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A Life Cycle Model of Multi-Stakeholder Networks

Article in Business Ethics A European Review · June 2008

DOI: 10.1111/j.1467-8608.2008.00537.x

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 Business Ethics: A European Review
Volume 17 Number 3 July 2008

A life cycle model of

multi-stakeholder networks
Julia Roloffn

In multi-stakeholder networks, actors from civil society, business and governmental institutions come
together in order to find a common solution to a problem that affects all of them. Problems approached
by such networks often affect people across national boundaries, tend to be very complex and are not
sufficiently understood. In multi-stakeholder networks, information concerning a problem is gathered
from different sources, learning takes place, conflicts between participants are addressed and
cooperation is sought. Corporations are key actors in many networks, because the problems addressed
are frequently related to business activities. The aim of this article is to conceptualise multi-stakeholder
networks by proposing a problem-centred stakeholder definition. From an analysis of several case
studies, a life cycle model is deduced that distinguishes seven phases: initiation, acquaintance, first and
second agreement, implementation, consolidation and institutionalisation.

Introduction point of view why multi-stakeholder networks are

a suitable approach to dealing with problems that
Multi-stakeholder networks – also called public- arise in the course of globalisation, and it high-
policy networks – are promoted as an innovative lights the role of corporations in this process. In
solution to the challenges of economic globalisa- order to conceptualise multi-stakeholder net-
tion (Reinicke 1998, Benner et al. 2002a, Kell & works as such, a problem-centred stakeholder
Levin 2003) and as an additional venue for definition is proposed that represents a new
democratic participation (Habermas 1998: 427, interpretation of stakeholder theory. From an
Rhodes 2000: 54, Palazzo 2002: 227–232, Hajer analysis of several networks, which are documen-
& Wagenaar 2003: 23). Examples of multi- ted in the literature (e.g. Bobrowsky 2000,
stakeholder networks are the United Nations Reinicke & Deng 2000, Hajer & Wagenaar 2003,
Global Compact, the Global Reporting Initiative Hengstmann & Seidel 2005), a life cycle model is
(GRI), the Apparel Industry Partnership (AIP) deduced. Special emphasis is given to the delib-
and the World Commission of Dams. In this type erative process that facilitates mutual understand-
of network, actors from civil society, business and ing, information transfer, process learning and
governmental institutions come together in order even conflict management.
to find a common solution to a problem that
affects all of them. Often, multi-stakeholder
networks are initiated because a problem has Addressing complexity and conflict in
already resulted in an open conflict between the
multi-stakeholder networks
actors concerned or an upcoming clash is
anticipated. This article explores from a business
As a consequence of the globalisation process,
many social, economic and ecological problems
ESC Rennes School of Business, Rennes, France.
n
cannot be handled on a national level due to their

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Oxford, OX4 2DQ, UK and 350 Main St, Malden, MA 02148, USA 311
 Business Ethics: A European Review
Volume 17 Number 3 July 2008

geographical, organisational or financial scope Reinicke & Deng (2000: 9) call this phenomen-
(Wettstein & Waddock 2005: 310). Multi-stake- on the ‘organisational gap’. Referring to the State
holder networks address such problems and as responsible for solving societal problems, they
assume the role of voluntary non-governmental argue that the organisational gap signifies that
policy-making and implementing bodies, whose governments ‘struggle to respond to challenges
activities are not confined to national borders. about which they lack sufficient information and
For example, the GRI organises multi-stake- whose origin is far beyond their geographic reach’
holder dialogues to develop and revise interna- (Reinicke & Deng 2000: 16). One way to address
tionally applicable standards for non-financial the operational gap is to refer the responsibility of
reporting (www.globalreporting.org). The GRI defining and implementing policies concerning
standards allow comparison between the social complex cross-border problems to supranational
and the ecological performance of corporations organisations such as the United Nations, the
from different countries, where national reporting European Union or the World Bank. However,
standards would have reduced the comparability. according to Reinicke & Deng (2000: 22),
Another example is the United Nations Global supranational organisations are confronted with
Compact that was initiated by the then Secretary- a participatory gap in their structure. Although
General Kofi Annan in order to foster basic they are democratically constituted by their
human and labour rights in the business context member states, they lack direct contact with the
and to encourage multinational companies to people concerned and have only informal means
address ecological challenges and to fight corrup- of cooperating with civil society and business. In
tion (www.unglobalcompact.org). Focusing on general, it is difficult to constitute a democratic
10 principles for responsible business practice, decision-making process that is able to include
companies are encouraged to discuss their perfor- people who live in different nations (Palazzo 2002:
mance on human and labour rights, environmen- 236). As a consequence, problems of international
tal issues and the fight against corruption with scope are dealt with in decision-making bodies
stakeholder groups in national networks and at that offer few opportunities for grass-root
issue-focused conferences. Corporate responsibil- participation.
ity is fostered by the Global Compact, because Reinicke & Deng (2000: 23) believe that public-
although business conduct is legally regulated policy networks are a more appropriate govern-
almost everywhere, existing laws are not suffi- ance mechanism to ensure effectiveness and
ciently enforced in many developing countries and efficiency on the one hand and legitimacy and
violations are frequently reported (Roloff 2006: inclusion on the other. The participation of a
310–337). A similar problem is faced by the AIP, variety of stakeholders – including business –
which aims to implement minimal social stan- makes it possible to collect and to link informa-
dards in the outsourced clothing production of tion concerning the problem from different
international brand companies (Bobrowsky 2000, sources, which helps to learn about its complexity
O’Rourke 2006). In all three cases, the geogra- and is an effective method to handle problems of a
phical scope inhibits a solution provided by a wide scope. However, the effectiveness and
single government. The objectives are far too efficiency of multi-stakeholder networks can be
challenging to be reached by a small number of undermined by conflicts between participants.
actors and the initial costs discourage potential Politicians, bureaucrats, business managers and
precursors. Neither corporations, which are key civil society activists rarely share the same interest
actors in all three networks, nor non-governmen- concerning a problem (Palazzo 2002: 212–226,
tal organisations (NGOs), which are founded with Torgerson 2003: 133). Thus, although the actors
the aim of addressing the problem, are able to might acknowledge that interdependencies exist
provide a solution to any problem of this scale. In between them relating to the problem in question,
such situations, state actors, business and civil they may be ignorant of the specific impact of the
society organisations need to cooperate. problem on other actors or of their own capacity

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 Business Ethics: A European Review
Volume 17 Number 3 July 2008

to solve or to aggravate the problem. Conse- itself that its activities will produce more good
quently, the major challenges of multi-stakeholder than harm (Kaler 2003: 81), which signifies that it
networks are to manage potential conflicts be- has to take account of its stakeholders’ interests.
tween participants and to understand and handle The classical stakeholder theory does not
the problem in its full complexity. discuss policymaking in multi-stakeholder net-
works. Stakeholder management is always pre-
sented as a corporate activity. Consequently, the
A problem-centred stakeholder definition company is always assumed to be the focal
organisation of a stakeholder network (Rowley
Stakeholder management was developed by Free- 1997: 890). However, because companies compete
man (1984) as a strategic management approach in markets with others, who have the same
that is used to organise a company’s public stakeholders, a larger network with several focal
relations and to monitor the risks that might points can be constructed (Rowley 1997: 892).
evolve from dissatisfied stakeholders. At its core it This leaves the question of whether multi-stake-
is a method to prevent the escalation of conflicts holder networks, in which several companies
that result from divergent interests (see Frooman participate, always encompass multiple focal
1999: 193) and is used as an ‘early warning system’ points. Considering existing multi-stakeholder
to detect changes and emerging issues in the social, networks such as the Global Compact, with over
political and economic environments (Preble 2005: 2400 companies, or the Fair Labor Association
408). Stakeholder theory was quickly embraced by (FLA), with 20 active companies, the assumption
business ethics scholars who interpreted it as a way that the focal point of multi-stakeholder networks
to implement corporate social responsibility in will be one or more corporations is misleading.
business decisions (e.g. Weiss 1994, Carroll & Clearly, the focal point of the Global Compact is
Buchholtz 2000). In contrast, Freeman insists that the United Nations and more precisely Kofi
‘stakeholder management is fundamentally a Annan, who initiated the Global Compact while
pragmatic concept’ (Freeman 1999: 234), which he was Secretary-General (Roloff 2004: 163). The
has the positive side effect of serving moral values FLA revolves around its board of directors, with
like common decency and fairness (Freeman & elected representatives from member companies,
Phillips 2002: 345). He rejects the idea that NGOs and universities (www.fairlabor.org).
business decisions have no moral content and Obviously, multi-stakeholder networks cannot
that moral decisions have no business content be solely defined through their business partici-
(Freeman 1994: 412). However, he believes that it pants. A more neutral definition is needed.
is sufficient to implement stakeholder management This leads to the definition of a stakeholder that
with the objective of serving pragmatic considera- refers to a focal organisation. The most cited
tions only, because it is still likely to have a definition is Freeman’s, according to which a
positive impact on ethical issues (Freeman & stakeholder is ‘any group or individual who can
Phillips 2002: 339 ff). With his argumentation, affect or is affected by the achievement of the
Freeman positions himself between the instru- firm’s objectives’ (Freeman 1984: 25). As discussed
mental (e.g. Hendry 2001) and the normative above, this definition of the term stakeholder leads
stakeholder approach (e.g. Phillips 1997, Reed to confusion when multi-stakeholder networks are
1999, Gibson 2000, Lampe 2001) and presumes concerned. Who is a stakeholder of the Global
that they are reconcilable. In contrast, Kaler Compact? Anyone who has a stake in its focal
(2003: 79) points out that the stakeholder theory organisation, the United Nations? This group is
implies ‘a rejection of any sort of sui generis status not specific enough. Anyone who has a stake in
for shareholder interest relative to those of non- the Global Compact’s objectives: human rights,
shareholders’ such as employees or consumers. labour rights and environmental protection? This
From this point of view, business cannot rely on leaves no one out. Neither the focal organisation
markets to serve the public good, but has to ensure nor the network’s objectives lead to a satisfactory

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Volume 17 Number 3 July 2008

demarcation. In order to overcome this problem, I for problem solving on a community level like the
suggest a definition that is connected to the Grainger Town Project (Healey et al. 2003),
activities a network carries out in order to achieve industry-specific like the Basle Committee on
its objectives. I define stakeholders within multi- Bank Supervision (Reinicke 1998: 103–117) and
stakeholder networks as any group or individual the AIP (Bobrowsky 2000, O’Rourke 2006) or
who can affect or is affected by the solution of the international initiatives like the Global Compact
problem addressed by the network (Roloff 2005: (Kell & Levin 2003). Despite their differences,
12). According to this definition, the network’s these networks share certain characteristics con-
active participants and persons who are affected cerning their participants and their process. Most
by the participants’ actions are considered to be multi-stakeholder networks are tripartite, which
stakeholders. As in Freeman’s theory, actors from means that representatives from business, civil
all societal spheres can be considered as stake- society and the state participate at some stage in
holders, e.g. business, civil society and state the network process. The process itself can be
representatives. This is important because it is divided into seven phases that amount to a life
the strength of multi-stakeholder networks that cycle: initiation, acquaintance, first agreement,
they integrate different parts of society. second agreement, implementation, consolidation
In public discourse, the term stakeholder is often and institutionalisation or extinction. The life
used as a synonym for civil society or a NGO. cycle model is constructed from an analysis of
However, the distinction between civil society and case studies published by Hajer & Wagenaar
stakeholder ought to be preserved. The concept of (2003), Reinicke (1998) and members of the
civil society refers to intermediary volitional, non- Global Public Policy Institute (www.gppi.net)
profit-seeking institutions and groups that link and from my own research into the deliberation
citizens and the state, give a voice to certain parts process in a company-specific stakeholder dialo-
of the society and are channels of political gue.1 The focus, initiator, members and activities
participation (Ibrahim 1996: 245). In contrast, of six multi-stakeholder networks are summarised
stakeholders can be profit seeking and they may in Table 1. The networks selected are well
act either exclusively on their own behalf or established and their activities are extensively
represent a heterogeneous group, as in the case documented. In order to give an overview of
of bureaucrats or politicians. Stakeholder manage- different types of multi-stakeholder networks, two
ment should not be mistaken for civil society international networks (Global Compact, GRI)
management, but one should keep in mind that and one local network (Grainger Town Project)
shareholders, consumers, employees, suppliers, that include stakeholders from various industries
competitors, governments and the media are and different parts of civil society were chosen.
stakeholders too. Consequently, companies face The World Commission of Dams and the AIP are
contradictory demands from their various stake- examples of industry-specific networks and the
holder groups that cannot simply be translated Talks at Banz focus only on one company: the
into one single, comprehensive strategy. Stake- sport apparel company Puma AG. The following
holder management always implies value decisions description of a typical life cycle of multi-
concerning how stakes are prioritised. These stakeholder networks refers to developments in
decisions can be made either by the corporation these networks in order to illustrate typical
alone or together with its stakeholders. problems and structures. Empirically, the phases
of the life cycle often overlap, as shown in Table 1.
The life cycle model is developed as an ideal
A life cycle model of multi-stakeholder type (Weber 1980) and its phases refer to
networks important steps in the deliberation process.
However, some activities – like becoming ac-
Multi-stakeholder networks can be found in a quainted and sharing knowledge – are not
vast range of forums. They may be local forums effectively completed after a few meetings, but

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......................................................................................................................................

Table 1: Overview of multi-stakeholder networks

Name and website Focus Initiator Stakeholders Current phase and
activities
AIP/FLA Social standards AIP was initiated in 20 companies (e.g. Phase 7:
(www.fairlabor.org) at suppliers of 1996 by US Adidas, Asics, H&M, Liz Institutionalisation. The
apparel President Bill Clinton. Claiborne, Nike, FLA implements a
companies The FLA was Patagonia, Phillips–Van verification procedure of
founded in 1998 Heusen, Puma, Reebok); monitored social
194 universities and standards, which is
colleges. Several local continuously revised in a
and international NGOs multi-stakeholder
in the advisory council dialogue. In addition,
training activities are
developed, new
approaches are tested
and conflicts are
moderated, if
necessary
United Nations Global 10 principles on Initiated in a speech Ca. 3800 participants, of Phases 4–6: Deliberation
Compact human and labour at the World whom approximately and implementation of
(www.unglobalcompact. rights, Economic Forum in 2900 are from business. the 10 principles.
org) environmental 1999 by UN Others are NGOs, Participants meet and
protection and Secretary-General academics, UN deliberate possible
anti-corruption Kofi Annan organisations and other implementation
civil society groups approaches in several
forums (e.g. issue
dialogues, national
networks).
Implementation is carried
out either in cooperation
with a few partners (e.g.
as a public–private
partnership project) or by
corporations on their own
GRI The definition of CERES (an In the stakeholder council Phase 7:
(www.globalreporting. standards for non- American NGO 44 constituency and Institutionalisation. The
org) financial reporting focusing on geographically diverse standards are used by
environmental individuals represent the member and non-
issues) and UNEP stakeholders. In addition, member companies and
more than 100 are regularly revised in
organisational an open dialogue with
stakeholders are stakeholders, users and
members of the GRI members based on a
draft prepared by
experts
WCD (www.dams.org) The definition of WCD was initiated No longer active Phase 7: Extinction. The
social and mutually by several standards were
environmental stakeholders completed, but not
standards for applied by all members.
large dam projects Today, the standards are
applied by some (new)
stakeholders

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Table 1: Continued
Name and website Focus Initiator Stakeholders Current phase and
activities
Grainger Town Project The restoration of Newcastle City Local business people, Phase 6: Consolidation.
(www.newcastle.gov.uk/ the old city of Council community groups, The majority of the
grainger.nsf) Newcastle artists and public restoration is completed;
institutions new objectives are
defined by the
participants
Talk at Banz Critical discussion Initiated by Puma in NGOs, unions, suppliers Phases 5 and 6:
stakeholder dialogue of and revision of 2003, after reports of and representatives from Implementation and
the Puma AG Puma’s social and standards violations several Puma consolidation. Projects
(www.puma.com) environmental at a Mexican supplier departments with several stakeholders
performance were published ensure a continuing
communication between
annual meetings that are
used to review the
progress
The stakeholders listed are current participants, according to a web search in February 2007.
AIP, Apparel Industry Partnership; FLA, Fair Labor Association; NGO, non-governmental organisation; GRI, Global Reporting Initiative;
WCD, World Commission of Dams.
......................................................................................................................................

will be continued in the following phases. In the inviting actor chooses – ideally in accord with
model, a new phase begins when the main focus of other relevant actors – the stakeholders who are
the deliberation shifts. A network is categorised to invited to a first meeting and decides who is not
be in more than one phase when its participants going to be invited. Although in most multi-
are strongly engaged in two or more activities stakeholder networks the group of participants
simultaneously. changes over time, because some actors will be
disappointed and others might learn later that a
network exists, the question of inclusion and
Initiation phase exclusion is crucial. Ideally, a stakeholder dialo-
Multi-stakeholder networks emerge when a pro- gue brings together more than the ‘usual suspects’
blem becomes urgent for several different actors (Burchell & Cook 2006: 162). Löhr et al. (2004)
who believe that they cannot or should not point out that the moral right to participate and
approach it on their own. The urgency might the ability to do so may differ. They name three
originate from the problem or from a conflict that possible barriers to participation: a lack of
is connected to the problem. It is typical that in expertise, language problems in international
the initiation phase the problem is named and networks and the problem that presence requires
discussed as such, although the problem descrip- resources such as time, energy, travel funds, etc.
tion and analysis might vary considerably be- In addition, not every person who has a stake in a
tween the discussion groups and some disputants problem is directly relevant for the network’s
might even deny that the problem exists. Never- discourse or has ‘an immediate moral right’ (Löhr
theless, they are talking about it. The public et al. 2004). For the sake of a functioning working
discussion also helps to determine a group of environment and a fruitful discussion, the number
potential participants for the deliberation process. of participants ought to be limited and will
Often, multi-stakeholder networks are initiated by depend on the nature of the problem as well as
a reputable actor such as a well-known politician on the working culture among the participants. In
or an important organisation.2 In this case, the many cases, a small number of experts will

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Volume 17 Number 3 July 2008

represent not only their organisations but larger ing the problem and learn how to communicate
stakeholder groups. For example, peasants in effectively with each other. Establishing a com-
developing countries might be represented by mon discourse language is an important step in
specialists from NGOs, cooperatives or academia if this process (Roloff 2006: 183–186). As Torgerson
it is too difficult to include the peasants themselves. (2003: 132) points out, ‘Parties to a discursive
The initiation phase of the AIP (Bobrowsky contest must have significant commonalities as
2000, Scherer 2003: 19–47, Sethi 2003, Zadek well as differences if they are even to achieve any
2004, O’Rourke 2006) illustrates several of the meaningful disagreement’. Through understand-
difficulties described above. Before the network ing others’ opinions and interpretations of the
was established, some major companies such as problem, the participants grasp the complexity of
Nike denied that the problem was severe and the problem and learn about interdependencies
claimed not to be responsible for the working that were not apparent before. During this early
conditions at their suppliers (Scherer 2003: 32–40, interaction, storytelling by directly affected per-
Sethi 2003: 161–170). In general, the corporations sons will be presented, together with experts’
were ill informed about the conditions under opinions and political statements. As a result of
which the production took place. It was the public discussing different accounts of the problem, focal
criticism by NGOs, trade unions and church issues will be attributed a specific vocabulary,
groups, as well as the presentation in the media, reflecting the shared meaning that evolved in the
that motivated some brand firms to follow the deliberative process (Innes & Booher 2003: 47).
recommendation of President Clinton to attend a The participating parties also learn to respect
meeting at the White House in 1996 on social each other’s concerns. Innes & Booher (2003)
standards in their supply chains (Bobrowsky report from the Sacramento Water Forum how
2000: 2–18). The meeting led to the foundation understanding each other’s positions changed the
of the network and later to the establishment of deliberation that followed:
an organisation, the FLA. During the initiation
phase, only actors from the USA participated in Participants learned what the issues meant to the
the deliberation on social standards, although the others. They were likely to respect one another’s
problem mainly concerned workers in other views and believe in one another’s sincerity, even
while continuing to disagree. In some cases a
countries (Bobrowsky 2000: 28). However, it
stakeholder would even speak for the others’
was assumed that the contracting US firms were
differing interests if the person was not present.
responsible before their American consumers to For example, the property developer representa-
ensure appropriate working conditions in their tive told the Water Forum the group could not go
supply chains. In the early phase of the AIP, the ahead with something that would benefit his
positions of managers and activists were diame- interest because the environmental stakeholders
trically opposed, which led to considerable were not there and the proposal would not meet
tension and distrust. Consequently, the delibera- their interests (Innes & Booher 2003: 43).
tive process is described as ‘extremely time-
consuming and difficult’ (Bobrowsky 2000: 31). It is important that all actors, including business
representatives, are sincerely involved in the
process. Accordingly, participating companies
Acquaintance phase will be required to adapt their behavioural style.
At the outset of networking, conflicting points of In the context of multi-stakeholder networks,
views and antagonist relationships are a common managers cannot refer to conventional strategic
phenomenon. Most multi-stakeholder networks stakeholder management approaches, as pro-
deal with conflict management in the acquain- posed by Mitchell et al. (1997) or Savage et al.
tance phase. In this phase, the network partici- (1991), for guidance. These authors developed
pants meet each other, learn each other’s point of stakeholder typologies and suggested correspond-
view, exchange opinions and information regard- ing strategies for the interaction with stakeholder

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Volume 17 Number 3 July 2008

groups. For example, a stakeholder that is agreement phase, in which different accounts
described as ‘marginal’ (Savage et al. 1991: 65) of the problem are presented and discussed with
or ‘dependent’ (Mitchell et al. 1997: 877) should the aim of agreeing upon a common problem
be monitored. In contrast, the company is advised description. Ideally, an analysis of problem-
to defend itself from stakeholders that are related knowledge – provided by the various
considered to be ‘non-supportive’ (Savage et al. stakeholders – and a shared interpretation of this
1991: 65) or ‘dangerous’ (Mitchell et al. 1997: knowledge lead to the problem definition
877). If a participant in a multi-stakeholder (Rauschmayer & Wittmer 2006: 112). Sometimes,
network adopts such strategies, communication the participants are tempted not to define the
will be interrupted and cooperation disturbed due problem. However, such neglect will lead to an
to the mistrust created by schematic responses. aimless discussion that does not result in any
Honest communication and trust building are action, as Burchell & Cook (2006) point out. In
important prerequisites for cooperation and their survey of stakeholder dialogues, an inter-
should thus be on the agenda of business viewed facilitator explains:
participants. The difference between strategic
It is built like a house of cards. If you haven’t
and dialogue orientation is highlighted by a
really properly established that there is a common
company representative, who explains that before
problem that you want to solve . . . then nothing
the stakeholder dialogue he would have commu- you come up with is going to work . . . You can’t
nicated with environmental activists only through just set it off running and ignore it.
the public affairs department, but now they would (Burchell & Cook 2006: 160)
talk on the phone and have ‘a good discussion’
(Burchell & Cook 2006: 165). Puma AG had a While discussing the problem, some basic proce-
similar experience: after they initiated annual dural rules typically emerge, either implicitly as a
dialogues with their stakeholders, the number of result of learning by doing or explicitly when they
informal contacts (e.g. phone calls, emails) are set up in a meta-discussion by the participants.
increased. The open communication with critical For example, rules concerning speaking time,
stakeholder groups such as the Clean Clothes consensus-making and disclosure of information
Campaign prepared the ground for several mutual shared are defined or spontaneously adhered to in
projects and agreements (Hengstmann & Seidel order to minimise interruptions of the delibera-
2005). Recently, Puma’s improved training and tion process and to foster a positive working
auditing programme led to more direct contact atmosphere. Preferably, the problem-definition
with a particularly vulnerable stakeholder group: process is dominated by an open and fair
the workers at the independent supplying fac- exchange of arguments as defined by Habermas
tories. Today, a growing number of workers (1999: 149) as the communicative action model.
approach Puma when they face problems with Innes & Booher (2003: 38) sum up: ‘Each speaker
their employers. Only a few years ago, direct must legitimately represent the interest for which
complaints from individual workers to western he or she claims to speak, each must speak
organisations or corporations were rare. Until sincerely, each must make statements that are
2003, only seven formal complaints reached the comprehensible to the others and each statement
FLA, most of them submitted by NGOs or trade must be accurate’. In this deliberation atmo-
unions (Fair Labor Association 2004: 256). sphere, arguments are assessed by means of a
transparent procedure, in which a speaker’s social
or political domination is not allowed to subdue
First agreement phase any legitimate claims of others. According to
The acquaintance phase serves to foster a better Renn (2006: 35), Habermas’ communicative
understanding of the problem’s complexity and of action model should be understood as ‘a visionary
the other stakeholders’ motivations and positions, benchmark for making people co-determine their
which is the basis for the discussion in the first own destiny’ in deliberative processes. Although

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Volume 17 Number 3 July 2008

not perfectly matched on most occasions, it guides in Puma’s first year of stakeholder dialogue
the participants as to how to achieve a meaningful (Hengstmann & Seidel 2005). Reaching a com-
deliberation. prehensive understanding of the status quo of their
Empirically, strategic behaviour is apparent in relationship is an important step for the stake-
the first agreement phase, because the problem holders in the process of changing the situation.
definition has implications for the kind of solu-
tions that are deemed feasible in the following
phases. Also, the range of stakeholders who Second agreement phase
participate in the network has an effect on the The aim of the second agreement phase is to
problem description. Everybody tries to ensure compare different solutions available and to select
that the problem definition serves his or her own one or more for implementation. Because the
interest in reducing the individual harm from the problem definition and its solution are interwo-
problem at minimal cost. Thus, the interest of ven, in the first agreement phase many aspects of
stakeholders who cannot or will not participate is the second agreement phase are already antici-
likely to be overlooked or misinterpreted. When- pated and problem definition and solution are
ever new stakeholders join the network, the old often discussed in the same sessions. However, a
problem definition might be challenged by them, co-mingling is likely to result in a narrow view of
due to the fundamental importance of the the problem and confines creativity in the search
definition for the network’s discussion and for a solution, because the stakeholders may
actions. The attending stakeholders will defend restrict their remarks concerning the nature of the
their positions and, consequently, in the first problem to aspects that they believe to be
agreement phase conflict management is a prior- remediable. The decision, which solution is
ity. A neutral moderation of the discussion helps selected, is closely related to the question of who
to avoid a relapse to strategic behaviour and to will contribute what in the implementation
foster an open, fair and problem-oriented discus- process. Consequently, the solution selected in
sion atmosphere. the second agreement phase may not be a solution
Despite the procedural rules, participants may an independent expert might propose, but it is
experience anxiety concerning the motivation of more likely to be easy to implement and not too
the other stakeholders for participating and the demanding. This is not necessarily the downfall of
possibility that their willingness to cooperate and the network, as critics often claim, but a necessary
share information is abused. Bobrowsky (2000) first step, because too demanding a solution may
exemplifies the dilemma of the AIP in this phase lead to the exodus of those participants who are
as follows: supposed to make a substantial contribution,
which are usually the enterprises, with their
If the AIP was to be more than an opportunity for financial and organisational means. A successful
companies to exploit the public relations benefits multi-stakeholder network will review its problem
of participating, as many of the NGOs feared, or
definition, the proposed solution and the imple-
for the NGOs to embarrass the companies by
exposing every instance of abuse (as inevitably
mentation steps and ameliorate its performance
would arise) as evidence of the companies’ bad in the course of time. Thus, an unspectacular
faith and insincerity, some minimum levels of beginning may be outweighed by good achieve-
social capital would need to be established. ments in the long run.
(Bobrowsky 2000: 26) A prominent example of the difficulty of
balancing ambitious objectives with the motiva-
In order not to be lost in a dilemma and the acc- tion of hesitant contributors is the Global
ompanying endless discussions, consent is needed Compact. The solution that has been proposed
not to spend more time on the conflict, but to try is that corporations commit themselves publicly
to cooperate. At this point, the network’s par- to the objectives outlined in the 10 principles and
ticipants often agree to disagree, as happened decide individually on implementation activities

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 Business Ethics: A European Review
Volume 17 Number 3 July 2008

(www.unglobalcompact.org). Given the large quo ante (Benner et al. 2002b: 31–34). Today, the
number and range of participants and the global guidelines of the World Commission on Dams are
expansion of the network, this smallest common widely recognised standards and in 2005 the large
denominator might be viewed as an achievement British bank HSBC made compliance with the
(PricewaterhouseCoopers 2005). However, the guidelines obligatory for any lending for dam
lack of any substantial control besides self- projects (www.irn.org/wcd/).
reporting and the sanction of being listed ‘in- It is important for the future of any multi-
active’ (United Nations Global Compact 2005, stakeholder network that the implementation
Attachment 1) have been widely criticised (Hamm phase yields some positive experience. However,
2002, von Schorlemer 2002, Zammit 2003: 152, this does not necessarily imply that the imple-
McKinsey 2004: 17–18). In the case of the AIP, mentation itself needs to be successful and that
the compromise that led to the foundation of the the problem has to be solved at the first attempt.
FLA did not meet all expectations. The unions Most problems addressed by multi-stakeholder
left the network claiming that the final agreement networks cannot be sorted out in a single
was too lenient, while some of the corporations implementation step. A positive experience can
judged it to be too demanding and deserted for result from functioning cooperation, even if the
that reason (Bobrowsky 2000: 41 ff). working objectives cannot be fulfilled. If the
activities chosen turn out not to be a solution to
the problem, a joint approach, a collective
Implementation phase problem analysis and a mutual remediation plan
When a multi-stakeholder network transitions may lead to a strong bond between the stake-
from the second agreement phase to the imple- holders, who are now assured that everybody is
mentation phase, an exodus of disappointed and fully committed. In the implementation phase,
dissatisfied participants is not unusual. They leave trust and motivation can be generated by failure
before they have to invest not just time and as well as by success as long as the cooperation
knowledge. During the implementation phase, the proves to be reliable. Multi-stakeholder networks
network shifts from communication to coopera- that last over time like the AIP, the Global
tion and action. The proposed solution is broken Compact or the GRI share a history of delibera-
down into activities and a division of labour is tion, agreements, revisions, more deliberation,
agreed upon by the stakeholders. Now everybody new agreements and so on. In a process of
has to honour his or her promises and contribute continuing deliberation, they advance their pro-
to the mutual aim. Implementation problems may blem analysis and solutions.
occur and demand swift coordination between the In connection with a changing problem defini-
actors. The whole network is put to the test. It is tion, the group of participants is likely to change
not surprising that many networks fail in this over time as well, because new stakeholders will
phase, as happened in the case of the World add their views of the problem and a new problem
Commission on Dams (www.dams.org). The analysis may require the inclusion of new actors.
participating supranational organisations, politi- Ideally, the changes in a multi-stakeholder net-
cians, NGOs and companies agreed upon rules work will reflect material changes in the problem.
that ensure that the construction of large dams is For example, the multi-stakeholder networks in
carried out in a socially and ecologically accep- the textile industry such as the AIP, the Fair Wear
table manner. The results from the negotiations Foundation and the Ethical Trading Initiative
were unanimously praised. But in the implemen- focused at the beginning on the control of social
tation phase, the World Bank broke its promise to standards. Later, they shifted their attention
make the observance of the guidelines, a pre- towards workers’ and managers’ training con-
requisite for all credits that finance dam projects. cerning social, work and safety standards because
The participants from the NGOs were deeply they learned that measuring compliance is not
disappointed and threatened to resume the status sufficient. In the case of the stakeholder dialogue

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Volume 17 Number 3 July 2008

conducted by Puma, the new interpretation of the now invest in a tested solution rather than
problem led to an inclusion of suppliers in the conduct an extensive trial and error phase. Even
deliberation, who contributed insights into prac- companies that are not a member may benefit
tical implementation problems (Hengstmann & from a network’s outcome without contributing
Seidel 2005: 9). to it. For example, the FLA certifies that its
member companies conduct social audits accord-
ing to FLA standards and verifies their results.
Consolidation phase Thanks to this, the member companies profit
After a multi-stakeholder network has completed from positive effects on their reputation. How-
its first implementation steps, it enters the ever, any other textile company that buys from
consolidation phase. In this phase, the experience the same suppliers benefits too. Sourcing from
of cooperating with each other has built companies with high social standards reduces the
substantial trust among the remaining actors. A risk of scandals and such companies tend to be
first comprehensive evaluation is possible: Are all better organised, have more motivated staff and a
relevant stakeholder groups represented? Is the lower product wastage rate than their competi-
procedure of the consultation process deemed to tors. A corporation may choose to source only
be legitimate, reasonable, responsive and fair? Is from suppliers that also work for FLA members
all relevant information taken into consideration and thereby benefit as a free-rider (Olson 1971)
or is there a need to learn more about the from the investments in standards monitoring and
problem? Are the stakeholders satisfied with the suppliers’ training made by the network’s mem-
outcome from the process? Abelson et al. (2003: bers. Like the FLA, many multi-stakeholder
244–245) advise evaluating deliberative processes networks face to some extent the problem of
as described above on the criteria of representation, securing the ownership of the solutions developed
procedure, information and outcomes. Reflecting for the participating stakeholders. Consequently,
on the past performance, the implementation of a some networks introduce some sort of member-
more sophisticated solution at greater cost for the ship during the consolidation phase. However, in
participants becomes more likely in the consolida- many cases, the benefits from the network
tion phase and many activities and procedures activities remain to some extent public goods.
become institutionalised. Often, an organisation is
established in this phase and a constitution is
written that defines procedural rules for the Institutionalisation or extinction phase
deliberation, the division of work and contribu- Multi-stakeholder networks have the disadvan-
tions between the stakeholders and so forth. Rules tage that they are time consuming and often
that used to be informal are selected to become unstable. Although their spontaneity and inform-
binding on the participants and are formulated as ality recommend them for urgent and complex
official rules for the cooperation. Although lasting problems that cannot be solved by established
structures are built at this point, the institutiona- institutions quickly enough, they are, in many
lisation still has an experimental character during cases, not able to construct a lasting and
the consolidation phase. The rules and organisa- comprehensive solution. Their strength is to be
tional forms chosen are tested and revised in the more than a quick fix that a single actor could
ongoing deliberation process and the participants provide, but their sphere of influence will always
are aware of their influence on the network’s be confined to the participants. Multi-stakeholder
progress. networks tend to alternate between the deliberation
Often, new stakeholders join the network in this and action stages in their life cycle (see Figure 1).
phase, when it has proven its abilities and some For example, some networks repeat the acquain-
transparent rules for participation have been tance and agreement phases, because new actors
established. Newcomers benefit from the learning whose perspective changes the common under-
process of the veteran members, because they can standing of the problem join them. Others will

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 Business Ethics: A European Review
Volume 17 Number 3 July 2008

Figure 1: Life cycle model of multi-stakeholder networks reason for a good corporate citizen not to support
mandatory standards; for a corporation already
committed to voluntary standards, there is
1. Initiation Phase
nothing to fear from making those standards
mandatory and potentially a good deal to be
Deliberation gained from a level playing field perspective’.
From this perspective, the question of whether
2. Acquaintance Phase laws and international regulations can be a long-
term outcome from multi-stakeholder networks
focuses on the necessity of a mandatory solution
and the practicability of its enforcement in a
3. First Agreement Phase
specific case.

4.Second Agreement Phase Summary

The role of business in society is changing. Under

Action the influence of the globalisation process, pro-
blems arise that cannot be handled solely at the
5. Implementation Phase 7. Institutionalisation governmental level, but need the attention of
/Extinction other influential societal actors as well (Reinicke
& Deng 2000: 2). For the same reason, corpora-
6. Consolidation Phase tions are confronted with a lack of stable
structures and with conflicts with citizens and
civil society organisations. Because they are
powerful and influential actors, the large multi-
national corporations are blamed for causing
reconsider the problem definition after evaluating some of the globalisation problems and are
the outcome of their implementation phase, and expected to help resolve them. Being confronted
consequently adjust the proposed solution, before with these expectations and with difficulties due to
venturing into another implementation phase. the lack of reliable structures, some corporations
Some networks are likely to retain deliberation join multi-stakeholder networks that address
as their central decision-making process and societal problems in a non-bureaucratic way. As
preserve their structure of a multi-stakeholder arenas for deliberation and action, multi-stake-
network. Others, however, will either dissolve, holder networks serve two purposes. First, they
because the deliberation fails to meet the partici- are a structure in which knowledge concerning
pants’ expectations, or become something else; complex problems is collected and a wide range of
e.g. their results are incorporated into laws and voices is acknowledged. Second, they offer a
regulations or they become formal organisations process for dealing with conflicts and for estab-
that adapt more structured modes of decision- lishing cooperation between actors from different
making than deliberation. backgrounds.
More substantial – ideally mandatory – regula- Multi-stakeholder networks have been analysed
tion is desirable in many cases, once action has by political scientists concerning their contribution
been taken to alleviate the problem. The respon- to a deliberative democracy (e.g. Reinicke 1998,
sibility for establishing regulations lies with the Hajer & Wagenaar 2003), but the implications that
societal actors that are qua status legitimated to participation has for corporations have not been
set rules: the governments. Wettstein & Waddock fully analysed. Utilising stakeholder theory in this
(2005: 312) point out: ‘There seems to be no context, the article shows that companies cannot

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 Business Ethics: A European Review
Volume 17 Number 3 July 2008

consider themselves as the centre of attention in a company, Puma AG. The aim of the stakeholder
multi-stakeholder network. Such networks focus dialogue is to ameliorate the company’s approach
on a problem shared by the actors. Consequently, on social and environmental standards (Hengst-
stakeholders are defined in this context as groups mann & Seidel 2005). For my doctoral research,
or individuals who can affect or are affected by the I gathered data with aspiring and established
suppliers of Puma on the impact of social
solution to the problem addressed by the network
standards as well as on the accompanying dialogue
(Roloff 2005: 12). Participating organisations –
and implementation processes (Roloff 2006).
such as companies, NGOs, governmental bodies, 2. For example, the United Nations Global Compact
etc. – have to be prepared to compromise with was proclaimed by the Secretary-General Kofi
other stakeholders. Stakeholder management is in Annan. The GRI was also initiated by the United
this context not an analytical tool to prevent risks, Nations and is an official collaborating centre of the
but implies a commitment to open communica- United Nations Environment Programme. The AIP
tion, fair interaction and contributing towards a met after an invitation by President Bill Clinton.
solution. The corporation needs to back its
commitment at all affected organisational levels
and its representative at the network’s meetings
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