Ensuring the organization's social responsibility based on stakeholder management

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Ensuring the organization's social responsibility based on stakeholder management

Mariia Bieloborodova

Objective: the purpose of the study is to model the interaction of enterprises as subjects of social responsibility with the main groups of their stakeholders in order to improve the quality of the organization.

Methods. The following general scientific and special research methods were used to solve the tasks of the paper, namely: critical analysis, comparative analysis, grouping, generalization, expert surveys, methods of statistical data processing, graphical method.

Results. In a market environment with established competition for business, it becomes necessary to study and analyze the influence of stakeholders on the activities of a particular business-entity. The main goal of identifying stakeholders and forming aggregated types of stakeholders is to strengthen the social responsibility of organizations and improve financial results. Practice shows that balancing the needs of stakeholders allows an organization to achieve sustainable success. Monitoring of interested parties is based on identification of their types, collection and accumulation of information about their activities. Stakeholder management is one of the tools that can be used to implement the strategic goals of businessentities. Thus, in the real practice of the organization there are gaps between the expectations of a significant group of stakeholders (on the example of LLC “Misksvitlo Plus”), and the real level of their satisfaction with the markers of social responsibility (availability of quality certificates and use of tender procedures) is quite low. Accordingly, these areas need further optimization.

The scientific novelty of the work is to adapt the theory of stakeholders from the standpoint of a socially responsible organization, as well as to identify ways of interaction between stakeholders based on their satisfaction with the organization.

The practical significance of the obtained research results lies in the possibility of using the developed recommendations for optimizing the quality of services of the organization in accordance with the expectations of stakeholders of the enterprise.

Keywords: entrepreneurship, quality, communication, stakeholder, matrix, cooperation, corporate social responsibility, strategy.

Марія Валеріївна БЄЛОБОРОДОВА кандидат економічних наук, доцент, доцент кафедри туризму та економіки підприємства, Національний технічний університет «Дніпровська Політехніка», м. Дніпро, Україна

Світлана Іванівна БЕССОНОВА кандидат економічних наук, професор, професор кафедри обліку та аудиту, ДВНЗ «Приазовський державний технічний університет», м. Дніпро, Україна

ЗАБЕЗПЕЧЕННЯ СОЦІАЛЬНОЇ ВІДПОВІДАЛЬНОСТІ ОРГАНІЗАЦІЇ НА ОСНОВІ УПРАВЛІННЯ ЗАЦІКАВЛЕНИМИ СТОРОНАМИ entrepreneurship quality communication stakeholder

Problem statement

Due to the current socio-economic situation, scientists, economists, and managers are greatly interested in the problem of deep understanding of corporate social responsibility within the framework of the stakeholder approach. Also, their areas of interest include the development of effective stakeholder-management methods and tools, the study of comprehensive measures to implement the model of socially responsible business behavior. In recent years, stakeholder theory has undergone significant changes. Stakeholder management is based on the processes of establishing links, developing relationships, and maintaining effective interaction between business entities and key stakeholders. Stakeholder groups that directly or indirectly influence business operations may not interact with each other, but they do influence as an informal coalition.

In a market environment with established competition for business, it becomes necessary to study and analyze the influence of stakeholders on the activities of a particular business entity. The main goal of identifying stakeholders and forming aggregated types of stakeholders is to strengthen the social responsibility of organizations and improve financial results.

Analysis of recent studies and publications

Freeman E. et al. [1, p. 289] made a great contribution to the formation of the theory of stakeholders. They formed the concept of “company stakeholders” as individuals, groups, or organizations that significantly influence decisions, made by the firm, or affected by such decisions. The basis of the stakeholder approach is the provision that the success of a company depends on the degree of satisfaction of all its stakeholders.

Separately, it is worth mentioning the matrix of Mendelow A. [5] who positioned stakeholders into four groups, based on two parameters: influence and interest. In turn, Mitchell

R. K. et al. [6] proposed to classify according to three criteria: power, legitimacy, and relevance, which allow identifying the characteristics of stakeholder groups. The research by Freeman R et al. [2] highlighted the latest trends in the practical application of stakeholder theory in management, as well as issues of relations between the company and its stakeholders. The authors emphasize the use of the theory from the point of view of business ethics, partially touching upon the application of stakeholder theory in the context of the concept of business social responsibility.

For a long period, the least studied issues in stakeholder management remained the problems of identifying the company's stakeholders. One of the ways to identify and position stakeholders is proposed by Laplume A. O. et al. [4]. The authors substantiated a variant of the classification of stakeholders based on two criteria: from the standpoint of the threat and benefits of cooperation for business.

Formulation of article objectives

Practice shows that balancing the needs of stakeholders allows an organization to achieve sustainable success. Controlling stakeholders includes the identification of their species, the collection and accumulation of information about their activities and the development of appropriate communication strategies [1]. Stakeholder management is one of the tools that can be used to implement the strategic goals of business entities. The purpose of the study is to model the interaction of enterprises as subjects of social responsibility with the main groups of their stakeholders in order to improve the quality of the organization.

Methods and methodology

The following general scientific and special research methods were used to solve the tasks of the paper, namely: method of abstraction, comparison, expert methods, in particular, survey, graphic method.

Presentation of the main research material

Consideration of the principles of interaction with stakeholders and their management from the point of corporate social responsibility is the most common among other approaches. The relationship between the theories of corporate social responsibility (hereinafter - CSR) and the theory of stakeholders was considered by both foreign and domestic scientists. According to [7, p. 50] CSR is a concept within which a company interacts with stakeholders and implements the principles of socially responsible behavior based on ethical standards. He argues that this behavior of social responsibility allows the development of human capital, both within the company and externally.

Real social life and modern relations provide a significant expansion of the scope of business activities. The public expects from modern entrepreneurs not only economic results, but also participation in solving social problems in general. In this regard, the ability of entrepreneurship as a separate social group to understand its own social significance, role and place in the structure of society, the regularity of the processes in which it is somehow involved and the direction of its activities accordingly. On this basis, social responsibility is formed as a certain level of voluntary response to social problems of society. Accordingly, the social responsibility of business entities covers various areas, ranging from the implementation of statutory obligations to pay taxes, production of quality products and standards to maintain appropriate working conditions and ending with voluntary social investment in their own staff, products, territory where business, support for social institutions and mechanisms, the formation of “correct” norms of behavior in society [15, p. 18].

The social responsibility of business entities is closely linked to the economic and social aspects of the company. It is, first of all, about the material security of its employees, their social status, psychological well-being, participation in the social life of the company, etc., honesty and integrity of the entrepreneur in relation to its employees and external partners [16, p. 29]. The company's profits as a result of its successful business are necessary to ensure a permanent job, pay a decent salary, pay taxes, develop new products, invest in services and promote the well-being of the communities in which they work. Therefore, the development of social responsibility of economic entities contributes not only to the growth and profitability of an individual company, but also to the effective growth of the economy as a whole. The real social responsibility of business entities is to eliminate social contradictions.

Most modern studies of corporate social responsibility issues as the main one, highlight the problem of empirical evidence of the positive impact of CSR on the value of the company. Some authors put forward the idea of the possible existence of an optimal degree of corporate

social responsibility that maximizes the company's value, Rodriguez-Gomez S., Arco-Castro M.L., Lopez-Perez M.V et al. [8] are among them. However, the key difficulty in determining such an optimal level of CSR in the company's management is primarily since it is characterized not only by the amount of financing for implementation but also by a large number of non- financial factors, many of which cannot be analyzed or predicted. These factors include:

1. Identification and positioning of the company's stakeholders for their classification and selection according to the degree of importance of interests;

2. The efficiency and effectiveness of the system of information interaction of stakeholders on the results of the company's activities within the framework of the strategy of corporate social responsibility;

3. The degree of stakeholder involvement in the strategic management of the company.

A similar trend is reflected in stakeholder theory. Grosul V. A. and Zubkov S. O. [3] introduced the concept of a networked approach to stakeholder management, which developed four main approaches to establishing networked stakeholder management, namely: dyadic, egonetwork, multiple, holistic, which were adopted for restaurant business industry.

Thus, the influence of stakeholders on the organizations' sustainable development and the level of their social responsibility is increasing. At the same time, the company, to conduct successful strategic planning, must also harmonize the goals of its stakeholders [13]. In the framework of the above, it is necessary to consider the main stakeholder management standard - AA1000SES in the field of sustainable development, developed by The Institute of Social and Ethical Accountability [11]. It is the first international standard in the field of stakeholder management. The main difference between the approach spelled out in the standard and other existing standards in this field is the implementation of a system of constant dialogue with stakeholders in the company's practice.

The Global Reporting Initiative, a non-governmental organization, developed the GRI standard as a guide to sustainability reporting in 1997. The fourth version of the guidelines, GRI G4, published in 2013, has become widespread. Currently, the fifth version of the standard GRI G5 has been released as a series of industry standards. The guidance defines the principles for preparing non-financial statements and the standard elements that should be contained, as well as for instructions for use. This standard can be useful to any organization, regardless of company size, industry, or location; it includes requirements for disclosure of information in the field of the company's management, its economic, environmental, and social performance.

Also, there is the IIRC standard - an international standard for integrated reporting (International Integral Reporting Council), which provides for the disclosure of information about an organization and the external environment in which it operates, namely: management; business models; risks, and opportunities; strategy and resource allocation; results of activities; perspectives and basic principles of presentation. The purpose of the integrated report is to explain to all stakeholders how the company creates value in the short and long term.

An important stage in stakeholder management is the process of identifying them. The most popular and effective method today is SWOT and PEST analysis. A detailed analysis of external factors influencing the company and its activities (OT part in SWOT and PEST analysis factors) allows us to determine not just events, but also the actors that set them in motion (stakeholders). This tool includes research on the following factors: socio-cultural, technological, economic, political, environmental, and legal aspects. The key segments of the companies' operational environment are precisely the elements of the PESTEL analysis: 63 environment, technology, economy, policy and legislation, demographic and cultural characteristics. Sciarelli M. and Tani M. [9] defined PEST and its variant PESTEL analysis as an analytical multivariate model of the external environment of business units. These two methods (SWOT and PEST/PESTEL analysis) do not always allow identifying the active and passive stakeholders, as well as the mediated stakeholders. However, there are also specialized techniques; the key to them this day remains the Mitchell model [6]. The Mitchell model identifies eight major stakeholder groups based on a combination of three key dimensions -- influence, legitimacy, and urgency -- and represents them by Euler circles.

Considering modern approaches to identifying stakeholders, one can observe a tendency to consider the firm as a central hub that can build around itself a network of peer companies that are critical at a given period of organizational development. This inter-firm organizational design is an alternative to vertical integration and is consistent with resource theory. Only in this case, the necessary resources are at the disposal of the firm for the duration of the contractual relationship with another firm [3].

According to the concepts of corporate social responsibility and stakeholder theory, the business entity can be considered as one of the participants in the network of interacting entities, in which it will play the role of network intermediary. The organization, by managing resource flows between groups of stakeholders, i.e. acting as a network intermediary, can ensure the emergence of relative rents of a special kind. Thus, we can identify the main groups of stakeholders directly or indirectly involved in the activities of socially responsible businessunits based on mutual exchange of resources, i.e. by using a resource approach.

The interests of the company's main stakeholders can be reconciled based on a procedure called “Pareto-optimality”, as stakeholders' expectations can be represented as multiple optimization problems - there is no best solution in all parameters, but there is the best available. Pareto-optimal equilibrium means that it is impossible to increase the usefulness of one group of stakeholders without reducing the usefulness of another group. The Pareto-optimal equilibrium should be on the curve of possible utility.

Therefore, having achieved in the process of mutual agreements and compromises Pareto-optimality, where the established relationship is acceptable to both parties, these groups of stakeholders can work with the company for a long period and get effective results. As a result, the interests of the company and both stakeholder groups will be agreed upon and harmonized in some way. Pareto-optimality is achieved by choosing an alternative that is nondominant (the best in one of the relationship effectiveness indicators, but no worse than the others) in the framework of building relationships with stakeholders [12, р. 210].

For an organization to effectively build and implement a strategy for a given stakeholder group, it is first necessary to understand which other groups make the greatest “contribution” to the imbalance. To do this, in the satisfaction matrix, we can subtract from each other the elements symmetric to the main diagonal. The obtained elements will reflect the differences in satisfaction with the exchange of resources between groups. Note that these differences (their absolute value) will be indicators of the imbalance of resource exchange. If all the satisfactions were equal (although there would be less than one), both structures of resource exchange would coincide [10, р. 75].

In the field of resource management from the point of social responsibility there is a case of the investment company “VolWest Group”, which runs strategic business projects. Through the specifics of organizational performance, the focus of the corporate social 64

responsibility is on labor resources. A key perfomance indicator in this field is minimization of staff turnover. Therefore, in 2018, the average staff turnover ratio by group was about 2.97% [14, p. 210]. Another example of the implementation of corporate social responsibility in terms of stakeholder management is the policy of Metro Cash and Carry, which since 2020 in Ukraine is implementing a CLCM project - customer led category management. The ultimate goal of the project is to transform the company from one that focused on the requirements of suppliers to one that builds its activities depending on customer needs. In addition to the private sector, resource management in corporate social responsibility has also found its application in the activities of administrative bodies and local governments.

The above indicates that social responsibility today is a long-term trend in the policy of modern business organizations, which reflects the emergence of a new type of social policy, which is managed not only by nation-states but also by the public, international and business structures. The new type of social policy is a response to the institutional environment of the business sector, which has undergone significant changes. Accordingly, in the new institutional environment, the concept of social policy has also received a broader interpretation, which includes not only the state guarantee of social rights of citizens but also the requirements for the more active involvement of business in social policy. The social responsibility of business has become a conceptual and ideological basis for a new type of social policy.

To determine the areas of improving the quality of the organization, a limited liability company “MISKSVITLO PLUS” was selected, which performs a wide range of electrical work in the Dnipro region. starting with the task of designing and calculating the loads and ending with the commissioning of works and service, while significantly reducing the time of work.

One of the priority areas of the enterprise is the further development of cooperation with the world's leading manufacturers of electrical products. “MISKSVITLO PLUS” LLC assumes responsibility for the safety, reliability of the installed electrical engineering systems and manufactured equipment, as well as for the quality of services provided. The management of the enterprise pays special attention to the decision of social questions in a life of collective, keeps the social infrastructure created for years of existence of the enterprise and supports many traditions and social guarantees.

As the company positions itself as socially responsible, we analyzed its main stakeholders, the most important of which according to the approach, based on an open survey of five experts representing the company's management (director, technical director, commercial director, site manager, chief accountant). Its major stakeholders were analyzed according to the approach proposed by [5]. The most important stakeholders of LLC “Misksvitlo Plus” are consumers of services and works that belong to the private (PJSC “Yuzhkoks”, PJSC “DMZ”, LLC “Avtoremzavod”) and public sectors (construction and housing departments, settlements councils and united territorial communities of Dnipro region, organization of co-owners of apartment buildings of the largest cities of Dnipro region) controlling bodies, including the State Architectural and Construction Inspectorate of Ukraine, the main suppliers (PJSC “Vatra”, LLC “Yuvislight”, PJSC “Zaporizhzhia Cable Plant”, etc.). Thus, according to the level of influence and significance, all stakeholders of the enterprise were divided into groups (table 1).

Table 1 Stakeholders matrix of LLC “MISKSVITLO PLUS”

According to [5], the types of stakeholders defined as passive and discretionary, located in the lower left corner of the matrix, can be attributed to the zone of interaction transformation, indicating the need for more detailed monitoring and feedback. For the researched enterprise, it is expedient to include the local territorial community in this group.

Stakeholders referred to the right quadrant of the matrix have a significant impact on the level of service quality of the enterprise, and accordingly on the level of its social responsibility. They fall into the zone of increased attention and controlling by the enterprise. For LLC “Misksvitlo Plus”, these are consumers, suppliers and employees of the organization.

Another group of stakeholders that has a significant impact on the social responsibility of the organization is the regulatory authorities and competitors, as they belong to the external environment of LLC “Misksvitlo Plus”, the influence on them by this organization is limited.

Based on the proposed distribution, we can analyze the expectations of prominent stakeholders of the organization (group 7 - consumers) for their satisfaction with the quality of services provided and the level of social responsibility of the organization. Representatives of the surveyed consumer organizations (PJSC “Yuzhkoks”, LLC “Avtoremzavod”, Department of Construction and Housing of Kamianske City Council, Kurylivka Village Council) and management representatives of LLC “Misksvitlo Plus” determined the speed of order processing, certification of works and services, transparency and breadth of use of tender procedures, availability of additional services. The criteria of social responsibility included the identity of the quality of works and services for the private and public sectors, the presence of flexible sales policy, the absence of tax arrears. After identifying the main markers of stakeholder satisfaction, the presence of gaps between expected and actual satisfaction of representatives of a significant group of stakeholders was assessed, as shown in fig.1. Data are calculated on a 5-point scale, respectively 1 - dissatisfied, 5 - completely satisfied. Thus, in the real practice of the organization there are gaps between the expectations of a significant group of stakeholders of LLC “Misksvitlo Plus”, and the real level of their satisfaction with the 66 markers of social responsibility (availability of quality certificates and use of tender procedures). Accordingly, these areas need further optimization.

When an organization interacts with a stakeholder, the resources received are a result for the organization and a cost to the stakeholder. Conversely, the resources received by the stakeholder are both its results and the costs of the organization. Hence, for resource exchange to be effective for both parties, it is necessary that the parties are equally satisfied with the resources received. An important role here is that the assessment of the same resource from the point of view of the organization and the stakeholder is different.

Fig. 1. Analysis of gaps between stakeholder expectations and their actual satisfaction, scores

On the other hand, the interaction of a business unit with each of its stakeholders is not only around resource exchange (although this component of the relationship is very important), and it will be effective for both parties if neither of them wants to change anything in the relationship. We can call such relations balanced.

Conclusions

A balanced relationship is a state in which neither the business unit nor the stakeholder has a desire to change anything in them. Moreover, since there is no desire to change something in the relationship, then mutual requests are satisfied quite well. The state of balance is optimal according to Pareto. If the business entity establishes a balanced relationship with all its stakeholder groups, it will mean that all their requests are satisfied well enough, which means that the relationship is effective. To identify and assess the impact of stakeholders on activities organizations use models, matrices, and stakeholders maps. The results of this research allows as to group the stakeholders of a socially responsible organization according to the resource approach and to identify ways of interaction of stakeholders based on their satisfaction.

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