Gathering insights from employees, seeking feedback from customers, and communicating with suppliers are essential for companies’ strategy development, due diligence and decision-making processes.
Recent legislation, such as the CSRD and CSDDD, highlights stakeholder engagement as a key component of double materiality analysis and the development of strong and robust human rights and environmental due diligence (HREDD) processes to assess, monitor, mitigate, and prevent risks to the environment, people, and the company itself. Regardless of whether the EU’s omnibus package postpones the application of some of these requirements, meaningful stakeholder engagement remains best business practice.
Legislative requirements
Both the CSRD and CSDDD legislative texts explicitly call for meaningful stakeholder engagement. The CSRD views engagement with affected stakeholders as an essential part of a company's due diligence and materiality assessment process. The CSDDD considers stakeholder engagement crucial for conducting supply chain due diligence and adequately addressing adverse environmental and human rights impacts. Some criteria for meaningful engagement include being transparent and honest, fit for purpose, oriented around human rights, context-sensitive, and conducted as a two-way cooperation.[1]
Know your why
The first question before embarking on your stakeholder engagement journey should always be, “Why are we doing it?” The reasons for engaging stakeholders can be varied, such as seeking specific information, integrating stakeholders in the human rights and environmental due diligence as well as the connected disclosure process, complying with legislation, or collaborating for innovation and product development. Understanding what you are seeking to achieve—and what not—is crucial for identifying the right stakeholders and developing the appropriate approach. It's also important in this context to differentiate between stakeholder engagement and stakeholder management. There are stakeholders whom you may wish to manage, but they are not necessarily the ones you need to engage in order to get specific insights or feedback on something.
Conducting a Thorough Analysis
Once you've answered the first question, the next step is a thorough stakeholder analysis to identify the groups and individuals who can support you in achieving your objective. A good starting point is to map out stakeholders who will be affected, and who are interested in your company (or a specific project) as well as stakeholders who may be affected by something that your company (or a business partner) does. After identifying relevant stakeholders, it is useful to prioritize them based on your objectives. Prioritization can be based on a single criterion or multiple criteria. For example, stakeholders can be prioritized according to their influence on your business, your leverage to engage them, as well as their interest in and knowledge of the issue at hand.
Finding the right approach
After determining the categories for prioritizing your stakeholders, you should group them to identify the appropriate approach and intensity of engagement for each group. For example, there may be stakeholders who you’d want to partner with going forward, whereas there may be others that you keep informed but do not seek collaboration with. The methods of engagement can vary widely, from interviews, surveys, community forums , on-site audits, or regular working groups. It is good practice to bear in mind stakeholder needs and potential access barriers in deciding on how to engage. This can relate to where engagement takes place, which language and terminology is used, as well as when you organise meetings. The intensity of the engagement method should align with your objectives, meaning that you might engage some groups more or less frequently than others.
Be considerate
Before you start engaging stakeholders, consider the overarching organization required for meaningful stakeholder engagement. There may be different expectations between you and the stakeholders. Stakeholders might be overwhelmed by engagement requests from multiple sources within the industry or organization. Additionally, stakeholder engagement that is insensitive to potential political, cultural and language can undermine trust-building and information gathering. This is especially true when engaging with vulnerable groups (e.g., migrant workers, human rights defenders, indigenous peoples) under challenging circumstances. It's crucial to be aware of the context and respond accordingly. Clearly communicating the outcomes and goals of your engagement is essential to avoid false expectations and maintain a trustful relationship. Remember that meaningful stakeholder engagement requires an investment of time and effort not only from your company, but also your stakeholders.
Build internal capacity
Furthermore, gaining the necessary internal buy-in for your project is vital. Meaningful stakeholder engagement aimed at building long-lasting, valuable relationships requires personnel and financial resources. From our experience, capacity building to develop the right competencies for engaging with different stakeholders in various contexts is of major importance. Additionally, you need resources to turn the information you gather into actions and targets. Clarifying the internal escalation process for situations where stakeholder engagement points to serious sustainability or safeguarding risks is also important. How you report and react internally to adverse environmental and human rights impacts uncovered during stakeholder engagement should be clear and swift.
Share your insights
Regarding reporting, consider who needs to know about your findings internally and externally, and what information they seek. You should establish indicators to measure the effectiveness and success of your engagement, action plans, and targets. Regular evaluation and improvement should be integrated into each engagement strategy from the start.
Finally, ensure that the documentation of your engagement is clear and that you communicate the ways you intend to report internally and externally. Discuss with each stakeholder the level of confidentiality required.
How we can help
LRQA can support you with the development of a holistic stakeholder engagement strategy catering to your business needs as well as various regulatory requirements (CSRD, CSDDD, EUDR, EUBR, etc.). We offer further services such as worker surveys, audit support and on-site assessments (ERSA), tailored capacity building programs through our learning plattform EiQ learn as well as our full supply chain due diligence software EiQ and all connected services (grievance mechanisms, responsible sourcing strategies, etc).
[1] UN_GCD_Insights_Series_HR_Due_Diligence_Stakeholderengagement_english.pdf
