Who are the ‘Five Stakeholders’ and why are they important?
The five stakeholders are important players in sustainable development not only in business but for the continued existence of the whole human race. The stakeholders are:
Society and Environment.
Here is a short story to show how each of these plays a role in the sustainable development of business, society, and the environment - thus the very existence of people.
Naresh was a rice farmer in the Uttar Pradesh Province, being part of a long line of rice farmers stretching back many generations from a young age he learned from his father what farming was all about.
His father passed away at a young age, Naresh was only fourteen years old and took over the responsibilities of providing food for his family – his mother and six other siblings.
From a very young age, he had helped his father plant the rice and also harvest it three times a year, depending on the rains.
At first, he only provided sufficient rice and vegetables to feed his immediate family and to some degree part of his extended family, but in time he was able to offer the surplus to all of his extended family and other people in his village. By the time he turned twenty-one, he was well respected for his agricultural skill and his philanthropic focus and was well-loved and many felt he would be destined for a leadership role in the region.
Partly in respect to his father, and for financial reasons, Naresh started by following the same practices that his father had taught him, which was, mainly, you always keep some of the grains to plant in the next season. This worked well and in time as he became more skilled in ploughing, he was able to produce a better yield from his store of grain.
At the same time, he was also able to start a small vegetable garden next to their home. It started by him creating a small compost pit, which he filled with vegetable cuttings and layers of leftover vegetable matter, rice husks, and soil. When the pit was full, he would leave this to decompose and when it had turned into compost, then he would plant a variety of vegetables in this nutrient-rich soil.
His family enjoyed the delicious tasting and healthy food they now enjoyed from Naresh’s kitchen garden. After some time his family encouraged him to sell these vegetables in the market as they were not only tasty but were nutritious, leading to better health.
At the same time as he had begun to create his vegetable garden, farmers began to use chemical fertilisers and some of his friends tried to encourage him to follow their example, but Naresh felt – somehow – that this was not in keeping with the principles he father had always insisted were the right way to farm for a sustainable future. One of the principles was ‘stay close to nature and do not use artificial, chemical, man-made additives. Using what nature creates is always a healthier, more sustainable way to farm.
In time Naresh was able to show from a financial point of view that his way was financially more profitable. His friends would have to go and buy more fertilisers from the pharmaceutical companies and in time they also had to buy chemical pesticides, fungicides, and insecticides, because for some unknown reason their products were more susceptible to pests and fungi. At the same time, Naresh did not have any of these overheads. In fact, he did not have any waste, it was all ploughed back into the soil in one way or another. This was a revolutionary discovery for Naresh and something he kept in the back of his mind as he developed his businesses.
As the demand in the market increased, he had to increase the size of his farms and along with this, he needed help to manage to need to produce more good quality, highly nutritious, tasty vegetables and grains. At first, this was easily done with his brothers and sisters joining in and working with him. But it was only a matter of time before they were unable to get all the work done and Naresh had to now start employing other people in the village.
Finding people to work with you was something that Naresh had never thought about and he did not know very much about it either. But true to his nature he was determined to learn and become the best he could. He had been an avid reader when he was young and had read almost all the books in the School Library while he attended school before having to work full time.
With the advent of the internet, he had also obtained computer skills through his own efforts and was able to learn a lot of what had to be done to find the best person who could do the work but also would be able to fit into the culture of his family business.
It took a few months before he decided to recruit their people from neighboring villages to join his small company. Two of the three showed an immediate aptitude for their work and were within a few months mastering all the tasks given them. The third person we can call them – K. K was intelligent, showing good results at school, had a pleasant personality and on the face of it seemed ideal for the position they were given, but they struggled with the tasks given them from day one.
K had been given the job of negotiating prices at the various markets in the region. This task was beyond K’s ability and part of the problem was the fact that they were unable to say no to the people with whom they negotiated. Naresh spent time with K and soon identified the cause of the problem. K was a friendly, intelligent person, but lacked the confidence to say “No” when it was necessary to express an honest opinion.
Naresh thought about the problem and decided to try a different set of tasks for K. This time he suggested that K work in the sorting department and this suited her abilities and her personality much better. The change in K’s enthusiasm and ability to perform was noticeable.
By this time many of Naresh’s friends were suffering financial difficulties, because they were paying more money to buy the seeds for their farms, also have to buy the chemical fertilisers, which in the longer term deprived the soil of essential nutriments and as a result produced produce that looked the same but did not taste the same. Coupled with this the need to buy more chemicals to get rid of insects and fungi added to their costs.
All of the above gave Naresh an advantage in the market and in time one of his close friends approached Naresh to ask if he could not work with him.
Naresh gave this opportunity some thought and after a few days came back to his friend to ask him a few questions. First of which was to ask what the friend was really good at? His friend immediately replied that he was good at accounting and finance. Naresh’s Company, “Vanya’s Global Trade” employed about 150 people, and Naresh felt it would be a good idea if he started getting his accounting and finance taken to another level of efficiency.
Having an expert in charge of this side of the business made sense because now there could be more accurate monthly figures on reflecting more accurate information on the income and expenditure, which in turn could help in the decision making.
Another friend – “Tu” - also joined the growing company and was put in charge of managing the suppliers, the companies who provided technical support to “Vanya’s Global Trade”. Tu took an interesting approach to the suppliers, he did not immediately bargain the lowest prices, but rather kept Naresh’s idea of long-term sustainability in mind, and asked for the best value for money to achieve sustainable long terms results.
At this point, it will be good to reflect on some of the unique developments in Naresh’s company.
He wanted sustainable results where his farming methods were “close to nature”, using recycling to create natural compost.
His priority was to make sure he knew what the market wanted and then he provided an excellent product that satisfied the customer.
His employees worked to their strengths and were well treated.
The Shareholders got an excellent return on their investment.
Suppliers were treated well and enjoyed a sustainable relationship.
Society and the environment benefitted from his approach to business.
We will write more about why the five key stakeholders are important. And it is now even more essential to focus on society and the environment.
People Plus cover topic of "The Importance of the Five Stakeholders" in our Creating Participative Management Culture workshop. You can view the detail of the programs HERE, or contact us HERE.