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Keeping you in-the-know on environmental, social and governance developments

The fourth in a series looking at groups generally thought to benefit from corporate ESG programs, examining which group may be the primary beneficiary of company ESG efforts. Part 1 dealt with investors (with an addendum here), Part 2 on Customers is here and Part 3 on Employees is here.

Who are Stakeholders?

Like other aspects of ESG, the term “stakeholders” is a bit vague. Wikipedia offers that a stakeholder is a member of “groups without whose support the organization would cease to exist”, as first used in a 1963 internal memorandum at the Stanford Research Institute. Investopedia defines the term as “a party that has an interest in a company and can either affect or be affected by the business.”

For purposes of this article, we lean towards Investopedia’s definition and consider it to mean parties without direct business relationships to a company but that are impacted by the company’s operations, such as

  • communities in which companies operate
  • the general public/society
  • media
  • governmental entities
  • NGOs
  • industry and professional organizations
  • unions
  • potential new customers and employees
  • nature/the Earth

Sharp comments from SEC Commissioner Hester Peirce earlier this week on SEC’s work toward ESG disclosure* specifically called out stakeholders and offers more color on who they are and where their interests lie:

The biggest ESG advocates are not investors, but stakeholders… As important as these groups are to issuers, they are not at the heart of the SEC’s mission, which is to protect investors, facilitate capital formation, and foster fair, orderly, and efficient markets…

Many non-investors have tried to repurpose the SEC’s investor-oriented disclosure tool to get information of interest to them and ultimately to shame issuers into changing their behavior. In a few instances, they have been successful… They hope to use the securities laws to force issuers to make disclosures about ESG issues important to them and ultimately to compel companies to make behavioral changes. 

How They Benefit from ESG

Generally speaking, stakeholders benefit by experiencing improvements to environment, health, or their raison dêtre. These improvements are usually non-financial. Taking from the list above, some examples of how stakeholders benefit from corporate ESG programs are: 

  • Communities in which companies operate: Reduced pollution, improved human health conditions, socio-economic improvements, improvements in education, improved sense of stability
  • The general public/society: Societal integration of environmental and social initiatives led by companies (such as DEI)
  • Governmental entities: Increased regulatory compliance and tax collection
  • NGOs: Improvements in human rights conditions, pollution reduction, increased trust in corporations
  • Nature/the Earth: Reduced industrial impacts on nature, clean air and water, retaining biodiversity

Stakeholders advocate for corporate ESG efforts because they gain much as a result of corporate “behavioral changes”. But are they the ones who receive the most? Our series will continue by exploring suppliers.


* While the purpose of this article is not to examine whether ESG disclosure should be required, her point about SEC’s mission and relationship to non-investors is important.

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The Editor

Lawrence Heim has been practicing in the field of ESG management for almost 40 years. He began his career as a legal assistant in the Environmental Practice of Vinson & Elkins working for a partner who is nationally recognized and an adjunct professor of environmental law at the University of Texas Law School. He moved into technical environmental consulting with ENSR Consulting & Engineering at the height of environmental regulatory development, working across a range of disciplines. He was one… View Profile