Identify three stakeholders from the case study. Describe each stakeholder’s primary interest AND their power/interest with the Flint Water Crisis in the at

GIIRS Emerging Market

Assessment Resource Guide:

Stakeholder Engagement

Page 1 of 9

What’s in this Guide?

I. Definition: What Are Stakeholders? II. Why Engage with Stakeholders? III. Designing a Stakeholder Engagement Plan IV. Methods of Engagement V. Principles for Successful Engagement VI. Regional Differences in Stakeholder Engagement VII. Additional Resources

I. Definition: What Are Stakeholders?

The term “stakeholders” generally refers to any individual or group that, either positively or negatively, impacts or is impacted by the decisions and actions of an organization. They are often categorized into two groups based on whether the impact is direct or indirect. Examples include:

Primary or Economic Stakeholders Directly impacted by company decisions

Secondary or External Stakeholders Indirectly impacted by company decisions

 Employees (Managers & Non-Managers)  Owners  Investors / Shareholders  Creditors  Customers / Clients / Consumers  Suppliers / Vendors  Distributors  Contractors

 Government (Local, National, International)

 Community  Civil Society / NGOs  Unions  Cooperatives  Industry & Trade Associations  Media  Academic Institutions  Competitors

This list is by no means exhaustive. Every company has a unique set of stakeholders based on its geography, industry, size, business model, and stage of growth, among numerous other factors. II. Why Engage with Stakeholders?

Stakeholder engagement refers to the process by which a company communicates or interacts with its stakeholders in order to achieve a desired outcome and enhance accountability. Companies have, to varying degrees, always engaged with stakeholders in one way or another. Historically, engagement tended to be more reactive or focused on risk mitigation. As the corporate social

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Stakeholder Engagement

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responsibility movement has grown, companies have become proactive under the assumption that stakeholder engagement can enhance the sustainability and profitability of the organization. 1 Benefits of engaging with stakeholders include:

Building Trust: Sincere efforts at engagement can improve relations between a company and its stakeholders. This can diffuse existing tensions and make it easier to solve potential problems down the road.

Risk Management: Working with stakeholders can lead to a more stable operating environment and reveal critical information that is important for company decision-making.

Brand Enhancement: By engaging with stakeholders a company can improve its visibility and reputation. Customers, investors, and other economic stakeholders may also view this engagement as a differentiating factor in the market.

Improved Productivity: Better internal engagement can identify areas in which the company can become more efficient. Additionally, employees that have a greater voice in the workplace tend to have higher morale.

Strategic Opportunities: Engaging with stakeholders can help a company to identify new business opportunities and market segments.

Partnerships: By collaborating with stakeholders, companies can pool resources to achieve a common goal.

Increased Investment: Greater transparency and stakeholder engagement can be an attractive draw for capital, particularly from impact investors.

1 SustainAbility, Practices and Principles for Successful Stakeholder Engagement, October 2007.

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Stakeholder Engagement

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The United Nations Environment Programme maps these benefits using a pyramid diagram: 2

The Business Case for Stakeholder Engagement: From Risk Management to Strategic Positioning

III. Designing a Stakeholder Engagement Plan

Although there are many approaches to stakeholder engagement, more structured plans often include the following basic steps:3 1. Identify Stakeholders and Key Issues

 Profile stakeholders to understand their interests, knowledge, and capacity to engage.  Categorize or map stakeholders based on the characteristics and issues that are most important

to the company or project. This can be accomplished through use of a table, chart, grid, zoning map, or any other methods appropriate for the company and context. Common dimensions used in stakeholder mapping include power, influence, interests, proximity and needs.

 Prioritize the issues and stakeholders that are most important to the business.  Identify who are the legitimate and accountable representatives of each stakeholder.

2 Source: UNEP, The Stakeholder Engagement Manual – Volume 1: The Guide to Practitioners’ Perspectives on Stakeholder Engagement, prepared by Stakeholder Research Associates Canada (July 2005). 3 Adapted from: AccountAbility, AA1000 Stakeholder Engagement Standard 2011 – Final Exposure Draft.

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Stakeholder Engagement

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2. Establish Objectives and Process  Decide on the scope of the process, timeline, and level of engagement.  Set strategic goals and agree upon expectations. Determine what methods are best suited to

achieve these objectives and how to measure outcomes.  Identify whether there are any regulatory or financial requirements for disclosure or

engagement.  Assign ownership for the process and outline responsibilities for carrying out the different

components of the plan.  Determine the resources available for

engagement and any training needed in order for all stakeholders to engage effectively. This may include sharing knowledge of the issues and process, supporting development of specific skills, or increasing resources, time or access to information.

 Establish a method for documenting progress and outcomes.

3 . Implement Plan  Managers make sure that the process moves

forward as planned, gather data, and coordinate with any third parties that are involved.

 Embed commitment to engagement across all

levels of company corporate and operating areas.

 Communicate progress to all stakeholders on

a frequent and transparent basis.  Enact written grievance mechanisms to allow

stakeholders a chance to provide feedback during the process.

Recommendations for Small Businesses

Engaging with stakeholders requires time, resources, and knowledge that some small companies may not have. It is important to remember that there is no one-size-fits-all approach. Rather, engagement between a company and its stakeholders should be tailored to fit the capacity of the participants. When designing a stakeholder engagement plan, small companies can rely on the following tips to make the process more manageable:  Prioritizing stakeholders and

targeting the most important ones first.

 Identify existing channels of communication that may be used to communicate with stakeholders. For example, employee engagement can be a good mechanism for communicating with a broader community in which the employees reside.

 Seek out third party organizations with additional resources that can serve as an intermediary stakeholder and enhance capacity.

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Stakeholder Engagement

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4. Review and Report  Keep track of how outcomes correspond with original objectives. Empowering stakeholders in

this process gives them more ownership and can strengthen the relationship. An independent party is also helpful in certain circumstances in order to improve accountability and credibility of the engagement process.

 Use findings and feedback to revise the plan as needed and capture key learnings that can be

applied in future stakeholder engagement initiatives.  Provide regular and transparent information to stakeholders about the results of the

engagement. No two stakeholder plans will be the same – even for the same company. It is important to strike a balance between welcoming stakeholder input on decisions that impact them directly while maintaining discretion regarding information that could compromise the company. IV. Methods of Engagement

A variety of tools can be used to engage with stakeholders. These are usually considered across a spectrum depending on the stakeholder’s involvement in the decision-making process.

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Engagement Type Description & Examples

Communicate / Disclose

Primarily one-way communication from the company to stakeholders about practices or new developments that may impact them. Sharing information can influence stakeholders, build trust, and demonstrate transparency and a willingness to engage. Bulletins, letters, newsletters, reports, presentations, speeches, videos, reports, interviews training, performance mechanisms, town hall meetings, open houses, tours, ratings, performance metrics

Consult

Company asks for stakeholder perspective and may consider it in decision-making. Primarily a one-way flow of information from the stakeholder to the company. Demonstrates that the company values stakeholder advice and feedback Surveys, focus groups, assessments, Public hearings, workshops, online feedback or discussion forums, hotlines

Participate

A two-way or multi-party conversation in which stakeholders play a more important role in decision-making. Decisions are often carried out by the company or the parties individually. Advisory Board, task force, leadership summit, interviews, research and analysis, workshops, focus groups

Partner / Negotiate

Collaboration between two or more parties on an area of mutual interest. The company and stakeholders achieve synergies and reduce risks by combining resources and areas of expertise. This anchors stakeholder relationships around a common purpose and can increase learning between the two groups. A negotiated outcome also allows both companies and stakeholders to come to a mutually agreed-upon decision and may be appropriate for certain situations in which an agreement is needed to continue operations. Joint committee, joint ventures, product partnerships, multi- stakeholder projects, alliances, collective bargaining

Empower

Stakeholders are given responsibility or legal recourse to influence company governance or operational decision-making. Stakeholder representation on Board of Directors, whistleblowing policies, ombudsperson, warranty

S T

A K

E H

O L

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V. Principles for Successful Engagement

Engage with stakeholders early and often: Proactive, transparent communication with stakeholders helps to build trust and shows that the company is committed to engagement. It is important to remain in communication with key stakeholders even when there is not a pressing need as this can pave the way for more effective problem solving when an issue does arise. Make it easy for stakeholders to understand: Ensure that the format (language, technology, medium, etc.) of engagement is understood by and accessible to stakeholders. Take a long-term approach to engagement: Cultivating a long-term relationship with stakeholders can improve operational stability and sustainability. Remain thoughtful and sincere: Listening is important. Successful engagement can enhance a company’s reputation and brand, and stakeholders will be more willing to participate if they feel they are being heard. Mutually define expectations: Establishing goals and a feasible engagement plan increase ownership and accountability. These should still be flexible enough to accommodate different interests that arise. Tailor engagement to the context: Different stakeholders will require different levels of engagement depending on the company or project type, stage, size, and many other factors. What is important is the quality and legitimacy of stakeholder engagement. Sensitivity to stakeholder dynamics: Culture, gender, and political balance can be important to different stakeholder groups. Make an effort to understand these and ensure that the company is interacting with a person or group that is viewed as a legitimate authority by the stakeholders it is trying to engage. Recognize challenges: Engagement requires time and resources. It also raises stakeholder expectations and can lead to disappointment if their views are not adequately incorporated into decision-making. VI. Regional Differences in Stakeholder Engagement4

Stakeholder Issues:  Social issues (education, health, job creation, etc.) tend to be more important than

4 United Nations Environment Programme, The Stakeholder Engagement Manual: The Guide to Practitioners’ Perspectives on Stakeholder Engagement (Vol. 1), prepared by Stakeholder Research Associates Canada, July 2005.

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Stakeholder Engagement

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environmental issues to stakeholders in emerging markets.  In developing countries, the environmental impact of extractive industries is more of a concern

for urban stakeholders, while rural stakeholders are primarily focused on employment opportunities.

 Civil society groups in developed regions are often focused on advocacy, litigation and policy

whereas those in emerging markets, especially in Asia and Latin America, are more focused on capacity building.

Characteristics of Engagement:  Local community organizations in emerging markets may be linked with NGOs or advocacy

associations in developed countries.  Formal partnerships are more common in Europe, while advisory panels and multi-stakeholder

groups seem to be preferred by external stakeholders in the U.S. Especially in Latin America, there tends to be a preference for an individual representative of the community to engage rather than a group or panel.

VII. Additional Resources

Background Materials: AccountAbility, AA1000 Stakeholder Engagement Standard 2011 – Basic, step-by-step guide to stakeholder engagement. http://www.accountability.org/standards/aa1000ses/index.html International Finance Corporation, Stakeholder Engagement: A Good Practice Handbook for Companies Doing Business in Emerging Markets, May 2007 (in Spanish, French, Portuguese, Chinese, and Russian). Chapter on Stakeholder Consultation, pages 33-56

Engaging with Indigenous Groups

Indigenous groups are often the most vulnerable in a society. It is therefore important to engage proactively to demonstrate a sincere commitment as it can take a long time to build trust with these stakeholders. Make sure to understand the hierarchy of authorities and engage with the right people in the right order. Language and the method of engagement should be appropriate for the culture and context. There are also often regulatory implications of engaging with indigenous communities. For example, engagement could be mandated by law, there may be disclosure requirements, or engaging with these communities might need to go through an approval process.

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Stakeholder Engagement

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http://www1.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/if c+sustainability/publications/publications_handbook_stakeholderengagement__wci__1319 577185063 SustainAbility, Practices and Principles for Successful Stakeholder Engagement, October 2007. Case studies available. http://www.sustainability.com/library/successful-stakeholder-engagement United Nations Environment Programme, The Stakeholder Engagement Manual: The Guide to Practitioners’ Perspectives on Stakeholder Engagement (Vol. 1), prepared by Stakeholder Research Associates Canada, July 2005. See Chapter 2 (page 15): “Corporations: Why and How Do We Engage?” http://www.unep.fr/scp/publications/details.asp?id=WEB/0114/PA United Nations Environment Programme, The Stakeholder Engagement Manual: The Practitioner's Handbook on Stakeholder Engagement (Vol. 2), prepared by AccountAbility, the United Nations Environment Programme, and Stakeholder Research Associates, October 2005 (available in English and Spanish). A step-by-step guide. See Chapter 3 (page 79): “Maintain and strengthen the capacities needed to engage effectively” http://www.unep.fr/scp/publications/details.asp?id=WEB/0115/PA

This case was originally developed by the Global Health Education and Learning Incubator at Harvard University by Rachel Gordon, MBA, Case Studies Program Manager, and Susan R. Holman, PhD, Senior Writer. It is used and distributed with permission by the Global Health Education and Learning Incubator at Harvard University. Cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.

This case is licensed Creative Commons Attribution-Non Commercial-NoDerivs3.0Unported [email protected]

617-495-8222

Rachel Gordon Susan R. Holman

Flint, Michigan: Lethal Water

2017

Between December 2011 and April 2015, the city of Flint, Michigan, was in legal “receivership,” a state of financial emergency that is usually a last-ditch attempt to avoid total bankruptcy. Over approximately 65 years, Flint had gone from automotive manufacturing powerhouse second only to Detroit in the 1950s,1 to a city with high levels of poverty and unemployment. Starting in the 1960s, Flint began losing residents to better opportunities elsewhere. Over the period of 55 years, 100,000 citizens fled. By 2015, only 99,000 citizens were still living in Flint.2 Like its neighbor, Detroit, located about 70 miles to the southeast, Flint’s fortunes had dwindled with the decline of the American automobile industry. By 2015, approximately 57 percent of Flint citizens were Black or African American; 41 percent lived in poverty, and the median household Flint income was $24,000; nearly one in five of citizens had a disability, and as of 2014, 14 percent had no health insurance.3 In 2015, Flint was rated the third most dangerous city in the United States for violent crime and sexual assault.4 By some estimates, the city’s unemployment rate in 2016 was more than twice the national average.5

Dollars, Cents, and Water

During Flint’s 2011-2015 fiscal crisis, the city’s finances were directed by Emergency Managers (EMs) appointed by Michigan Governor, Rick Snyder, who took office on January 1, 2011. Under the interim governance of these EMs, Flint city officials decided to slash costs by changing the source of the city’s municipal water. For decades, Flint’s water had been piped from Lake Huron through the Detroit Water and Sewerage Department. The Karegnondi Water Authority (KWA) of Genesee County, where Flint is located, was in the process of planning a new water system separate from the Detroit system. In March 2013, Ed Kurtz, one of the four EMs to serve between 2011 and 2015, signed an agreement for Flint to switch over to the KWA system when it was ready. Construction on the new water system, however, would not be complete until 2016 at the earliest. Meanwhile, the Detroit water department raised Flint’s water payment rates to a level that would cost the city an additional $10 million over the interim two years—funds not readily available in the near-bankrupt city budget. In June, Kurtz—in an unprecedented move for Flint’s local water supply—signed an order for an engineering contract that would return to operation Flint’s own water treatment plant—not used since 1967,6 using water from the Flint River “as a primary drinking source for approximately two years and then converting to KWA delivered lake water when available.”7

This decision was made despite the known fact that, for decades, the Flint River had served “as the local industry’s sewage collection system.”8 Early in the fiscal crisis—in 2012—officials went on record to recommend against using the Flint River for city water.9 In September 2013, a new Emergency

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617-495-8222

Flint, Michigan: Lethal Water

Manager—Michael Brown—approved an order for a contract between Flint, Genesee County, and the KWA. In October 2013, Brown was replaced by yet another Emergency Manager, a longtime state employee, Darnell Earley. Earley had served Flint in the early 2000s as both city administrator and interim mayor. During this time Earley was not a local resident, living almost 90 miles away in Lansing, yet he still earned $180,000 annually as Flint’s city manager.10

The city of Flint continued to use the Detroit water system until April 25, 2014. On that day, city officials—including Earley and then-Mayor, Dayne Walling, celebrated a public switch of the valve that controlled the city’s water source, switching it from Lake Huron water, treated through Detroit, to water from the Flint River.

No Cause for Celebration

Immediately residents complained. Complainants noted changes in water’s color, smell, and taste. In August 2014, the water tested positive for E. coli, a bacterium commonly associated with food poisoning; E. coli causes serious debilitating intestinal illness and can also cause kidney disease. Officials told citizens to boil water; complaints about the odor and discoloration continued.11

To try and address these concerns, the city added chlorine treatment, at levels so high that residents complained of not only worse odor but also burning symptoms in any contact with the water. Soon officials noted that high chlorine levels were causing unsafe production of a chlorine byproduct, trihalomethane; another warning was issued.12

Meanwhile, in Flint’s General Motors plant—historically one of Flint’s largest employers—workers alerted the company that the water was also corroding engine parts. Once this complaint reached Governor Snyder’s office, the governor, it was said, “quietly spent $440,000 to hook GM back up to the Lake Huron water”13 through connections in Flint Township, an adjacent municipality that had not gone with the city of Flint in the switch.

“There is No Need to Worry”

By January 2015 the city’s mayor, Dayne Walling, was continuing to insist that Flint’s water was safe,14 despite increasingly vocal complaints from residents. The concern was so great that officials in the Detroit water treatment system offered to reconnect Flint to its water at no cost. Earley turned down this offer for reasons that remain unclear.15 A few weeks later, Snyder re-appointed Earley to a new position, as Emergency Manager for the Detroit Public Schools; Gerald Ambrose took Earley’s place in Flint. Ambrose, determined to balance the books and fix Flint’s finances, also rejected an attempt to switch back to Lake Huron water, calling a city council vote for this change in March 2015 “incomprehensible.”16

Throughout these months, Flint’s concerned citizens began to flock to city hall and city council meetings in repeated but futile attempts to persuade the city governance to recognize and admit that a problem existed with the water that needed urgent attention and action.

One of these citizens was LeeAnn Walters. Walters had moved to Flint in June 2011 with her husband, a Navy Reserve officer, and their four children. When they bought their house, it was missing all of its interior plumbing; the Walters had the plumbing restored with a renovation that used safety-compliant PVC plastic pipes and filters. Soon after the city switched to the Flint River water, Walters and her children began to suffer from inexplicable skin rashes and hair loss even before December 2014, when the water coming out of their faucets turned consistently brown. In February 2015, Flint’s Utilities Administrator, Mike Glasgow, visited Walters’ home in response to her complaints about the discolored

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617-495-8222

Flint, Michigan: Lethal Water

water. It was Glasgow who first identified elevated lead levels in her water and immediately warned the family to stop using it.17 Periodic retesting confirmed increasingly elevated lead levels.

Lead ingestion of any kind and at any level poses a health risk; the ideal lead level in water is zero parts per billion (ppb). In the United States today, any level over 15 ppb is considered a serious problem. Walters’ water measured 104 ppb on Glasgow’s first visit. It eventually skyrocketed on subsequent testing to over 13,000 ppb, nearly three times the level considered to be toxic waste. Lead itself is invisible in water; the discoloration was caused by other substances such as iron and copper that were leaching into the water due to corrosion of the old pipes throughout the city’s water system.

Demanding to be Heard

Walters immediately took action to learn exactly what her family was experiencing and what all the measurements meant for Flint’s water and public health. She contacted the U.S. Environmental Protection Agency (EPA) and spoke with Miguel Del Toral, the Regulations Manager for the ground water and drinking water branch. With Walters’ information, Del Toral soon identified that the Flint River water plant failed to include corrosion control treatment. Corrosion control is a standard part of water treatment, and helps to coat water pipes with substances that prevent old lead, iron, and copper pipes from leaching their metals into the water; corrosion control was standard protocol in the Detroit water treatment system. The corrosive (and untreated) nature of the Flint River water had stripped the pipes of its protective coatings and pulled toxins into the water that the city’s citizens were using for drinking and bathing.

Del Toral—who one EPA official would later call a “hero”18—chose to go public with the information. He wrote an interim report citing Walters’ data and test results, and allowed it to “leak” to the press when it became obvious that top officials at Michigan’s Department of Environmental Quality (MDEQ) were failing to take citizens’ concerns seriously. “Where these problems exist, I will not ignore them,” he would write later.19 “I understand that this is not a comfortable situation, but the State is complicit in this and the public has a right to know what they are doing because it is their children that are being harmed,” Del Toral wrote. “At a MINIMUM [emphasis in origina

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