Stakeholder Engagement in a Changing Business Landscape
While stakeholder engagement is a legal imperative reinforced by regulations, its business value extends far beyond compliance. BSR shares how stakeholder engagement can help companies protect their ability to operate and contribute to broader community resilience and societal progress.
Foto: Photo by stevanovicigor on iStock
Key Points
- A powerful tool that can help companies navigate uncertainty and risk in their operations and across their value chains, stakeholder engagement bridges business priorities and societal needs by grounding decisions in the perspectives of those most affected.
- While recent regulations reinforce stakeholder engagement as a legal imperative, stakeholder engagement’s true business value lies in strengthening long-term resilience.
- BSR shares how stakeholder engagement can help companies protect their ability to operate, contribute to broader community resilience and societal progress, and meet regulatory expectations worldwide.
This is the first in a series of blogs that will unpack the importance of stakeholder engagement, how regulations have reshaped the landscape, and how companies can continue to conduct meaningful stakeholder engagement in alignment with well-established industry best practices that align with expectations set out in standards like the United Nations Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises.
Various regulations, such as the EU Corporate Sustainability Reporting Directive (CSRD), have made stakeholder engagement a legal imperative, but the rationale for engagement has always extended beyond compliance into long-term business resilience. It helps align business priorities with external expectations and allows companies to identify, anticipate, and manage risks and impacts.
Stakeholder engagement also enables companies to build trusted relationships that are mutually beneficial, gain insights to improve decision-making, enhance their reputation, and meet legal and regulatory requirements. In fact, it may be one of the most powerful tools companies have to navigate uncertainty for both their own operations, as well as across their value chains.
Amid regulatory uncertainty, it’s time for companies to shift from a compliance approach to a strategic approach and unlock the full value of engagement for business and society alike.
Who Is a Stakeholder?
Stakeholders are individuals or groups who affect or are affected by a company’s operations, activities, products, or services, including employees, local communities, suppliers, customers, civil society organizations, governments, and investors.
Affected stakeholders, also known as rightsholders, are a special category of stakeholders that are individuals or groups whose human rights may be directly impacted by business activities, products, or services. These may include employees, trade unions, local communities, Indigenous Peoples, landholders, direct customers, and local suppliers.
What Is Stakeholder Engagement?
Stakeholder engagement is the process of building and maintaining relationships with stakeholders, addressing their concerns, and integrating their insights into business strategy, governance, and operations. It can take many forms depending on objectives and stakeholder groups, including focus groups or interviews during a double materiality assessment, supplier trainings on a Code of Conduct, or community consultations before operational changes. Stakeholder engagement is an ongoing dialogue and relationship that should be meaningful, inclusive, and transparent. Stakeholder engagement has long been recognized as an expectation for responsible business conduct in international standards like the UNGPs and the OECD Guidelines.
Why Should Companies Conduct Stakeholder Engagement?
Stakeholder engagement bridges business priorities and societal needs by grounding decisions in the perspectives of those most affected. Meaningful engagement helps companies anticipate risks, surface concerns early, and adapt strategies while building trust between companies and stakeholders. By integrating stakeholder insights into all aspects of their business and operating models, companies can protect their ability to operate and grow, and contribute to broader community resilience and societal progress.
Strategic Drivers for Stakeholder Engagement and Their Business Value
| Driver | Business Value of Stakeholder Engagement |
|---|---|
| Strategy and Resilience | Stakeholder input helps identify long-term risks and opportunities (e.g., climate, community, partners), enabling proactive action. |
| Finance and Capital Access | Investors expect meaningful engagement as part of risk management, compliance, and due diligence. |
| Innovation and Product Development | Insights from customers and communities drive responsible innovation and new market opportunities. |
| Brand and Reputation | Transparent engagement builds trust, strengthens loyalty, and reduces reputational risk. |
| Operational Risk Management | Early engagement with workers and communities helps prevent delays, protests, and supply chain disruptions. |
| Social License to Operate | Ongoing engagement is essential to build trust, address concerns, and maintain community acceptance of a company’s activities, reducing conflict and costly delays. |
| Meeting International Standards | International standards (e.g., UNGPs, OECD) promote engagement as key to identifying and managing risks. |
| Regulatory Compliance | EU directives (CSRD, CSDDD) require information on stakeholder engagement at different levels. |
The Regulatory Landscape Influencing Stakeholder Engagement
To meet certain regulatory expectations, companies are required to demonstrate not only that stakeholder engagement is happening, but that it is meaningful, inclusive, and woven into decision-making. These regulations reflect a global shift to embedding stakeholder engagement in corporate governance and sustainability processes, not as a one-off event, but as an ongoing, integrated practice.
International frameworks, such as the UNGPs and the OECD Guidelines, have long established that companies have an ongoing responsibility to engage and consult meaningfully with affected rightsholders as part of their human rights due diligence and responsible business conduct.
Key Laws Addressing Stakeholder Engagement
European Union
- Corporate Sustainability Reporting Directive (CSRD): Mandates disclosures on impacts affecting rightsholders and affected stakeholders, as well as disclosures on stakeholder engagement strategies.
- Corporate Sustainability Due Diligence Directive (CSDDD): Requires companies in scope to carry out social and environmental due diligence, though implementation is currently delayed.
- Digital Services Act: Sets an expectation for companies to consult stakeholders when assessing risks and designing mitigation measures as part of systemic risk assessments of online platforms. Stakeholders include users of the services, groups potentially impacted, independent experts, and civil society organizations.
Germany
- Supply Chain Due Diligence Act: Requires companies to consult with stakeholders on risk analysis and mitigation related to human rights and environmental obligations in their supply chains.
France
- Duty of Vigilance Law: Obliges large companies to implement and publish a vigilance plan developed in consultation with stakeholders to prevent serious human rights and environmental violations.
Amid regulatory uncertainty, it’s time for companies to shift from a compliance approach to a strategic approach and unlock the full value of engagement for business and society alike.
Much of the regulatory momentum has been concentrated in Western jurisdictions, particularly in Europe. How these standards influence approaches in other regions, including in the Global South, will be important to monitor in the years ahead. The ripple effects may redefine expectations and practices for global companies operating across diverse regulatory environments.
Conclusion
As sustainability commitments face scrutiny and some companies retreat from proactively addressing human rights impacts, stakeholder engagement provides a constructive path forward. By fostering meaningful relationships with communities, customers, and workers, companies can help restore societal trust in the role of business and demonstrate that they can create lasting positive impact for people as well as profit.
As regulations evolve and expectations rise, now is the time for companies to strengthen their internal approaches on stakeholder engagement. With decades of experience designing and implementing stakeholder engagement strategies across industries and geographies, BSR is ready to help companies take the next step. Interested in conducting meaningful stakeholder engagement at your company? Reach out to BSR’s Human Rights and Transformation teams to find out more about BSR’s 5-Step Approach to Stakeholder Engagement.
