Supply Chain Leaders Must Negotiate Mutual Gains To Safeguard Long-Term Value

The challenges facing supply chain leaders in today’s highly connected and networked global economy have never been greater.  Companies rely increasingly on raw materials that are in short supply, and work with suppliers in locations where stakeholders have a major impact on access and production.

There are potential pitfalls for supply chain leaders at every turn: community protests in one country may cause project delays, creating costly cascade effects on the supply chain overall.  The actions of suppliers on the ground may attract negative media coverage, damaging a company’s reputation or causing boycotts, shareholder resolutions, product recalls, or even lawsuits and fines.  Conversely, effective corporate community engagement may result in strengthened company license to operate, improved production and productivity, higher local incomes, and company-community alliances.

Rethinking the Business Case

Increasingly, supply chain leaders are recognizing that effective stakeholder engagement is about more than PR.  Consider the following:

  • Peer reviewed social research shows that positive stakeholder relationships directly correlate with financial benefits and negatively correlate with loss and delay.
  • Procurement reporting indicates that risk reduction strategies like improved environmental and labor practices can pay back 85 times their cost.
  • A longitudinal study found that companies suffered a stock price decrease of 0.1% per paragraph written in the New York Times on protests of their activities.
  • Harvard Professors Robert G. Eccles and George Serafeim, and London Business School Professor Ioannis Ioannou recently noted that “high sustainability” companies — defined in part as those that employ “organized procedures for stakeholder engagement” — “significantly outperform their counterparts over the long-term both in terms of stock market and accounting performance.”
  • Wharton Business School Professor Witold Henisz researched the correlation between 50,000 “stakeholder events” and the valuation of 26 gold mines and found “that the value of the relationship with politicians and community members is worth twice as much as the value of the gold that the 26 mines ostensibly control.”

The Mutual Gains Approach to Supply Chain Management

As this research makes clear, there is enormous power in embracing a Mutual Gains Approach to supply chain management.  By involving a diverse array of stakeholders in the design and implementation of business decisions, companies produce stronger outcomes and reduce supply chain disruption.  Creating a shared understanding of the core needs and priorities of all parties provides the basis for effective strategic planning, long-term agreements and sustainable relationships.

There are four steps to the Mutual Gains Approach, and they are applicable to a range of supply chain management contexts:

  1. Prepare the organization for external engagement;
  2. Explore issues, options and ways to engage with stakeholders;
  3. Construct solutions jointly; and
  4. Follow through on commitments.

These steps may seem simple in theory but, for many companies, implementing them requires an organization-wide shift in mindset.  Companies must transition from a short-term, transactional approach to managing their supply chains to a longer-term vision focused on understanding the perspectives and interests of the communities that bear the burden of resource extraction and production.

We have worked with companies from diverse sectors (from oil and gas, to mining, to the pharmaceutical and automobile industries) to transform relationships across their supply chains.  The result is fewer supply chain disruptions, greater efficiency, higher productivity, more sustained community development, and stronger relationships.  For companies that invest the time and resources into developing their capacity for a Mutual Gains Approach to supply chain management, the potential upside is enormous.

CorpU and CBI have partnered to create our Art of Negotiation program which includes A Mutual Gains Approach. The Consensus Building Institute (CBI) is a not-for-profit organization founded in 1993 by leading practitioners and theory builders in the fields of negotiation and dispute resolution. Their experts bring decades of experience brokering agreements and building collaboration in complex, high-stakes environments. They share their approach with others through partnership, research, and teaching at the Program on Negotiation at Harvard Law School, MIT, and other leading institutions.

Merrick HobenMerrick Hoben is Director of the Consensus Building Institute’s Washington, D.C., Regional Office, Practitioner Associate at the MIT-Harvard Public Disputes Program, and Faculty Associate at the Lincoln Institute of Land Policy. As leader of CBI’s Corporate-Community Engagement practice, he specializes in helping business and its stakeholders/rights holders engage one another more effectively, designing and guiding voluntary standard setting processes, supporting collaborative resource management efforts, and leading complex strategic planning initiatives. Merrick holds an M.S. in Resource Policy and Public Dispute Resolution from the University of Michigan, a B.S. in Environmental Science from the University of Vermont and he completed his negotiation and mediation training at the Program on Negotiation at Harvard Law School.

Tobias BerkmanTobias Berkman is an Associate at the Consensus Building Institute, where he is a trainer, mediator, facilitator, and researcher working on a variety of issues from international development to private sector negotiation training. He is a certified mediator and an experienced negotiation trainer, having worked with corporate and non-profit clients from the U.S. and abroad, and served as a Senior Working Group Leader at the Harvard Negotiation Institute and an Adjunct Professor in Conflict Management at Pace University. Tobias is a Harvard Zuckerman Fellow with a JD from Harvard Law School, a Masters in Public Policy from Harvard’s Kennedy School of Government, and a B.A. from Harvard College.