What is stakeholder engagement?
Stakeholder engagement refers to the process through which companies actively communicate and interact with individuals or groups that can influence or are influenced by their operations. It involves a series of deliberate actions to involve stakeholders in meaningful conversations, aiming to gather insights, feedback, and support for business operations and initiatives.
Stakeholder engagement for CSRD
In the context of the Corporate Sustainability Reporting Directive (CSRD), stakeholder engagement refers to the process through which companies systematically identify, communicate with, and consider the interests and concerns of their stakeholders in their sustainability reporting practices.
The CSRD, which aims to enhance and standardize sustainability reporting across the EU, places significant emphasis on transparency, accountability, and the provision of relevant, reliable, and comparable sustainability information to stakeholders.
Doing stakeholder engagement for CSRD
Stakeholder engagement under the Corporate Sustainability Reporting Directive (CSRD) requires a structured approach to ensure that sustainability reporting is comprehensive, relevant, and aligned with stakeholder expectations. Below is a detailed section on how to conduct stakeholder engagement for CSRD compliance:
1. Define sustainability themes that are important
The first step involves identifying and defining the sustainability themes that are important to your company’s operations and impact. This list with themes is also known as the longlist.
Themes on this longlist can range across environmental, social, and governance (ESG) aspects such as climate change, worker safety, diversity and inclusion, and ethical governance.
2. Identify Your Important Stakeholders
Once the key sustainability themes are identified, the next step is to determine who your important stakeholders are. This involves mapping out groups and individuals who have a direct or indirect stake in your company’s operations and sustainability performance.
Important stakeholders typically include employees, customers, suppliers, local communities, investors, and regulatory bodies. Consider both primary stakeholders, who have a direct relationship with your company, and affected stakeholders, whose well-being or environment may be impacted by your operations.
3. Choose your engagement method
Engagement methods can be broadly categorized into two types: open engagement and survey engagement. Those methods have their best use cases:
- Open engagement: This method is more interactive and involves direct dialogue with stakeholders through interviews, roundtable discussions, workshops, or focus groups. Open engagement is particularly effective for deeply understanding the perspectives and priorities of your most important stakeholders. It allows for a two-way exchange of information, where stakeholders can provide nuanced feedback on sustainability themes, and companies can clarify their sustainability strategies and actions. This method is recommended for engaging with key stakeholders such as major investors, key clients, community leaders, and strategic suppliers.
- Survey engagement: This approach involves sending out structured surveys to stakeholders to gather their views on the company’s sustainability themes and performance. Surveys are efficient for reaching a larger audience and are particularly useful for engaging with a broader group of stakeholders whose individual impact might be less direct but still significant. This method can help gauge general sentiment and priorities across a wider stakeholder base and is recommended for engaging with larger groups of employees, customers, or smaller suppliers.
4. Engage with Stakeholders
Engaging with stakeholders is the core of this process. Utilize the chosen engagement methods to reach out to your stakeholders and discuss the sustainability themes identified in step 1. The goal is to understand which themes stakeholders find most important and why. This step is crucial for:
- Gathering insights: Stakeholders can provide valuable insights into how they view the company’s sustainability performance and which issues they believe should be a priority.
- Prioritizing themes: Based on stakeholder feedback, companies can prioritize sustainability themes that are of greatest concern or interest to stakeholders. This ensures that sustainability reporting under CSRD is focused on material aspects that reflect the company’s most significant impacts and stakeholder expectations.
- Building relationships: Through meaningful engagement, companies can build or strengthen relationships with their stakeholders, fostering a sense of trust and collaboration.
It’s important to document the engagement process, stakeholder feedback, and any actions taken as a result. This documentation not only serves as evidence of compliance with CSRD requirements but also enhances the transparency and credibility of your sustainability reporting.
Why is stakeholder engagement important for CSRD?
The Corporate Sustainability Reporting Directive (CSRD) represents a significant step forward in enhancing transparency and accountability in corporate sustainability practices. Stakeholder engagement plays a critical role in this context for several reasons:
Informed decision-making and strategy alignment
Stakeholder engagement with primary and affected stakeholders is crucial for understanding the broad spectrum of sustainability issues relevant to different stakeholder groups. This understanding is essential for companies to align their business strategies with the expectations and requirements outlined in the CSRD.
By engaging stakeholders, companies can identify which sustainability topics are most significant to their business and stakeholders, aiding in the prioritization of efforts and resources.
Enhancing transparency and trust
The CSRD aims to increase transparency in sustainability reporting, requiring companies to disclose detailed information on their social and environmental impacts. Stakeholder engagement strengthens this transparency, as it involves open communication and collaboration with stakeholders about the company’s sustainability practices, challenges, and achievements.
By actively involving stakeholders in the reporting process, companies can build trust and credibility, demonstrating their commitment to sustainability and accountability.
Improving reporting quality and materiality
A key aspect of the CSRD is the emphasis on materiality—focusing on sustainability matters that are most significant to the business and its stakeholders. Stakeholder engagement is essential for identifying these material issues.
Through dialogue and feedback, companies can gain insights into the environmental, social, and governance (ESG) topics that stakeholders find most important. This engagement helps ensure that sustainability reports under the CSRD are not only comprehensive but also focused on the issues that truly matter, enhancing the quality and relevance of the information reported.