Page 4: Potential stakeholder conflict
It is important for a business to balance the interest of its various stakeholders. Different stakeholder groups have different priorities, for example:
- Shareholders expect the business to make a profit and receive a return on their investment
- Employees require good working conditions if they are to be retained
- Potential investors may want to see evidence of how a company responds to environmental issues before committing money to the business
- Customers expect accurate and reliable products
Stakeholder conflict arises when the needs of some stakeholder groups compromise the expectations of others. A business has to make choices which some stakeholders might not like. For example, the cheapest supplier goods, which can help keep prices down for customers, must not come at the expense of ethical practice by suppliers or product safety. Whilst the end product may be cheaper, association with an unethical supplier or low quality product risks damaging our business reputation and financial loss.
Some activities may not give immediate financial return on investment but support the business’ ethical standards. Such policies need to be communicated and explained to all stakeholders involved, so they understand the longer-term value they provide. For example, investment in ‘green’ energy (such as solar power) may be more expensive but can help the company reduce its environmental footprint. Ongoing data centre upgrade projects contributed to a decrease of 1% in energy consumption at our data centres in 2015 despite increasing online delivery of our products and services. The investment in improving data centre efficiency is helping to reduce our environmental impact
Supporting employees may also lead to trade-offs. RELX Group employees are offered development opportunities so that they can reach their potential. RELX Group has to justify this investment against the opportunity cost of using the time and resources for other purposes. It also has to assess the potential downside of not training its employees. This could include losing good people to other organisations or mistakes happening through lack of training.