- New Perspectives in Research on Corporate Sustainability series
Edited by Sanjay Sharma and Mark Starik
Chapter 7: Managing Organizational Project Risks of Stakeholder Demands in Industrial Investments
7. Managing organisational project risks of stakeholder demands in industrial investments Rianne de Leeuw and Joram Krozer INTRODUCTION This chapter discusses the manner in which companies during investment preparation can anticipate the demands of stakeholders to reduce investment risks. These stakeholders, like authorities, residents and environmental organisations, represent public interests. An investment risk is deﬁned as the chance of liability times the extra costs caused by the liability (after Carey and Turnbull, 2001). An investment takes many years: starting with an idea and feasibility study, then basic and detailed engineering, which is followed by technology procurement with applications for permits, construction of the facility and start up of production. Only thereafter can income from sales be generated. The expenditures grow exponentially in each phase, mostly ﬁnanced by loans and shares. Non-compliance with the stakeholders’ demands is a risk because it can cause delays in the start up of production, extend ﬁnancial negotiations, trigger a higher interest rate and invoke tougher than expected standards in permits. Firstly, the literature about companies’ strategies in view of stakeholders’ demands is discussed, then stakeholders’ interests based on a case study of an investment preparation in magnesium production, and ﬁnally the authors illustrate how investors can anticipate environmental demands in order to reduce investment risks connected with the permit procedure. 166 Managing organisational project risks 167 LITERATURE REVIEW: ANTICIPATING STAKEHOLDER DEMANDS AND COSTS OF NON-COMPLIANCE Anticipating Stakeholder Demands Dealing with stakeholder demands can take many forms, ranging from neglecting the demands to joint projects....
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