What is stakeholder theory?

Stakeholder theory posits that organizations should recognize and consider the interests of all parties affected by their activities, rather than solely focusing on maximizing profits for shareholders. This theory emphasizes the importance of understanding the needs and expectations of various stakeholders, including employees, customers, suppliers, communities, and the environment. By adopting a broader perspective, organizations can create value not only for shareholders but also for other stakeholders, which can lead to long-term sustainability and success.

This theory is significant in the context of sustainability accounting, as it aligns with concepts of corporate social responsibility and ethical governance. By integrating stakeholder interests into decision-making processes, organizations can enhance their reputations, build trust within communities, and mitigate risks associated with neglecting stakeholder concerns. Ultimately, stakeholder theory promotes a holistic approach to business that recognizes the interconnectedness of economic, social, and environmental factors.