|We recently revised the updated Ceres Roadmap Expectations. Learn about what we updated and why.|
Stakeholder engagement is a critical process that helps companies understand their key environmental and social impacts, identify risks and develop innovative solutions to sustainability challenges. Stakeholders include people or groups within or outside the company who are affected by the company’s activities.
Employees are a key internal driver of sustainability performance. They have long been advocates for their own labor rights. More recently, their interest and commitment has been directed towards the pursuit of innovations in sustainability. Efforts to engage internal stakeholders have evolved beyond the appointment of dedicated green teams and internal CSR departments. Now engagements are more strategic, focused on core business issues and involving senior executives from different business lines, geographic regions, and areas of expertise.
External stakeholders are also getting more attention. Engaging with and responding to external stakeholders helps companies establish credibility and support for their license to operate. It is especially critical for multi-national companies to capture the input of stakeholders in specific markets to understand local impacts.
The role and process of stakeholder engagement has evolved over the past few decades. Historically, companies engaged local community members and other organizations to meet regulatory requirements and secure permits for specific locations. As companies began to realize the benefits of regular dialogue with key constituency groups, engagement transitioned from a process largely focused on compliance conditions to one that was about identifying and managing a wider range of risks. Such stakeholder engagement proved invaluable as a way of working through issues in the wake of incidents or conflicts. Focus groups, one-off meetings, and ongoing engagements also help companies to understand reputational risks.
Now companies are engaging stakeholders to get out ahead in addressing emerging issues. Companies are increasingly seeing the connection between engagement, disclosure and corporate performance. By focusing on those issues that are most important to stakeholders, materiality analysis better equips a company with the insights that can foster innovation, including the development of new business practices, products and services. Investors, for their part, are beginning to recognize that companies that routinely engage stakeholders on sustainability issues are also typically leaders in risk management and innovation.
This has encouraged companies to adopt a more expansive approach to identifying and communicating with stakeholders, including engagement on a broader range of topics. There is now greater disclosure of the scope, process, and results of stakeholder dialogues. Companies are also using new methods to reach different stakeholder groups. Emerging communication vehicles provide both risks and opportunities. In particular, the rapid growth in social media has not only created new forums for dialogue, but has begun to blur the lines between engagement and disclosure.