Research in Progress: Managing stakeholder expectations in a polarized society

By Juan Liu and Lingling Zhang, Towson University

Since the introduction of the United Nations Sustainable Development Goals (SDGs) in 2015, corporations have been using the goals as a guideline for disseminating and communicating their corporate sustainability agendas. Sustainable development when integrated by the organization is called corporate sustainability and is composed of three dimensions:

• Environmental
• Social
• Governance

Identifying and meeting public expectations toward an organization is vital for the effective management of organization-public relationships and organizational reputation. Organizations failing to meet public expectancy run the risk of losing organizational legitimacy. As more and more corporations embrace sustainability in their business strategies and practice, public expectation about a corporation’s sustainable management and operation has also increased.

However, the discrepancy between public expectancy and enacted behavior of corporations is repeatedly observed. For instance, in March of 2022, employees, especially LGBTQ workers pressured Disney to take a stronger stand against legislation that limits instruction on homosexuality and transgender issues.

In January of 2020, hundreds of employees at Amazon used the hashtag #AMZNSpeakOut in public statements that condemn the company for not taking sufficient action on the climate crisis.

In the aftermath of George Floyd’s death, Coca-Cola, whose CEO declared the company would put the resources and energy toward helping end the cycle of systemic racism, was boycotted in March of 2021 by Georgia activists over its refusal to oppose the voting bills in the Georgia legislature that would suppress voter access.

While many companies wish to be seen as leaders in sustainability, stakeholders are often skeptical about a corporation’s motivations for sustainability initiatives. In particular, a corporation committed to a sustainable business violating stakeholders’ expectations may experience a challenge crisis.

Scholars have defined a challenge crisis as confrontations by disgruntled stakeholders claiming an organization is operating in an inappropriate manner. Different from other crises, a challenge crisis is not caused by an event; rather, stakeholders’ claims possibly instigating a challenge crisis. Hence, a corporation may experience a challenge crisis if its corporate sustainability commitment violates stakeholders’ expectations.

Past research reveals that emphasizing corporate social responsibility (CSR) fit can attenuate stakeholders’ skeptical perceptions, meet stakeholders’ expectations, and enhance corporate credibility. CSR fit concerns with thematic congruence between a company’s primary area of business and its CSR efforts. Highlighting such a fit between the mission of CSR and that of a company in the apology statement can lessen anger toward a company in a crisis.

Does corporate sustainability have to be controversial? How do you manage corporate sustainability in a challenge crisis?

We will address the two overarching questions in our research, which will provide nuanced insights into the understanding of stakeholder reactions to corporate sustainability initiatives by investigating one of the most important stakeholder groups to companies – consumers–to explore why and how they react to corporate sustainability.

► Study 1 aims to explore whether public evaluations of organizations may vary based on the types of sustainability issues that corporations are involved in, media frames to portray sustainability performance, and levels of public skepticism of sustainability practices.

► Study 2 tests whether enhancing company-cause fit in crisis responses can help reduce public negative perceptions of corporate sustainability performance. Moreover, it also examines whether perceptions of a corporation’s crisis response can vary based upon the types of challenge crises (i.e., employees vs. nonprofits) facing a company.

By conducting the proposed two studies, we will fill the void to understand stakeholder reactions to corporate sustainability issues and provide nuanced insights into how organizations are engaging in sustainability communication in the context of a challenge crisis. Our research will contribute to expectancy violation theory and sustainability communication research and have important practical implications for companies to embed sustainability internally and externally, link stakeholders’ values and support for sustainability with the company’s operations, and create positive change to social welfare.

For further information on this study, please email Juan Liu at juanliu@towson.edu or Lingling Zhang at lizhang@towson.edu. Findings from the study will be available next year. This project is supported by a 2022 Page/Johnson Legacy Scholar Grant from the Arthur W. Page Center.