This research explores the nexus of sustainability and stakeholder engagement in a New Zealand business context. A grounded theory approach was used to examine the perceptions of the people involved in stakeholder-organisation relationships, particularly pertaining to sustainability, set against the background of the New Zealand power industry, focusing on the generation sector of that industry.

Three companies from this single industry sector were used as the focal organisations for this research. Ninety eight interviews were conducted with staff members of the three companies and a wide variety of stakeholders external to the companies. Data from the interviews were analysed using a thematic approach to identify trends and draw linkages with extant literature in the sustainability and stakeholder domains.

Findings confirm that stakeholder engagement has the potential to broaden companies’ perceptions of issues of importance in a business decision-making context. The research offers a typology of characteristics that indicate whether stakeholder-organisation relationships are functional or dysfunctional. These characteristics are:

• the level of contact between parties to the relationship; • the stance taken by parties to the relationship; • the degree to which the relationship is perceived by stakeholders as engagement or management; • the level of reciprocity in evidence in the relationship; • the willingness of parties to be flexible with regard to developing collaborative goals; and • the level of openness that parties display, to a wider audience, with regard to interactions between stakeholders and organisations.

At a theoretical level, this research has developed the stakeholder case for sustainability, in particular contrasted to the business case for sustainable development, and as an adjunct to the strong sustainability model. This development is achieved by reframing the business case for sustainable development within a broader and more inclusive stakeholder perspective in keeping with a paradigm shift away from a narrower economically focused mind-set.

Although this ideal may seem difficult to achieve in practice this research also offers practical suggestions for companies and stakeholders alike seeking to successfully engage with each other over sustainability issues:

• stakeholder-organisation relationships are dynamic and must be nurtured across time and place to achieve functional longevity; • while relationships are inter-organisational, the interpersonal interactions between the people representing the parties to relationships are pivotal; • responsibility for maintaining stakeholder relationships should be assigned to dedicated and adequately resourced organisational staff; • all parties to stakeholder-organisation relationships must be willing to contribute to achieving mutually agreed outcomes, successful relationships are unlikely to result when some parties are only concerned with what they can get for their side; • open and informative interactions are more likely to lead to successful relationships.

Engagement between organisations and their stakeholders may contribute to heightened awareness of sustainability concerns and action on some issues. However, even best practice engagement alone is unlikely to bring about significant change that could be described as reorienting organisations towards sustainability. While sustainability may accommodate the varying perspectives of organisations and their stakeholders, it does require a systemic orientation that extends beyond the parties to relationships focusing on sustaining themselves and their own interests.