One thing that has become clear throughout our years of experience in human rights risk management is that meaningful stakeholder engagement is at the cornerstone of an effective corporate sustainability due diligence system. The recently adopted EU Corporate Sustainability Due Diligence Directive (CSDDD) underscores this in Article 13, mandating meaningful stakeholder engagement at different stages of the due diligence process.
Here is how the EU CSDDD defines stakeholder:
the company’s employees, the employees of its subsidiaries, trade unions and workers’ representatives, consumers and other individuals, groupings, communities or entities whose rights or interests are or could be affected by the products, services and operations of the company, its subsidiaries and its business partners, including the employees of the company’s business partners and their trade unions and workers’ representatives, national human rights and environmental institutions, civil society organizations whose purposes include the protection of the environment, and the legitimate representatives of those individuals, groupings, communities or entities.
Before diving into practical steps, let’s take a moment to appreciate the benefits companies gain by incorporating meaningful stakeholder engagement into their human rights due diligence ecosystem:
- More resilient supply chains. Companies will gain a better understanding of the human rights risks their suppliers face, allowing them to address these risks more effectively. This, in turn, will strengthen the overall resilience of their supply chains.
- Enhanced risk understanding and mitigation. Engaging with different teams across the company can uncover valuable insights, enhancing current due diligence procedures.
- Strengthened grievance mechanisms. Stakeholder engagement, especially if it takes place early on (i.e., in the design of the grievance mechanism), ensures grievance mechanisms reflect stakeholder needs, avoiding costs in the long term.
- Tailored measures. Stakeholder engagement informs the development and implementation of measures that are specifically suited to the context.
- Greater impact through collaboration. Engaging with peers and participating in multi-stakeholder initiatives, where peer companies as well as companies at different levels of a supply chain collaborate, help address systemic human rights issues more effectively.
We’re clear on the benefits. Let’s now talk implementation.
1. Mapping and identifying all relevant stakeholders.
Start broad and then narrow down to your specific context and business activity. This mapping includes employees, customers, suppliers, local communities, civil society organizations, investors and government bodies. A common mistake companies make in this exercise is engaging only with a limited set of stakeholders and overlooking groups like local communities affected by the company’s or its suppliers’ production activities, or temporary workers who frequently go unnoticed but encounter greater human rights risks compared to permanent employees.
2. Finding the right format for engagement.
A format that works well with one group may not be effective with another. Understand the local context and realities of each stakeholder group and tailor your engagement strategy accordingly. Make sure you have people with the right skills to conduct meaningful engagement who can gather the necessary information.
While the CSDDD does not explicitly define what “meaningful” means, it provides clear expectations on how such engagement should be, emphasizing that effective engagement should allow for “genuine interaction and dialogue at the appropriate level, such as project or site level, and with appropriate periodicity” and should also include providing “the relevant and comprehensive information” to those consulted for the sake of transparency. It is crucial to consider barriers that might hinder engagement and ensure stakeholders are free from retaliation, including by maintaining confidentiality and anonymity, giving particular attention to the needs of vulnerable stakeholders.
3. Integrating continuous engagement into risk management.
Meaningful stakeholder engagement is about placing people at the core of the due diligence process. It should not be seen as a one-off step or a sporadic interaction during a crisis or as part of a specific due diligence obligation. On the contrary, proactive and regular dialogue with stakeholders should be embedded in day-to-day business operations and inform long-term business decisions. Meaningful stakeholder engagement should reflect a genuine commitment to upholding human rights standards and treat rights holders as equal and essential partners.
In our experience, engaging with and truly listening to those most impacted bring due diligence to another level. Those that are most impacted by business activities are also those that understand the challenges, and in many instances, know the solutions and the way forward. They just need their voices to reach those with the power to enact change. The latter action falls on us. This is our mission at CORE: we build bridges between different actors along global value chains and amplify the voices of the rightsholders.
Cecilia for the CORE team
Read the other articles in the “3 Tips for CSDDD Success” series below:
- Tip #1: Approach Risk Prioritization Strategically.
- Tip #2: Engage with Stakeholders Meaningfully.
- Tip #3: Build Human Rights Confidence Adequately.
