Module 6: Methods for stakeholder engagement

A key challenge for organisations that are conducting a materiality assessment is figuring out the right way to engage their stakeholders.

The reporting frameworks are not prescriptive about how or when to engage stakeholders, so it’s up to organisations to determine appropriate methods of engagement using these best practice principles:

Guiding principles 

• For impact materiality, affected stakeholders are to be engaged for the purpose of identifying and assessing the significance of impacts.
• An organisation could use the potential degree of the impact on stakeholders to determine the extent of its engagement with that stakeholder group. 
• Direct engagement with affected stakeholders may not always be possible, and in these circumstances the organisation should use a legitimate proxy. For example, an organisation is unlikely to be able to directly engage workers employed by a supplier in its value chain, so it could seek advice from a human rights non-governmental organisation.
• The organisation should also consider nature a ‘silent stakeholder’, and its views expressed through data, research, articles, and relevant experts.
• For financial materiality, users of general purpose financial reporting could be engaged to test and validate the organisation’s judgements.
• For both dimensions of materiality, the organisation should consider engaging with subject matter experts to identify, assess and validate its judgements about impacts, risks and opportunities.
• The materiality assessment should be conducted without undue cost or effort; this will be entity-specific, and it means the organisation does not need to be exhaustive in its efforts, but it should weigh the resources required to explore materiality against the nature of potential risks, to make a judgement on the resources it should apply.

Whether it is applying a single or double lens to its materiality assessment, an organisation will find it helpful to undertake a preliminary assessment once it has mapped its value chain, so that it can develop a stakeholder engagement plan.

By undertaking a preliminary assessment, an organisation can understand:

• Different stakeholder groups that could be impacted by a topic, and
• The number of stakeholders in those groups, and 
• The nature of its relationship with those stakeholders.

This will help the organisation determine the most appropriate methods for engaging each group.

Depending on the size and nature of its relationship with different stakeholder groups, an organisation could undertake engagement in a number of ways. Some ideas are outlined below, and again, these are not prescriptive, but a general guide.

Surveys: This method is suitable for large groups, and where the organisation already has access to email addresses and / or phone numbers, such as employees, customers, and shareholders.

Workshops: These are useful when there are affected stakeholders, or representatives of affected stakeholders, that hold great technical skill or knowledge in relation to the topic. Workshops can also be useful for gaining the input of stakeholders that act as part of a larger membership group, such as members of a community group.

Direct 1:1 interviews: can be useful for gaining the views of individual stakeholders that are likely to be significantly negatively or positively impacted by the organisation, or their representatives, such as trade unions and non-governmental organisations. 

Indirect channels

So far we’ve considered channels for direct engagement, however, an organisation can also consider information that it has gathered via its usual stakeholder communication channels, such as social media, non-ESG related surveys, and customer complaints.

Recall that to determine financial materiality, an organisation could engage users of general purpose financial reporting to test and validate the organisation’s judgements. 

An organisation is most likely to engage internal and external risk, accounting and subject matter experts to help it quantify and assess financial effects related to its impacts, and to determine any other financial effects of ESG topics generally.

A stakeholder engagement plan to support a risk and opportunity assessment will likely consider who internally the organisation can leverage to quantify and qualify information, and whether any external experts may need to be engaged.

• Peer reports
• Research papers
• Data
• Media reports
• Regulations
• Market and industry trends

• Peer reports
• Research papers
• Data
• Media reports
• Regulations
• Market and industry trends