Effective stakeholder engagement is vital for adhering to the EU’s Corporate Sustainability Reporting Directive (CSRD).
According to Greenomy, a corporate sustainability manager overseeing CSRD reporting greatly benefits from involving those with relevant knowledge and cooperating with all participants in the process. The success of the CSRD Double Materiality Assessment (DMA) and the overall sustainability strategy relies heavily on input from both stakeholders and internal experts.
However, engaging stakeholders without the requisite experience can be inefficient and may lead to suboptimal outcomes. Thus, it’s imperative to understand the legal requisites and draw on the expertise of seasoned professionals. Identifying who the stakeholders are and how to engage them effectively is crucial.
Stakeholders include any individual or group that might influence or be impacted by a company’s decisions. For CSRD, typical stakeholder categories include employees, suppliers, consumers, local communities, and public authorities such as regulators and central banks.
The ESRS, fundamental to CSRD reporting requirements, distinguishes between two types of stakeholders: those affected by the company’s activities and users of the sustainability statements. The latter group includes investors, lenders, and asset managers who depend on sustainability reports for decision-making. The environment can also be considered an implicit stakeholder, thus necessitating the inclusion of environmental experts or NGOs in discussions.
Stakeholder engagement entails the process through which an organisation includes these parties in its decision-making processes, playing a critical role in the DMA, which is fundamental to CSRD reporting.
Engaging with stakeholders is essential for a thorough DMA, providing valuable insights into impact, risk, and opportunity considerations, thus enhancing the assessment’s quality and credibility. The DMA requires an understanding of various sustainability topics, the company’s operations, and the sector’s nuances.
Given the relative novelty and complexity of the CSRD and ESG frameworks, the project lead must engage with internal experts and stakeholders to facilitate a comprehensive understanding and avoid pitfalls. Research by EFRAG indicates that around 70% of companies use an objective, evidence-based approach to DMA, integrating data with stakeholder and expert input.
The CSRD and ESRS underscore the importance of stakeholder engagement in the DMA, though it is not mandated. Transparency in how stakeholder input is incorporated into the materiality assessment is required in CSRD reports, outlining the influence of stakeholder feedback on the company’s activities and decisions.
Effective stakeholder engagement begins with meticulous planning, ideally starting two months before active engagement. Companies should decide whether to develop a preliminary list of impacts, risks, and opportunities based on initial stakeholder input or to refine an internally developed draft through stakeholder feedback. Greenomy’s sustainability analysts suggest starting with a draft before consultation to focus engagement on areas of highest uncertainty and materiality, thereby enhancing the relevancy and efficacy of the engagement.
Documentation and transparent reporting of stakeholder consultations are critical, with an engagement register proving invaluable for tracking interactions and supporting transparent disclosures as required by the CSRD.
Identifying and prioritising stakeholders is crucial, leveraging existing networks and relationships. Methods such as surveys, interviews, and workshops can be adapted based on the company’s context and the stakeholders’ familiarity and engagement levels with sustainability issues. Greenomy recommends initiating engagement with surveys or interviews, progressing to more interactive methods as needed to gather in-depth qualitative insights.
While stakeholder engagement is pivotal for DMA, it also plays a significant role in broader CSRD disclosures, especially concerning policies on workforce, community impact, and consumer interactions. Additionally, implementing a continual Corporate Sustainability Due Diligence process as outlined by the CSDDD enhances the effectiveness of stakeholder engagement, aiding in identifying and addressing adverse impacts.
Greenomy’s experts suggest a pragmatic approach starting with selected key stakeholders, early preparations, and tailored strategies. Flexibility and adaptability, coupled with the involvement of internal experts, enhance the process’s effectiveness, ensuring that stakeholder input meaningfully informs the DMA and subsequent strategy and policy formulations.
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