Human rights and environmental due diligence (HREDD) is the process companies carry out to meet their responsibility to respect the rights of individuals and protect natural resources. But how can a process meant to protect people be effective if it doesn’t involve them?
Incorporating the viewpoints and experiences of those whom HREDD ultimately seeks to protect is a necessary part of any HREDD. Based on our decade of experience advising organizations on HREDD, we’ve seen that without such engagement, the impact of measures taken will be limited, reducing their effectiveness and sustainability.
Stakeholder engagement is not about sending out surveys or hosting a single roundtable; it’s about genuine interest in different perspectives and maintaining an ongoing dialogue between a company and its stakeholders.
What are the legal requirements for stakeholder engagement in corporate sustainability due diligence?
Current corporate sustainability regulations and international standards strongly emphasize the importance of stakeholder engagement in human rights and environmental due diligence (HREDD):
- The recently adopted EU Corporate Sustainability Due Diligence Directive (CSDDD) highlights this in Article 13, which requires meaningful stakeholder engagement throughout different stages of the due diligence process. Read our article on stakeholder engagement under CSDDD here.
- The EU Corporate Sustainability Reporting Directive (CSRD) mandates a double materiality assessment, requiring companies to involve stakeholders in identifying material topics and to report in line with the European Sustainability Reporting Standards (ESRS), which include multiple stakeholder engagement indicators across the company’s due diligence processes.
- In Germany, the Supply Chain Act (LkSG) requires companies to consider the interests of workers and individuals impacted by their activities when designing and implementing human rights risk management.
These regulations reflect the growing recognition of stakeholder engagement in HREDD, which is supported by and grounded in internationally recognized standards. The UN Guiding Principles on Business and Human Rights (UNGPs), for example, stress the need for meaningful consultation with potentially affected individuals and other stakeholders during the human rights due diligence process (Principle 18 b). Together, these frameworks signal the increasing necessity of stakeholder involvement in responsible business practices.
How can companies effectively engage relevant stakeholders in their corporate sustainability due diligence?
Meaningful stakeholder engagement in HREDD remains an evolving and experimental field in many ways. However, some clear principles and starting points can guide companies toward more meaningful interactions with those impacted by business operations and supply chains. Here is a closer look at what stakeholder engagement entails in practice.
At its core, stakeholder engagement is about dialogue. It’s not just about sharing information or ticking regulatory boxes; it’s about creating a genuine, two-way exchange where voices are heard and acted upon.
The WHO: Who is a stakeholder?
In general terms, a ‘stakeholder’ is an individual or group who may affect or be affected by a company’s activities. When it comes to HREDD, it’s crucial to differentiate between rightsholders and other stakeholders.
- Rightsholders: These are individuals or groups whose human rights are directly impacted by a company’s operations. They can include employees, contracted workers, workers in the supply chain, smallholder farmers, their families, and members of the local communities where the company operates. HREDD seeks to protect these individuals.
- Other stakeholders: These are individuals or groups whose perspectives should still be taken into account, but whose rights may not be directly impacted. They can include human rights experts, civil society organizations, or proxies representing the views of affected individuals, such as trade unions or local NGOs.
The distinction between stakeholders in a corporate sense and rightsholders in the context of human rights is crucial to ensuring that those who most need to be heard are prioritized.
Traditionally, companies have focused on engaging with stakeholders who have significant influence or pose business risks, such as shareholders or strategic business partners. Engagement with such parties in the context of HREDD is still relevant – especially those whose buy-in and collaboration businesses need to implement effective due diligence measures. However, the main purpose of stakeholder engagement under the CSDDD and UNGPs is to understand and address the concerns of those whose rights are at risk – not just those with power or influence.
A risk-based approach lies at the heart of HREDD, and the same applies to stakeholder engagement. Because meaningful stakeholder engagement takes time and resources, companies should prioritize their engagement efforts where the highest risks lie, focusing on those stakeholders along their value chain that are most severely impacted. This is especially important for individuals who face severe impacts but have limited influence over the company, such as vulnerable groups marginalized by law or practice.
For instance, a company’s operations might heavily rely on migrant workers, who are often excluded from formal discussions due to language barriers, precarious employment conditions, or fear of retaliation. Without specific efforts to engage them confidentially – whether directly or through organizations or individuals representing them – critical issues such as wage theft or exploitative labor practices may go unnoticed, perpetuating severe risks for the most vulnerable.
The HOW: How should a company engage with stakeholders?
1- Stakeholder engagement should be a continuous, evolving process that builds relationships over time. For instance, a company developing a mining project shouldn’t limit its engagement with local communities to the early stages of the project. Instead, engagement should continue throughout the project’s lifecycle—before, during, and after operations. Ongoing contact ensures that concerns are addressed as they arise and that relationships are nurtured rather than eroded over time.
2- Building trust is central to meaningful engagement, but it can’t be achieved overnight. Companies often engage only when they need something, such as regulatory approval. But trust is built when engagement starts early, even when there’s no immediate business need. When stakeholders see that a company values their input from the outset, it builds credibility for future, more critical discussions. Providing feedback to stakeholders about how their input was used shows respect for their contributions and reinforces a commitment to transparency.
3- Engagement is not just about the dialogue, but about turning that dialogue into tangible outcomes. Companies need to focus on addressing real issues, such as how their operations impact the environment, workers, and local communities. For example, rather than simply highlighting their corporate social responsibility efforts, a company might actively seek feedback from local farmers on how its activities affect their livelihoods and take concrete steps to address those issues.
Importantly, this stakeholder input should feed directly into the company’s human rights due diligence processes. Whether revising labor policies, adapting sourcing practices, or addressing environmental concerns, the goal is to ensure that stakeholder engagement results in positive changes for those most at risk of negative impacts.
4- The nature of engagement matters. Sometimes, small, focused discussions with particular stakeholder groups—such as individual sessions with workers—are necessary to address unique challenges and risks. For example, one-on-one sessions with agricultural workers on a coffee farm may uncover issues related to pesticide exposure or inadequate access to clean drinking water that may not surface in larger, formal meetings.
In other instances, joint sessions with community leaders and company representatives can facilitate more productive discussions. For example, as a wind project progresses from planning to operation, concerns about environmental impacts, such as noise pollution, may arise. Holding joint sessions that bring together company representatives, environmental and human rights experts and community leaders can help identify solutions to these issues.
5- Engagement methods must be adapted to stakeholder needs. In the textile industry, for instance, where women make up a significant portion of the workforce, a gender-sensitive approach is crucial. Women often face unique challenges, such as harassment or unequal pay, that may not be fully addressed in mixed settings. Organizing women-only focus groups facilitated by women can create a safer space for them to share their experiences openly.
Addressing power imbalances is also essential to ensuring that all voices, especially those of vulnerable or marginalized groups, are included and respected in HREDD processes. Empowering affected communities means providing them with the tools and knowledge necessary to participate meaningfully in decisions that impact their lives.
For instance, an infrastructure company might offer legal support or access to independent environmental experts to help local communities understand a project’s potential effects. In situations marked by distrust or complexity, neutral third parties, such as mediators, can facilitate more constructive dialogues. It is important to recognize that engaging marginalized or vulnerable groups can carry risks, including potential reprisals. Companies should work with local experts to ensure that these engagements are safe and effective, minimizing potential threats to those involved.
In summary, meaningful stakeholder engagement goes far beyond initial discussions or one-off stakeholder roundtables – it’s about building and nurturing ongoing relationships and acting on feedback.
At CORE, engagement is one of our three service pillars. We regularly facilitate stakeholder engagement, building bridges between companies, rightsholders and stakeholders to identify and address risks, seize opportunities, and develop joint solutions.
Leveraging the CORE Network, our network of local and subject matter experts around the globe, we engage rightsholders in our Human Rights Impact Assessments, support stakeholder dialogues and craft engagement strategies. In our projects, we recognize the diverse perspectives and interests at play and put an emphasis on working collaboratively to find practical solutions.
Learn more about our engagement activities here.
Stephanie for the CORE team