Stakeholder engagement is an essential tool for comprehensive reporting under the Corporate Sustainability Reporting Directive (CSRD). The success of both the Double Materiality Assessment (DMA) and the broader sustainability strategy heavily hinges on inputs from stakeholders and internal experts.
Effectively identifying and engaging the right stakeholders for each material topic is essential. Without sufficient preparation and a clear understanding of the process, stakeholder engagement can become time-consuming and yield unsatisfactory results. Additionally, the CSRD lead often has limited opportunities to engage with internal ESG specialists, making it crucial to maximise the value of these interactions.
Our team of CSRD experts has assisted organisations from a wide range of sectors in their stakeholder engagement for their DMA and overall CSRD reporting. This article draws from Greenomy’s expertise to outline the steps and timeframes for stakeholder engagement that will deliver real value. Learn about:
- What is Stakeholder Engagement in CSRD Reporting?
- Why is Stakeholder Engagement Important in the Double Materiality Assessment?
- Is Stakeholder Engagement Required in the Double Materiality Assessment under the CSRD?
- What Stakeholders Should you Engage with for the CSRD?
- How to Plan and Conduct Stakeholder Engagement in the CSRD?
- What is the Difference Between Stakeholders and Internal Experts in CSRD Reporting?
- Stakeholder Engagement Beyond the DMA
- Stakeholder Engagement for the CSRD: 6 Key Tips
What is Stakeholder Engagement in CSRD Reporting?
In CSRD, stakeholder engagement refers to the process of involving individuals or groups, who can influence or be influenced by an undertaking’s actions, strategies, and policies, in its CSRD reporting. It can happen through any type of engagement: interviews, surveys, workshops, assemblies, etc.
Conducting efficient discussions is crucial as stakeholders provide essential inputs for the report, particularly in the Double Materiality Assessment (DMA). This assessment is foundational to CSRD, determining the specific information that an organisation needs to disclose in its CSRD report. We will further explore stakeholder engagement for CSRD in this article, but first, let’s remember the essentials of the DMA.
Double Materiality Assessment: A Quick Reminder
As the first step of CSRD reporting, the Double Materiality Assessment allows undertakings to select ESG topics to report depending on their relevance to their specific business case, value chain, and context.
Starting with a list of potentially material ESG topics available in the European Sustainability Reporting Standards (ESRS), an undertaking must determine which sustainability topics are most relevant from two key perspectives:
- Impact Materiality – Evaluating how the undertaking’s activities affect the environment and society in relation to a given sustainability topic.
- Financial Materiality – Assessing whether the topic presents financial risks or opportunities for the company.
The findings of the Double Materiality Assessment guide the identification of relevant disclosure requirements and data points that must be reported. This assessment is a mandatory prerequisite before developing a CSRD report.
Read more about the DMA
Double Materiality and its Implications for CSRD Reporting
How to Conduct a Double Materiality Assessment in 6 Steps
How to Identify Impacts, Risks, and Opportunities (IROs) for CSRD Reporting
Why is Stakeholder Engagement Important in the DMA?
Engaging stakeholders ensures a robust DMA, providing insights into impacts, risks and opportunities (IROs) and enhancing the quality, objectivity, and credibility of the assessment. Performing a DMA requires knowledge about multiple sustainability topics, a deep understanding of the functioning of the undertaking in its various departments, and expertise in the sector and context in which the undertaking operates.
The ESG reporting lead cannot be an expert in all these areas alone. They will need support from ESG topic experts, such as an HR representative for social topics or a Sustainability Manager for environmental matters. Engaging with stakeholders ensures a robust DMA, providing insights into specific IROs and enhancing the quality, objectivity, and credibility of the assessment.
Additionally, the concepts of ESG, and in particular the legal framework of the CSRD, are relatively new and complex, with a steep learning curve for everyone involved. Therefore, the project lead of the DMA will benefit from the help of internal experts and stakeholders.
According to a recent study by EFRAG, approximately 70% of the interviewed undertakings use an objective evidence-based approach to DMA, combining data sources with inputs from internal experts and stakeholders.
Is Stakeholder Engagement in the DMA Required by the Directive?
Officially, the CSRD and ESRS highlight stakeholder engagement as central but not mandatory in the DMA. However, while the ESRS do not prescribe specific behaviors, they do require companies to be transparent about their consultations with affected stakeholders in the CSRD report. The undertaking is required to disclose whether and how stakeholders are consulted in the materiality assessment process to identify and assess its impacts and understand how they may be affected by the undertakings' activities and decisions.
What Stakeholders Should you Engage with for the CSRD?
While the specific stakeholders involved may vary depending on an organisation’s characteristics—such as its core business and structure—the ESRS identify two key stakeholder groups relevant to all organisations:
- Affected Stakeholders: Individuals or groups whose interests are directly influenced by the organisation’s activities. E.g. employees, suppliers, and customers.
- Users of Sustainability Statements: Individuals or entities that rely on sustainability disclosures for decision-making. E.g. investors, financial institutions, and public authorities.
Incorporating both stakeholder groups is essential for producing a comprehensive CSRD report. Additionally, it is worth noting that nature can be considered a silent stakeholder. In this context, engagement with environmental experts or specialised NGOs can provide valuable insights. The methodology for identifying relevant stakeholders will be further detailed later in the article.
How to Plan and Execute Stakeholder Engagement in the DMA in 9 Steps
Careful planning makes up for most of the success of a project, and stakeholder engagement is no exception. We recommend starting planning two months before engaging with stakeholders.
Drawing on the expertise of our CSRD experts assisting companies from various industries in their CSRD, here is Greenomy’s nine-step methodology to efficiently engage with stakeholders. Bear in mind that processes and timing may need to be adapted as you proceed with the project and may vary depending on your company’s size and activities.
1. Create a Stakeholder Engagement Roadmap (2 months in advance)
According to the Materiality Assessment Implementation Guidance published by EFRAG, engagement is not required in every DMA step. Stakeholders can contribute to the definition and scoring of impacts, risks, and opportunities (IROs) for each sustainability matter. They can also provide specific context and evidence on how they are affected, where major issues and strengths lie and what their expectations related to sustainability are.
For instance, the engagement of a strategic supplier can provide insights on impacts and financial risks and opportunities in the supply chain. An investor may guide the undertaking in prioritising certain sustainability matters from a financial perspective.
Therefore, there are two possible approaches:
- Discussions can take place early in the process to develop an initial draft of IROs, or
- They can be used later to validate and refine a pre-existing list of potential IROs.
Both approaches are valid. At Greenomy, we recommend conducting preliminary research and preparing a draft of potentially material sustainability matters, including related IROs, before engaging with stakeholders.
This enables a more targeted approach focusing on uncertain IROs during discussions and ensuring that responses are more effective and relevant to the final outcome.
For more information on the DMA methodology have a look at our dedicated article "How to Conduct a Double Materiality Assessment in 6 Steps".
2. Documenting and Reporting Insights (2 months in advance)
Stakeholder engagement involves a high amount of information. Creating an engagement ledger to track names, contacts, specific topics, and responses early on will help track progress and appropriately elaborate the information. Prepare where and how you will document interactions with stakeholders before getting started to avoid any loss of information.
This will also support the audit process and employees in case of turnover. As mentioned above, the CSRD requires you to disclose transparently whether and how stakeholders have been consulted during the DMA.
Furthermore, the assessment process will be third-party assured. An engagement register will be relevant as evidence for the applied approach and support CSR Managers or Project Leads in providing clear information in the CSRD report.
3. Identify Relevant Stakeholders (2 months in advance)
It is time to identify the relevant stakeholders you want to engage with. Leveraging existing stakeholder initiatives and relationships can be an excellent starting point. If the company lacks previous stakeholder engagement, this could be an opportunity to analyse the company’s ecosystem and identify key actors within the value chain and relevant communities who can provide valuable insights into potentially material sustainability matters.
To create a stakeholder map, start broadly, then narrow your focus. Begin by defining the key stakeholder categories (e.g., suppliers, employees, customers, users, investors, regulators, sectoral associations, or NGOs). For each category, identify a spokesperson or representative - this could be a specific person or organisation that can be contacted later in the process. At this stage, it is also helpful to consider which ESRS or sustainability matters might be relevant to each stakeholder, ensuring a diversified engagement covering all topics.
4. Selecting the Stakeholder Engagement Method (1.5 months in advance)
The Stakeholder Engagement method significantly impacts both the quality of the results and the time required for the engagement process. Choosing the appropriate method depends greatly on the specific circumstances of the company. Possible methods include surveys, interviews, workshops, or assemblies.
- Surveys are often the most efficient way to engage with a large number of stakeholders while maintaining anonymity. They allow for easy data processing through survey platforms and help foster objectivity. However, if the organisation is experiencing survey fatigue from an excessive number of past surveys, response rates may be low, making this approach less effective.
- Interviews, on the other hand, can be an effective method for obtaining detailed and informed responses. They help build trust with stakeholders and provide room for uncovering unexpected insights.
- Workshops are particularly valuable when stakeholder interaction is expected to foster deeper understanding and generate more comprehensive insights.
- If your goal is to engage with a broad range of stakeholders while encouraging collective discussion and deliberation, assemblies may be a suitable option.
At Greenomy, we recommend starting with surveys and/or interviews as a primary approach, then gradually exploring other methods when deeper qualitative insights are needed. Conducting a DMA for the first time presents various challenges and introduces unfamiliar concepts to a company. Therefore, selecting a straightforward engagement method is essential to optimise both time and resources efficiently.
5. Prioritising Stakeholders (1.5 months in advance)
Given that stakeholder engagement is time-intensive and resources are limited, this step helps to prioritise relevant stakeholders for discussion based on specific criteria.
- Size: Larger stakeholders with significant influence or who are heavily impacted by the company’s operations.
- ESG Maturity: Stakeholders with different levels of ESG maturity, offering diverse perspectives.
- Stakeholder Relationship: The nature and strength of the relationship between the stakeholder and the company.
The shortlist should at least include consumers, employees, and suppliers but will expand further depending on your organisation. For instance, an engagement session can be organised with specific ESG or sectoral experts (e.g., a sustainability expert from an NGO or sectoral association).
6. Preparing Discussions (1 month in advance)
To ensure efficient discussions, it is essential to prepare ahead. This involves gathering information about participants, including their responsibilities and expertise, and formulating targeted questions on specific themes relevant to the DMA. Since stakeholder engagement aims to address data gaps, it is crucial to focus efforts on areas of uncertainty.
Suggested discussion structure to refine IROs in CSRD reporting
1. Explanation of objective and scope of study
2. Provision of brief definition of sustainability matters
3. Warm-up questions e.g. What are the main problem areas regarding ESG topics in your specific context? Where do you see space for improvement? How can our company contribute to improving the context
4. Targeted questions addressing data gaps and areas of uncertainty e.g. As an employee, do you feel safe in your work environment? As our supplier, do you have a solution for toxic water discharges generated during your operations?
Discussions need to be adapted to the specific stakeholders and their level of ESG maturity. The agenda and definitions of key CSRD concepts may be sent out prior to the meeting so that the stakeholders can read the info beforehand.
7. Reaching out to Stakeholders (3 weeks in advance)
Building strong relationships is crucial in this process. We recommend being mindful of stakeholders' own objectives and timelines when scheduling meetings and communicating the purpose of their participation. Providing advance notice will be appreciated, as stakeholders may need time to review information relevant to their area of expertise.
This phase of stakeholder engagement also presents a good opportunity to brief them on the importance of the CSRD and its alignment with company goals. Emphasising board-level support can further underscore the significance of the project. Lastly, sharing your overall timeline ensures stakeholders can plan their participation with a clear understanding of upcoming deadlines, helping to keep the process on track.
8. Engaging with Stakeholders (on the day)
When the time comes to engage with the identified stakeholders, ensure you document your interactions thoroughly, either by taking detailed notes or, with their consent, recording the session. Start by setting the stage with a clear agenda that outlines the objectives and engagement process, ensuring all participants are aligned.
During discussions, avoid the use of CSRD-specific jargon unless the stakeholder is already familiar with it. Instead, focus on understanding departmental processes, workflows, and key points of intersection, as many IROs span multiple departments—an area where data alone may not provide the full picture. For surveys, remember to schedule follow-up reminders to encourage responses.
9. Following up with the Stakeholders (1 month after)
To thank participants and foster strong relationships, make sure to keep stakeholders informed about how their input is being used. Sharing the final report, when possible, allows them to see how their contributions fit into the broader project and what actions will follow as a result.
Stakeholder engagement is a complex and time-intensive process, often spanning several months, with much of the effort dedicated to careful planning. Since each stakeholder brings unique perspectives and requirements, there is no one-size-fits-all approach. Continuously refining and adjusting engagement strategies ensures that the process remains effective, responsive, and aligned with the human element at its core.
What is the Difference Between Stakeholders and Internal Experts in CSRD Reporting?
Stakeholders and internal experts are both crucial in the DMA, and more boardly CSRD reporting, but have different roles and responsibilities. While stakeholders will never be directly involved in the CSRD project, only engaged through targeted approaches, internal experts may perform key tasks specific to the topics they are knowledgeable about. For example, an HR manager will be considered an internal expert on social indicators such as workforce metrics.
The Importance of Internal Experts in CSRD Reporting
Internal experts are directly involved in the DMA project due to their expertise related to specific sustainability topics. It is highly recommended to collaborate with these professionals at one point in the project—ideally, throughout the whole process.
Their responsibilities may include validating a draft of potential material sustainability matters, scoring their importance, and performing stakeholder engagement. Who knows the supply chain better than the internal procurement management? Who would be better to discuss the supply chain with suppliers than a procurement employee?
Engaging these employees is also key to building strong knowledge in the company on the CSRD and in general about ESG. To ensure high engagement, it is highly important to be transparent from the start about the required effort of these functions and to be mindful of their availabilities. Just like with stakeholder engagement, the planning phase plays a crucial role in determining the success of a project when collaborating with experts.
Stakeholder Engagement Beyond the DMA
Stakeholder engagement may extend beyond the DMA. There are specific CSRD disclosure requirements that refer to stakeholder engagement independently of the DMA. The main focus here is on reporting how interests and views are considered in the undertaking’s strategy and business model, and when developing sustainability policies, actions, and targets.
Particular attention to stakeholder engagement is required in the reporting of “Own Workforce”, “Affected Community”, and “Consumer/End-user” material topics. Regarding the latter, the overall process of engaging with these groups and how this feeds the process of mitigating negative impacts needs to be explained.
Stakeholder engagement is fundamentally an opportunity to open the company’s doors to external input. It serves as a catalyst for challenging internal assumptions, identifying problem areas, fostering innovation, and aligning with evolving expectations and trends. Maximising the value of stakeholder engagement requires leveraging it strategically to achieve these multiple objectives.
Implementing an Ongoing Corporate Sustainability Due Diligence
An effective way to meet stakeholder engagement’s disclosure requirements in CSRD is by implementing an ongoing due diligence process based on the Corporate Sustainability Due Diligence Directive (CSDDD). This thorough investigation, mitigation, and reporting process helps identify and address adverse human rights and environmental impacts in an undertaking’s operations, subsidiaries, and value chain.
Stakeholder engagement provides valuable insights, helping to identify and address relevant issues more effectively. Insights from the due diligence process should reach top management to shape the strategy, business model, policies, actions, and targets. The outcomes of a due diligence process provide a robust basis for the DMA.
Stakeholder Engagement for the CSRD: 6 Key Tips
Whether integrated into a comprehensive due diligence system or used in a more straightforward approach to support double materiality, stakeholder engagement is central to the CSRD. The complexity and novelty of the directive pose significant challenges for companies. To help navigate these challenges, Greenomy’s experts offer the following key recommendations to get started with stakeholder engagement in CSRD:
- Opt for a pragmatic and efficient approach, such as gathering opinions and interests through surveys of a selected group of key stakeholders.
- Begin stakeholder engagement preparations early.
- Apply a tailored and targeted strategy for each stakeholder type.
- Remain flexible and adapt the process to meet the needs and characteristics of stakeholders.
- Involve internal experts in stakeholder engagement to leverage their knowledge.
- Leverage engagement outcomes in the DMA and when updating or developing your strategy, policies, actions, and targets.
Greenomy to Get Started on ESG Reporting
Seeking assistance with your CSRD reporting? Greenomy assists you with your Stakeholder Engagement for your CSRD report. From the outset, our sustainability analysts offer advisory support to help you plan, organise, and execute your stakeholder engagement efficiently.
Collaborating with sustainability experts like Greenomy offers invaluable guidance and support, ensuring your organisation not only meets regulatory requirements but also utilises its sustainability reporting as a strategic asset. Book a call for further details.
.png)
_logo.svg){kind=logo}
.png){kind=logo}
.svg)
