Stakeholder engagement has been a cornerstone of corporate sustainability efforts long before the arrival of the Corporate Sustainability Reporting Directive (CSRD) requirements that advocates for involving affected stakeholders in the materiality process. Recognising the interdependence between businesses, society and the environment in which they operate, organisations have increasingly sought to engage with stakeholders to understand their concerns, expectations, and impacts.

With the emergence of heightened standards for sustainability reporting such as the CSRD, stakeholder engagement gains renewed importance, particularly in the materiality assessment process. Engaging both internal and external stakeholders is fundamental to the Double Materiality Assessment (DMA), providing comprehensive insights into a company's impacts, risks, and opportunities. This direct engagement not only ensures compliance with rising standards but also cultivates trust, boosts reputation, and catalyses long-term value creation.

Challenges in stakeholder engagement for double materiality

Despite its significance, engaging external stakeholders also presents as significant challenge for many organisations. As identified in Finch & Beak’s survey for the State of ESG 2024 report completed by 140+ stock listed companies, 36% of respondents reported that improving employee engagement was a main objective of its sustainability program, alongside enhancing reputation, and building a stronger brand from sustainability. Here stakeholder engagement becomes extremely relevant, as it is a tool to reach all of these objectives. Additionally, out of the surveyed companies that already completed a DMA, 41% reported that engaging external stakeholders was one of the main challenges in the process.

Illustrating this, the Chief Sustainability Officer at a leading real estate company stated that “…some groups of external stakeholders have not been the most forthcoming during survey and interview request for (company)'s annual materiality assessment, hence the lack of insight to their perspective has posed a challenge.”

Further challenges in stakeholder engagement for double materiality include:

• Complexity of sustainability topics: The density of sustainability topics, including the intricate nature of impact materiality and financial materiality, demand a deep understanding and often impede meaningful stakeholder participation if there is insufficient guidance or explanation.
• Maintaining stakeholder interest and mitigating bias: Sustaining stakeholder engagement over time demands consistent communication, updates, and avenues for involvement. However, approaching engagement activities in a last-minute and improvised manner can induce fatigue, and contribute to potential survey bias.
• Ensuring audit readiness: To accurately showcase the impact of stakeholder engagement, particularly when under the scrutiny of auditors, engagement procedures need to be highly relevant and well-documented.

Learning from best practice examples

Leading organisations have been developing tailored strategies which exemplify best practices in stakeholder engagement for many years already, offering valuable insights for others. For instance, French multinational utility company ENGIE’s Just Transition Stakeholder Engagement document outlines the company’s approach to addressing social impacts of the energy transition towards net zero by 2045 including three case studies of local engagement.

Another effective approach involves giving back to engaged stakeholders to make their efforts feel worthwhile. This method is exemplified by logistical real estate company WDP, which demonstrated appreciation and accountability by serving lunch to stakeholders participating in an in-person panel session and sharing the outcome of the materiality assessment before publication.

Providing stakeholders with insights into the outcomes of their engagement efforts and soliciting feedback helps build trust and demonstrates accountability and transparency. Here, maintaining an open dialogue and addressing stakeholders' priorities and expectations are crucial components of this engagement strategy. This approach is also scalable across business units and geographies by starting small and gradually expanding across the different corporate levels and entities.

Key takeaways for success in stakeholder engagement

Alongside the above outlined best practices to overcome stakeholder engagement challenges, companies can utilise the following key strategies:

1. Identify and prioritise stakeholder groups, for instance using the Stakeholder Salience model based on the attributes power, legitimacy, and urgency; as not all stakeholders hold equal importance to the organisation. Once stakeholders are categorised and weighted, tailored strategies for each group can ensure effective engagement. Collaborating with internal teams (e.g. investor relations, procurement, public affairs, human resources) is helpful to identify key contacts within each stakeholder group, to facilitate more targeted and effective engagement efforts, e.g. for materiality interviews.

2. Tailor engagement methods in the materiality assessment: Develop customised engagement strategies that align with the company’s sustainability and overall business objectives. By establishing clear goals and selecting appropriate engagement instruments in the materiality assessment like workshops, interviews, or panel sessions, companies can foster meaningful interactions that cultivate long-term relationships and trust with stakeholders.

Move beyond traditional survey methods, and embrace more interactive approaches, as these allow for deeper conversations and provides valuable context for stakeholders to grasp complex sustainability topics. Additionally, providing preparation materials in advance can ensure that participants are well-informed and ready to engage meaningfully. Helpful tools for online engagement such as Miro and Mentimeter offer visual and measuring capabilities like voting to facilitate discussion and enable greater exchanges across geographic boundaries.

3. Integrate engagement across functions: To ensure broad participation and ownership, stakeholder engagement on sustainability should be integrated across various functions and levels within the organisation. By embedding this into other organisational functions, such as sales meetings and as part of the post-materiality process, stakeholders' expectations can be continuously monitored.

Unsure of how to approach stakeholder engagement?

Would you like to know more about how to design an effective approach to stakeholder engagement or require assistance with your double materiality assessment? Get in touch to discuss how our team at SLR Consulting can support you.

^{Photo by Roman Kraft on Unsplash}