course to learn more about strategy planning.
