Stakeholder engagement in sustainable business: insights from sustainability managers and leaders

The world is dominated by crisis. Climate change, loss of biodiversity, pollution and raw-material sufficiency are the most urgent global environmental problems. We also face severe social inequality problems. The business approach to solving global problems is called sustainable business, which covers companies’ responsibility for their economic, environmental and social dimension (Dahlsrud, 2008; Sarkar and Searcy, 2016). Economic responsibility refers to e.g. the profitability of the company (Dahlsrud, 2008; Sarkar and Searcy, 2016), environmental to the state of the natural environment (Dahlsrud, 2008) and social to the relationships between the company and the society (Dahlsrud, 2008; Sarkar and Searcy, 2016), i.e. between the company and its stakeholders.

In this article, we focus on stakeholders and especially stakeholder engagement. Stakeholders are individuals or groups who can affect or are affected by the company (Freeman, 1984). Stakeholder engagement, based on Kujala et al. (2022, 1160), “refers to the aims, activities, and impacts of stakeholder relations in a moral, strategic, and/or pragmatic manner.” In the context of sustainable business, stakeholder engagement mean that the focus areas of sustainable business are defined together with the stakeholders. For this reason, stakeholders are occasionally referred as the fourth dimension of sustainable business (Dahlsrud, 2008; Sarkar and Searcy, 2016).

Companies build stakeholder engagement for several reasons. For example, it is a potential source of competitive advantage and facilitates value creation for stakeholders and society (Freeman et al., 2017; Sulkowski et al., 2018). Through sustainable business activities and policies, companies aim to meet internal and external stakeholders’ interests and expectations regarding sustainability (Ashrafi et al., 2020). Stakeholders’ actions and influence affect whether companies engage in sustainable business and what actions they take (Horak et al., 2018). Stakeholders who are perceived to have more power and legitimacy have a greater influence (Schwartz and Carroll, 2008).

Developing sustainable business requires broad thinking, information and knowledge about stakeholders. This can be achieved by improving dialogue with stakeholders, increasing motivation and opportunities for stakeholder engagement, identifying related pitfalls and being proactive with sustainable business (e.g. Freeman et al., 2017; Myllykangas et al., 2010). Interaction with stakeholders has traditionally been based on voluntary actions (European Commission, 2002). However, there are regulations (e.g. new EU directives on corporate sustainability reporting [CSRD] and corporate sustainability due diligence [CSDDD], and standards and guidelines [e.g. ISO 26000 and the Global Reporting Initiative (GRI), 2022] that emphasise the importance of stakeholder engagement). From a business perspective, the benefits of stakeholder engagement relate to the development of trust and shared responsibility; the efficient use of resources; increased flexibility, innovation and learning; and the delivery of a wider societal good (Freeman et al., 2017; Kujala et al., 2022).

It is important for companies to understand all aspects of stakeholder engagement and update their values and strategies to reflect stakeholder views and requirements. The process of stakeholder engagement is valuable for both, the company and the stakeholders: When different parties are invited to participate in planning and implementing sustainable business from their own perspectives and with respect for their different views – without attempting to gain consensus or identify a common target – the content and boundaries of sustainable business are defined together and their relationships are sustainable (Kujala, 2014).

Despite the abundance of studies on stakeholder engagement since the 2000s, the field is still fragmented [see e.g. Kujala’s et al. (2022) literature review on the topic], there is room to consider how it is adopted in the context of increasing sustainable business and embedded in sustainable business strategies. According to Kujala et al. (2022), the previous studied have addressed stakeholder engagement from moral (e.g. legitimacy, inclusion and accountability), strategic (e.g. financial performance and risk management) and pragmatic points of view (e.g. context specific problem-solving). There is a lack of empirical studies on integrating sustainable business into strategic management (Engert et al., 2016); more empirical examples and case studies are needed to further our understanding of stakeholder engagement (Kujala and Sachs, 2019, also Kujala et al., 2022). Our paper addresses this particular research gap. We found no studies considering the insights of sustainability managers and leaders on stakeholder engagement in the context of sustainable business. Our empirical study helps address the practical challenges and activities for stakeholder engagement.

We examine managers’ understanding of stakeholder engagement in sustainable business and seek to answer the following research question: What are the motivations for sustainability managers to pursue stakeholder engagement? We investigated managers’ views on stakeholder engagement by interviewing 14 sustainability managers from large companies and collecting data from two case studies. Our results highlight related to stakeholder engagement, the key aims, concerns and related actions, that sustainability leaders and managers perceive in the current transition process whereby sustainability is deeply embedded in business strategies. Our study contributes to the literature by proposing that companies’ motivation to pursue stakeholder engagement has three dimensions: regulatory, business and planetary. Four categories of stakeholder engagement ambition can be distinguished:

1. Public image management;

2. Sustainability reporting;

3. Value co-creation; and

4. System change.

We argue that the ambition model ^[1] can facilitate analysis of how stakeholder engagement is organised within companies and of what is important when moving towards more sustainable business. The model can also be used to identify, from a company perspective, the adequacy and scope of multilevel stakeholder engagement and the actions that emerge as key in different categories.

The paper is structured as follows. In the next section, we present sustainable business and stakeholder engagement as the theoretical framework of our study. In Section 3, we introduce the materials and methods: the interviews and two case studies. Section 4 focuses on the results. We then discuss our findings and offer ideas for future research.

This chapter focuses on the definition of sustainable business. We discuss its content and applications at the strategic level. In addition, we develop the concept and its content.

Sustainable business refers to companies’ responsibility for the economic, environmental and social impacts of their activities (Dahlsrud, 2008; Sarkar and Searcy, 2016). In practice, this means that business management examines the role of these impacts in the business environment and in relationships with other organisations, networks, ecosystems and the wider society (Engert et al., 2016; Montiel, 2008; Montiel and Delgado-Ceballos, 2014). It also refers to the short- and long-term economic, environmental and social aspects of company performance (Ashrafi et al., 2018). Central to sustainable business is setting objectives, implementing management approaches (Baumgartner and Rauter, 2017) and monitoring and reporting on sustainable business activities (Starik and Kanashiro, 2013). To manage sustainable business, companies may use different methods and tools, such as environmental or social management systems (e.g. ISO 14001), integrated management systems (Nunhes et al., 2022) and management support tools, such as life cycle assessment (LCA) or environmental cost accounting (ECA) (Baumgartner and Rauter, 2017).

Sustainable business is difficult to define. There are many similar concepts and definitions, including corporate sustainability (CS) and corporate social responsibility (CSR), which we treat as synonymous in this paper. The definition of sustainable business is complex because it deals with difficult systemic phenomena and contradictions; furthermore, the concept is constantly evolving (Sheehy, 2015, see also Matten and Moon, 2020). It covers multiple multidimensional elements: obligation to society, stakeholder engagement, improvement in quality of life, economic development, ethical business practice, legal compliance, voluntariness, human rights, environmental protection, transparency and accountability (Rahman, 2011). Consequently, the application of the concept is challenging for companies. The evolution of the content of concept adds to the complexity. Matten and Moon (2020) described this evolution in their article. While in 2000 sustainable business was focusing on core stakeholders, philanthropy and actions in USA and Europe, in 2020s sustainable business is truly international and in addition to core stakeholders also the societies and the planet is valued. As Matten and Moon (2020) concluded sustainable business is a dynamic concept.

Sustainable business can be viewed and practised at the strategic level in a company. This means that sustainable business has broadened from risk management, cost effectiveness and the search for competitive advantage to purpose-driven strategies that have broadened the scope from businesses’ direct impacts to value chains and networks representing advanced sustainable development and regenerative business (Hahn and Tampe, 2020; The Organisation for Economic Co-operation and Development [OECD], 2023). According to a literature review (Engert et al., 2016), the key drivers of sustainable business inclusion at the strategy level are legal compliance, competitive advantage, cost reduction, economic performance, innovation, social and environmental responsibility, risk management, corporate reputation and quality management. However, the “big disconnect between company activities and the global state of the environment and society” persists (Dyllick and Muff, 2016, p. 157).

Implementing impactful sustainable business practices requires understanding the bigger picture of societal change, and the state of the natural environment. Sustainable business provides companies with the necessary guidance to maintain or enhance their profitability while improving their societal and environmental performance (Ashrafi et al., 2018). However, as Landrum (2018) pointed out, sustainable business practices are currently examples of weak sustainability. Focus is on efficiency improvements and growing production and sales. For companies to achieve strong sustainability, they should focus on the nature and not on the economy (Landrum, 2018). They should not focus on decreasing their environmental impact (as they do currently) but on regenerating nature – that is, repairing the environmental damage that they are causing.

Stakeholders influence the sustainable business practices. Sustainable business focuses on integrating sustainability (social and environmental concerns) into a company’s management models and meeting current and future stakeholder requirements (European Commission, 2022; Steurer et al., 2005). According to Dyllick and Hockerts (2002, p. 134):

Therefore, the key to stakeholder engagement is how well companies communicate and justify their actions and values to stakeholders. Next, we discuss in more detail the importance of stakeholder engagement for sustainable business.

This section takes a closer look at how stakeholder engagement is conceived in the context of sustainable business.

Stakeholder engagement has become a widely used concept in business and society research and the related literature. It has been applied to understand and explain the relationships between organisations and stakeholders, such as employees, customers, suppliers, competitors, local communities and citizens and the various outcomes of these relationships (Freeman et al., 2017; Kujala et al., 2022; Mitchell et al., 2022). According to Kujala et al. (2022), the most cited definition of stakeholder engagement in the business and social science literature is “the practices that the organization undertakes to involve stakeholders in a positive manner in organizational activities” (Greenwood, 2007, pp. 317–318).

Stakeholder engagement is often approached through stakeholder theory; the basic idea is that companies should create value for all their stakeholders – that is, those who can influence the realisation of the organisation’s purpose or be influenced by the company (broad definition) or those without whom the organisation would not exist (narrow definition) (Dmytriyev et al., 2021; Freeman, 1984; Freeman et al., 2010). Stakeholder engagement is also recognised as fundamental to executing sustainable business (International Organization for Standardization (ISO) 26000, 2010; Lane and Devin, 2018) and brings together business and ethical thinking (Kujala and Kuvaja, 2002; Mitchell et al., 2022). As Barney and Harrison (2020, 209) phrase this, a sustainable company “provides an excellent and safe product at a fair price, pays its suppliers fairly and on time, treats its employees well, is respectful to the local communities in which it operates, pays its financiers as promised, provides a reasonable return to its shareholders, obeys applicable laws and exhibits trustworthy behaviour in its interactions with all its stakeholders.”

Many benefits and influences of stakeholder engagement have been recognised (Stutz and Sachs, 2018), including the positive impacts of a company’s financial performance (e.g. Ayuso et al., 2014; Gupta et al., 2020; Hillman and Keim, 2001). In a literature review of 90 articles, Kujala et al. (2022) showed the relevance of stakeholder engagement to organisational activities, including value creation (e.g. Freudenreich et al., 2020), strategic planning and decision-making (e.g. Castelló et al., 2016), innovation (e.g. Alvarez and Sachs, 2021), learning and knowledge creation (e.g. Mitchell et al., 2022), accounting and reporting (e.g. Böhling et al., 2019) and CSR and sustainability (e.g. Dobele et al., 2014). It is therefore easy to see the importance of stakeholder engagement for sustainable business, in which the aforementioned functions and actions are essential. Table 1 shows some moral, strategic and pragmatic components of the stakeholder engagement.

By engaging with stakeholders, organisations communicate their sustainability objectives and seek to ensure that their decisions and actions are socially acceptable (Green and Hunton-Clarke, 2003). Thus, they commit to contributing to building a socially sustainable society wherein structures such as established social, political, economic and cultural frameworks do not act as barriers to people’s health, empowerment, competence, objectivity or meaningfulness (Missimer et al., 2017). Sulkowski et al. (2018) also highlighted that proactive engagement with stakeholders, which can be beneficial in any business environment, is urgently needed, particularly to achieve deep systemic change in the context of global ecological crises and societal problems. Some researchers (e.g. Dyllick and Muff, 2016; Pihkola, 2021) have also raised the question of whether, given the current sustainability consciousness, companies should be specific in defining their role in terms of promoting the common good and improving sustainability performance rather than focusing on delivering (economic) value to shareholders and stakeholders.

Stakeholder engagement occurs at different levels and from various perspectives. For example, Roloff (2008) distinguished between two types of stakeholder engagement:

1. Organisation-centred, which emphasises organisational well-being; and

2. Issue-centred, which focuses on issues that affect stakeholder relationships and well-being and the legitimacy of company actions.

Similarly, Kujala and Sachs (2019) stated that stakeholder engagement occurs at multiple levels and can be viewed from the perspectives of the company, stakeholder and problem to be solved. They highlighted that stakeholder engagement is a two-way process that forms a specific network. Maintaining stakeholder relationships should be based on the principles of fairness and reciprocity (Phillips, 2003) and should be mutual; that is, companies and their managers are responsible for creating stakeholder value, but stakeholders are also responsible for sustaining the relationship (Goodstein and Wicks, 2007).

However, stakeholder engagement and managing stakeholder relationships can be difficult. Hörisch et al. (2014) identified three challenges in managing stakeholder relationships for sustainability:

1. Validating stakeholders’ sustainability interests;

2. Creating mutual sustainability interests; and

3. Empowering stakeholders to act as mediators between nature and sustainability.

To address these challenges, they proposed three interlinked mechanisms: education, regulation and sustainability-based value creation for stakeholders. Furthermore, including vulnerable stakeholders in the debate is important. According to the United Nations Development Programme’s (UNDP) Interpretative Guide, “the key to human rights due diligence is the need to understand the perspective of potentially affected individuals and groups” (United Nations Human Rights Office of the High Commissioner, 2012, p. 33).

Various process descriptions of stakeholder engagement exist. First, Freeman et al. (2017) listed the key themes of executing stakeholder engagement:

• Reviewing stakeholder relationships;

• Communicating with stakeholders;

• Learning with and from stakeholders; and

• Integrating stakeholder engagement.

Second, according to Myllykangas et al. (2010), the key to successful stakeholder engagement based on common value co-creation is understanding and considering a few main areas:

• Stakeholders’ targets;

• Stakeholders’ learning potential;

• The history of the collaboration;

• Interaction;

• Information sharing; and

• Trust.

Third, Lane and Devin (2018) outlined the steps to operationalising stakeholder engagement as part of sustainable business, arguing that this step-by-step approach provides “check and balance points” whereby problems in stakeholder engagement can be identified and corrected. The steps are:

• Identifying and selecting stakeholders;

• Ensuring stakeholder interest; and

• Implementing strategy, methodology and results.

These create legitimacy of decisions, processes and organisation. Researchers have also pointed out that stakeholder engagement is context specific and influenced by upstream factors.

Previous studies have examined the impact of stakeholder engagement on organisational performance and explored the benefits and challenges of managing stakeholder relationships. The key themes and steps involved in operationalising stakeholder relationships have also been compiled into frameworks. However, the perspectives and views of practitioners have received less scholarly attention; hence, our research focuses on what key sustainability practitioners emphasise when discussing stakeholder relationship development. Next, we present our research data.

We have performed a qualitative study and collected qualitative data. We collected the data in two phases. First, we interviewed 14 sustainability leaders. The aim of these interviews was to get an overview of stakeholder engagement in various industries. We selected the interviewees from large, multinational companies who had appointed a sustainability expert. Second we conducted two case studies. Here the aim was deepening the understanding of stakeholder engagement in two companies, based on the general results of the interviews. We analysed the data with qualitative content analysis. The data collection and analysis phases are summarised in Figure 1.

The sustainability leaders whom we interviewed were from 14 large Finnish companies that consider sustainability to be essential to their business. The interviewees were responsible for directing or managing sustainable business or one of its dimensions at the company that they represented, although their position titles did not always carry the “sustainability” concept. The sustainability leaders were considered as suitable persons to discuss and summarize the company’s view on stakeholder engagement.

The companies were chosen to represent widely different industries and dealt with sustainability issues in their management practices. All except one were listed companies, with revenues ranging from over €100m to over €50bn. Information about the interviews is presented in Table 2.

Thematic interviews were used to limit the discussion to topics that were relevant to the research and to enable the interviewees to speak freely (Hirsjärvi and Hurme, 2001). Interviews included the following topics:

• Concept of sustainable business.

• Changes in sustainable business.

• Key content of sustainability from a business perspective.

• Key challenges.

• Stakeholders.

We, for example, asked from the interviewees: Which stakeholders are central to your operations in sustainability? What kinds of practices do you have in your value chains or networks? How is the cooperation with these stakeholders currently going? What current and future needs are related to the stakeholder cooperation?

At the start of the interview, the nature of the study was explained, and the interviewees were informed about the use of the data for research and development purposes. All the interviewees gave voluntary consent to participate and for the use of the data. The interviewees were asked to describe the situation of stakeholder engagement in their own company and from their own perspective. The interviews were recorded and transcribed, except for one due to technical issues. Each interview lasted for 1–1.5 h, and the transcribed data accounted for 246 pages.

After all interviews were conducted and analysed, we sent a summary report of the results to the interviewees. All the interviewees were also invited to attend the final seminar of the research project.

We also conducted two case studies at two companies. These two companies were selected as they showed willingness to improve their social sustainability practices together with the researchers. In the case studies, the informants represented various departments, as we wanted to have a deep understanding of the concrete stakeholder engagement actions in these companies. However, all the informants had experience in stakeholder engagement. After the participation in the project, the researchers sent a report to the case companies and asked for feedback. In the feedback, the company representatives apprised that the workshops widened their own understanding of various interpretations of stakeholder engagement inside their own company. Next, we present the companies and data collection process.

Company A is a growing, family-owned business with 100 + years of history and over 800 employees in nine countries. It produces and sells chemical industry solutions in construction, industrial adhesives and fireproofing, professional hygiene and consumer goods. For Company A, it was important to be able to address the dimensions of social sustainability and make it visible, create a roadmap for development and discuss the topic with stakeholders.

At Company A, we conducted seven in-depth interviews focusing on social sustainability. The informants represented personnel administration, legal affairs, media and communications, procurement, management and ownership. Each interview took between 30 and 60 min and was recorded. Two researchers also took detailed notes. Next, two workshops were organised for key personnel (15 persons), during which the latest scientific research and business case examples were presented, followed by discussions on the concepts and dimensions of social sustainability and procedures for developing stakeholder engagement. Exercises covering stakeholders’ expectations, needs and values as well as implementation methods, evaluation and monitoring were conducted. The researchers took notes during the workshop discussions, and after the sessions, they discussed and wrote down their initial findings.

Company B is a technology developer and licensor focusing on electronics, especially in the automotive industry. It has 100 employees and operates in five countries in Europe, North America and Asia. Its key motivation was to gain a better understanding of its business impact. The case was built on LCA analysis, and the identified circular economy business model options were developed from the findings.

Two 2-hour workshops were organised. The first focused on stakeholder analysis and identified the changes in business models in case elements of circularity were introduced. In addition, based on the upcoming EU regulation on reporting, material sustainability issues were assessed. In the second workshop, the participants worked with the sustainability value proposition of the company’s potential new business model and discussed stakeholder engagement and collaboration practices. The workshops provided the four participants (from finance and administration, product management and marketing, sustainability and product planning) with ideas and input for their development measures and a place to discuss the potential effects of the stronger integration of sustainability into their business strategy and models. We took notes based on the discussions and recorded key points using workshop templates.

As Figure 1 shows, we used data from the sustainability leaders and the case studies in the qualitative analysis, which was thematic analysis. We analysed the data in three steps, as explained below.

First, we started our analysis by examined the interview data using content analysis (Kohlbacher, 2006; Mayring, 2000). Adapting Krippendorff’s (1980) technique, we divided the text into content areas. We considered only content related to stakeholder engagement and in this article our focus was on the aims, concerns and actions. Aims focused on the reasons, why the study participants engaged with the various stakeholders. Concerns related with the problems or challenges the interviewees had faced with stakeholder engagement. The actions, for that matter, are the solutions interviewees had used to solve the concerns. Next, we read the interview transcripts several times and split the text into smaller units (i.e. codes) describing the type of engagement involved. This part was done manually in collaboration with two authors of this paper. These refined codes are visible in  AppendixTables A1 and A2 as lists in columns “Concerns” and “Actions”. These codes were further combined to five themes with external stakeholders (external sustainability reporting, non-governmental organization [NGO] communication, cross-industry cooperation, public debate and value creation) and to two themes with internal stakeholder engagement (internal dialogue and internal sustainability reporting). Finally, we reorganised the factors that we found into broader themes covering business benefits, regulation and complex planetary challenges. These three boarder themes made the basis for the ambition model. The material from the case study workshops was used to complement and refine the results.

The quotations below depict specific issues that the interviewees raised (Clark and Gerrig, 1990; Wade and Clark, 1993). We use summative descriptions of interview content or key words identified from the text to share the findings (Tables A1–A2).

This chapter presents the main findings of the data analysis. First, we describe practitioners’ perceptions of stakeholder engagement. Here we concentrate on what kind of aims the practitioners place on stakeholder engagement. Second, we focus on the concerns of the stakeholder engagement and the proposed actions. We discuss these from the point of views of internal and external stakeholders. Third, based on these empirical findings we created four ambition categories for stakeholder engagement which we present the third subsection

The main aim of stakeholder engagement is to learn sustainable business practices. The informants hoped that the internal stakeholders (employees, management and owners), supply chains, value networks of the company and value networks among themselves would share sustainability awareness, knowledge, a common understanding and values. The role of networks in the success of sustainable business orientation was emphasised. Sustainability managers described their views of network value as follows:

In addition to learning practices, the objectives expressed by informants to increase knowledge and develop a more comprehensive understanding of sustainable business were related to both moral benefits and value creation from a business perspective. Conversely, stakeholder engagement and communication were also reported to be geared towards demonstrating the company’s and industry’s potential to influence global sustainability issues. The following quotes illustrate this perspective:

The case companies also highlighted the importance of sustainable business. In case A, environmental sustainability perspectives were considered at the strategy level. The company had developed targets and programmes for its day-to-day management and follow-up but lacked full integration at the business area level. The need created by customers and regulations prompted the company to develop a programme for social responsibility themes. The company representatives saw social responsibility themes as a competitive advantage, while environmental issues were described as more of a business necessity. In the case of Company B, the focus had been on technology development and its efficiency (also in terms of material savings, etc. and from environmental perspectives), but the company had not actively examined its technology’s sustainability impact and the sustainability value created for its stakeholders. The key person from Company B described how the market pull of sustainable options unlocks new possibilities within the company to include sustainability in more strategic-level discussions.

The company representatives saw information exchange as key to learning practices, but active participation and influence in external value networks were seen as essential to making sustainability a strategic business factor in the company and industry. Some stressed social importance but as subordinate to business, which in other words means that economic profitability always comes with first priority.

The interviewees and case company representatives raised concerns or problems they have come across in the stakeholder engagement both with external and internal stakeholders. The practitioners had found ways to address these concerns; we call these as actions. The findings are summarised in  Appendix (Tables A1 of the external stakeholders and Table A2 for the internal stakeholders). We discuss these findings from external and internal stakeholders’ perspectives in the following subsections.

The sustainability practitioners discussed the external stakeholder engagement concerns and the related actions from five perspectives. These were external sustainability reporting, NGO communication, cross-industry cooperation, public debate and value creation. These are discussed in detail below.

The informants raised concerns about sustainability reporting. Although reporting has evolved and various methods and platforms exist, key persons experienced significant challenges related to the fact that there are many different ways, requirements and tools for reporting depending on the client network organisation that requires reporting. There are too many enquirers, extensive reporting forms and reporting systems. Similarly, informants face difficulties in selecting the most appropriate reporting tools for their own supplier network.

The informants pointed out that certain standardised requirements work well for data collection, categorisation and choice making, but there is often a need for more flexibility in negotiation and an overall view of how genuinely or well sustainability has been pursued in the supply and/or customer network and how, for example, significant local improvements have been achieved. Managing the local operations of the supplier network was a key challenge for multinational operators owing to differences in culture and distance. In addition, if only formal data are collected from suppliers for reporting purposes, it is difficult for the company to deepen cooperation and motivate stakeholders to engage in sustainability activities.

The informants reported that challenges have been addressed by developing contract practices, codes of conduct, ethical guidelines, supplier requirements, minimum standards, responsibility criteria and audits. They said that various measurement tools, materiality assessments and interviews are also used, and stakeholders are obliged to report. Some auditing of the processes of the subcontractor network and training in sustainable business management are also being carried out. In addition, various management tools are used to encourage discussions and motivate stakeholders. However, these activities are resource intensive and infeasible for many small businesses.

Regarding NGO communication, informants stressed the difficulty of finding the right partners. NGO communication was considered important among respondents, but finding the right NGO partners was seen as a challenge. This situation was particularly pronounced when activities were carried out in several countries and/or regions. If suitable partners were found, NGO cooperation was seen as useful, for example, in developing the level of education and conditions in the region.

The challenge of cross-sectoral cooperation in sustainable business was described by the informants as a clash of perspectives and objectives, making progress difficult. The informants stressed that it is difficult for smaller actors to influence networks and effect change. Furthermore, at the network level, it is difficult to know the real sustainability impacts. However, interviewees within different sectors noted, it has been possible to jointly formulate visions and practices of sustainable business and influence regulatory work. In addition, various advisory committees on sustainable development have been established, partners sparred and concrete changes made.

Public debate was seen as challenging. According to informants, it is difficult to make sustainability efforts visible and emphasize the right issues; honesty can attract criticism, and mistakes are easily identified. It is also difficult to target the message the correct way and to the right audience, and that is why some companies use professional communication partners to help communicate sustainability. Companies also strive to be as transparent as possible about their own activities and those of the network, although surprises may arise, especially with regard to the network. Some informants emphasised the importance of business involvement in the social debate and were willing to pass on their knowledge and lessons learned and felt responsible for doing so. Many also highlighted the companies’ role as a part of society and the need to assess their societal-level impact and the importance of participating in societal discussion and providing stakeholders with information on the issues that they find important. However, some informants disagreed about participating in the social debate and stressed the need for caution when acting in corporate positions. From a business value creation perspective, the challenge of stakeholder engagement in sustainability was said to be the result of a clash of different backgrounds and mindsets. The informants described the difficulty of finding the right partners and deepening dialogue with them. Making positive impacts visible was also a challenge in terms of getting stakeholders to commit to sustainable business. Internal commitment challenges were also highlighted. According to the informants, it is difficult to get salespeople to understand the importance of the issue and it is easy to return to the challenge of not perceiving sustainability as a selling point. Companies have sought to increase debate with value chain partners and to join alliances, industrial parks and/or industrial ecosystems. Discussions are held with value network partners on the requirements, and efforts are made to develop trust and understanding of different starting points and backgrounds. There is also a need for network building; an active approach to discussions with local people; and attention to consumer feedback, training, information, assistance and support at different levels. Some informants also saw the dissemination of best practices as part of their role. Similarly, informing public authorities and lobbying through industry associations were seen as important stakeholder activities for promoting sustainable business.

Stakeholder engagement with internal stakeholders was discussed from two perspectives, which were internal dialogue and internal sustainability reporting. These are discussed in detail below.

In terms of internal stakeholder engagement, the informants reported that finding a common understanding of the importance of sustainable business, as well as time and resources, was challenging. To increase internal dialogue on sustainable business practices the following activities have been organised by companies: an internal network to address sustainability issues, training courses, activities and training opportunities, sustainability debates for employees, campaigns and knowledge sharing between managers and specialist from different expert areas. For example, sales staff were mentioned as being difficult to motivate to cooperate on sustainability issues. Key themes in internal engagement were diversity, inclusion and equality, well-being and safety.

Internal sustainability reporting often focuses on social sustainability only. Companies have measured occupational safety using indicators such as accidents and absences, and as well-being using job satisfaction surveys. Alongside these, surveys and discussions that better measure diversity, inclusion, and equality have also emerged. In some companies, it was reported that discussions on the above-mentioned issues are still difficult, and relevance of themes are sometimes questioned.

As noted, the challenges of stakeholder cooperation are multifaceted. They include the various ways of reporting to different stakeholders as well as the need to find reliable partners and the resources and procedures for dialogue and concrete action. The key players in sustainable business also reflect in different ways the role of business in society. Key questions and issues that emerged from the debate include the following: What is sustainability data used for inside and outside the company? How and with whom do companies cooperate inside and outside the company? Next, we consider the motivations for companies’ actions in terms of ambition levels.

We summarise our results as four ambition categories for the stakeholder engagement process (see Figure 2). We identified that companies have three main reasons for stakeholder engagement: implementing legislation, pursuing business benefits and aspiring towards planetary benefits (social and environmental sustainability). These we used to build the axes of the cube, and we call them as the three motivational dimensions. Coordinating these dimensions revealed four ambition categories for sustainable business-related stakeholder engagement in companies:

1. Management of the company’s public image;

2. Sustainability reporting;

3. Value co-creation; and

4. The driving of systemic change.

The categories describe what companies are aiming for when they develop stakeholder engagement related to sustainable business.

The small boxes inside the cube describe the main targets of the company: sustainability reporting, managing public image, value co-creation and changing the system. When a company’s motivation for stakeholder engagement focuses primarily on regulatory compliance, the objectives and implementation emphasize stakeholder reporting. The cube closest to the origin is empty, as in practice large companies cannot operate in a business environment where both legal requirements and business motives for stakeholder engagement are negligible. Efforts to achieve good public image management through stakeholder engagement were mainly based on business motives. Business interests also clearly influenced the creation of shared value, but on the other hand, regulatory motivation factors were also behind this, as companies sought to work with various stakeholders and networks to find effective ways and tools for implementing regulatory reporting and influencing legislation. In the upper right corner of the cube, when legal requirements can be met and the business environment supports motivation, the aim is to change and develop the entire system with the involvement of stakeholders towards a more sustainable operating logic. In all cases, the depth of the boxes may vary from company to company, depending on how significant the company’s motives for planetary well-being are.

The model can be used to examine systemically the backgrounds and aspirations of stakeholder engagement in sustainable business in companies. Even if a company does not clearly fall to a single ambition category, the model can be used, for example, to identify the focus of its current activities and to determine whether this corresponds to the company’s objectives. In addition, the model raises awareness in companies of the different levels of objectives and aspirations associated with stakeholder engagement in sustainable business. Particularly at the beginning of stakeholder engagement development process, the model helps managers to understand the dimensions of engagement and the targeting of actions.

The key persons in sustainable business discussed the importance of stakeholder engagement on several levels: regarding not only how to treat their stakeholders but also what it means to be a stakeholder. Some saw their role more broadly than others regarding promoting planetary sustainability. Conversely, in practice, companies’ activities were strongly based on business value creation, alongside which the level of implementation of the minimum requirements with their regulatory obligations became central. The implementation of minimum standards – particularly how to implement them in practice through stakeholder cooperation – was also seen as a major challenge. Public image management was another motivating factor that was newly highlighted by social media.

When sustainable business was discussed in workshops with different key people (e.g. in procurement, marketing and legal), many participants reported that their own thinking about sustainable business had broadened significantly, mainly through their own work.

We examined how stakeholder engagement is perceived in companies transforming towards sustainable business. We focused on the aims, concerns and related actions in stakeholder engagement that sustainable business practitioners have recognised. We present three motivation dimensions and four ambition categories for companies developing stakeholder engagement related to sustainable business. We offer companies a way to consider their ambitions and willingness for stakeholder engagement from different perspectives. In the following section, we discuss our findings from two perspectives: multifaceted stakeholder engagement and the implications of our stakeholder engagement model.

The stakeholder approach is widespread in the literature and has been found to inspire companies to act responsibly and contribute to communities’ well-being (Shireesh and Kumar, 2018). However, sustainability challenges and the directives and proposals of the European Commission (2024), CSRD and CSDDD are driving sustainability thinking towards deeper embeddedness in companies’ core business. Based on our study, the sustainability managers, leaders and representatives of the case companies were aware of this trend and recognised the need for more careful and multifaceted stakeholder engagement in sustainable business. However, they were concerned about finding the right partners, deepening key stakeholder relationships, meeting the requirements of reporting, making positive impacts visible and reconciling diverse stakeholders’ views and perspectives. These concerns are consistent with the challenges identified by Hörisch et al. (2014): validating stakeholders’ sustainability interests, creating mutual sustainability interests and empowering stakeholders.

When considering stakeholder engagement in sustainable business, we found that company representatives considered it from different perspectives. Stakeholder relations were interpreted as a multifaceted, multi-objective and complex phenomenon, as Harrison and Freeman (1999) stated. The ambition behind stakeholder engagement was also approached from different angles. First, the interviewees considered its importance for the company’s core business. Second, they highlighted the role of the company stakeholders in systemic change towards a more sustainable society and possible actions to care for the planet. This reflected a shift in thinking towards regenerative business, which refers to business that enhances and thrives through the health of socioecological systems in a co-evolutionary process (Hahn and Tampe, 2020; Landrum, 2018). This notion aligns also with Matten and Moon’s (2020) evolution of sustainable business. Today companies need to focus their sustainability work on the whole value chains, whole societies and even the planet. Third, companies seek to ensure business continuity by engaging stakeholders to comply with regulations related, for example, to sustainability reporting and stakeholder communication.

Next, we discuss the practical implications of our stakeholder engagement model based on its categories. Through stakeholder engagement, companies also manage their public image (category 1) regarding sustainability issues. The companies considered it important to contribute to the public debate on sustainability as a way to polish their public image. However, a real desire to change the business environment in a more sustainable direction and share the lessons learned could be identified. According to López‐Concepción et al. (2022), sustainable business is a potential health initiative that can reduce stress among workers and increase motivation and commitment, which interviewees also referred to as a willingness to empower employees. Although the key stakeholders were mainly considered to be those with business influence, respecting the voices of critical, silent and marginalised stakeholders is important in stakeholder communication (e.g. Hart and Sharma, 2004; Joutsenvirta, 2009). As Hart and Sharma (2004) stated, companies are expected to go beyond the traditional logic of stakeholder importance and to identify and include “marginal” stakeholders (those who are not considered legitimate and those who are powerless and even non-human). Golob and Pondar (2014) highlighted the frequent risk of asymmetrical communication imposed by the stronger party. Through public debate, companies can deepen their understanding of the sustainability dimensions. Successful public debate requires skill to conduct public debate ethically and responsibly.

In Category 2 (sustainability reporting), we found that companies emphasised reporting owing to recent legislative changes (CSRD and CSDDD). The main driver was the provision of the evidence required by regulations that stakeholders are acting responsibly. Reporting obligations are also a way for a company to engage its stakeholders in its vision of sustainable business. We also noticed the meaning of reporting on supporting systemic changes, as well as the image benefits for the company. Stocker et al. (2020) examined stakeholder engagement in sustainability reporting, and according to their results, companies concentrate their engagement actions at less complex levels, such as informing and responding. Based on our study, producing information through different reporting tools, ensuring its accuracy, motivating stakeholders and managing diverse stakeholder relations were perceived as challenging in reporting. Regarding sustainability reporting, the company representatives talked less about how they create sustainability value for their stakeholders and more about how their stakeholders are expected to deliver value to them.

Concerning Category 3 (value co-creation in the context of sustainability), business benefits for the company were the primary target. The concept of value creation is based on actors in service ecosystems being expected to co-create value by sharing their experiences and innovations (see service-dominant logic; Vargo and Lusch, 2017). The value is not only monetary but also multidimensional and related to social, cultural and economic factors (Ben Letaifa, 2014). Stakeholders play a fundamental role in service-for-service exchange, value creation and the evaluation of value, which is why service providers need to understand stakeholders’ contexts, operations and needs (Prahalad and Ramaswamy, 2004; Vargo and Lusch, 2004). Business models are often used to organise and facilitate relationships and the corresponding value exchange (Freudenreich et al., 2020; Wieland et al., 2017). Attanasio et al. (2022), for example, examined how engaged stakeholder groups contribute to the value flow in sustainability business models. Value creation is also emphasized by Matten and Moon as a part of sustainable business today.

Regarding Category 4 (driving systemic change), our findings suggest that companies operating internationally, or at least their sustainability managers, had a diverse and system thinking perspective on stakeholder engagement. This is essential because jointly implemented, large-scale changes in sociotechnical systems are the key orientation towards systemic change regarding sustainable business (Savaget et al., 2019). Also, Matten and Moon (2020) pointed out that sustainable business has nowadays an international focus. Voulvoulis et al. (2022) argued for a systems approach to holistic, integrated and interdisciplinary thinking that challenges assumptions and worldviews and relies crucially on public participation. Such engagement creates the conditions for sustainability to emerge. Voulvoulis et al. (2022) also argued that to avoid unsustainable behaviour, systemic change requires deliberate and interconnected changes in technologies, social practices, business models, regulations and societal norms. This can be seen as a paradigm shift enabling the transition to sustainable development and to succeed, it needs support at many levels. However, management research has been unable to find innovative ways to understand the potential barriers, bridges and pitfalls of integrating sustainability into business as well as the corporate policies, processes and practices needed for a fundamental sustainability transition (Martinez et al., 2019; Starik and Kanashiro, 2013). Williams et al. (2017) stated that although sustainable business thinking is based on a systems approach, the dominant conceptualisations of business sustainability remain focused on the organisation’s business logic. Based on our findings, companies are adopting a systems thinking perspective and striving towards shared value commitment and actions to change unsustainable activities and business environments.

Stakeholder theory is “about value creation and trade and how to manage a business effectively” (Freeman et al., 2010, p. 9). According to Tapaninaho and Kujala (2019), interest in sustainability issues and theory development within stakeholder value creation studies has recently increased, and some examine stakeholder orientation from a multiple value perspective. Value creation focuses on business relations and benefits, while driving systemic change focuses on actively seeking to transform the operating logic in the business environment. Achieving systemic change was perceived as requiring long-term commitment, knowledge sharing and cooperation between many actors in the industry and across industry boundaries, as well as a willingness to contribute and to renew mindsets. This also involves inner dimensions and transformation, which are essential to understanding and facilitating personal and collective processes of change in our consciousness and relationships with ourselves, others and the environment (Woiwode et al., 2021). Beyond the win–win logic of business, Martinez et al. (2019) suggested syncretism as an approach that recognises and uses the processes through which faiths and beliefs are maintained. According to them, nonconventional, “game changing,” and long‐lasting business–stakeholder relationships and dialogue are also important. Hahn and Tampe (2020) also stressed the importance of a systemic approach to developing sustainable business in a regenerative direction.

Our research has some limitations. These limitations raise topics for future research. We have focused only on the views of company representatives – mainly sustainability managers from large, globally operating companies. In the future, stakeholder engagement in the context of sustainable business should also be considered from the perspective of smaller actors and different stakeholders (e.g. NGOs, regional actors and suppliers) and marginalised groups. Research focusing on stakeholder networks is needed. Further research is also needed on how companies see themselves succeeding in their efforts to build stakeholder engagement in a new context wherein sustainability is increasingly embedded in corporate strategy and the drive is towards a regenerative business mindset. Observing how stakeholders and companies work together and comparing their perspectives (what engagement looks like from different viewpoints) is important. In addition, we welcome more research in different cultural and geographical locations to validate our results.

Our study emphasizes the importance of analysing the nature of stakeholder ambition regarding sustainable business. We propose an open dialogue within companies and with stakeholders about the aims of sustainable business and how to improve stakeholder engagement. This paper makes three contributions to the research on stakeholder engagement in the context of sustainable business. First, it deepens our understanding of the drivers, concerns and actions of stakeholder engagement. Second, companies’ motivations to pursue stakeholder engagement are considered from three dimensions: regulatory, business and planetary benefits. Third, four categories of ambitions regarding sustainability work are distinguished. The ambition model of stakeholder engagement can facilitate a systematic and deeper analysis of how it is organised in companies and how to move towards it while supporting sustainability growth and development. The model can be used to identify, from a company perspective, the adequacy and scope of multilevel stakeholder engagement and the key actions required.

Marinka Lanne is based at VTT Technical Research Centre of Finland, Tampere, Finland.

Marileena Mäkelä is based at Jyväskylä University School of Business and Economics, University of Jyväskylä, Jyväskylä, Finland, and School of Resource Wisdom, University of Jyväskylä, Jyväskylä, Finland.

Katariina Palomäki is based at VTT Technical Research Centre of Finland, Tampere, Finland.