Why is stakeholder consultation so important for CSRD?
Involving the interests and perspectives of stakeholders is an important part of the CSRD. That is why this comes back at different stages of the directive and implementation. Stakeholder consultation enables the development of an insight into the sustainability themes that are important for stakeholders. And into the way in which the activities of the organisation and its value chain affect them in respect of these themes. The aim is to get a good picture of these impacts and interests. This requires a continuous dialogue with stakeholders, as stakeholder interests may change.
How do you distinguish the different categories of stakeholders?
The CSRD distinguishes between two stakeholder categories:
1. Affected stakeholders
Individuals or groups whose interests are (potentially) affected by the activities of the organisation and its value chain, such as:
- Employees of your organisation
- Employees in the value chain
- Customers
- Suppliers
- Local communities
Moreover, a number of ‘silent stakeholders’ may come within the category of ‘affected stakeholders’. These are stakeholders who cannot represent their own interests towards your organisation, such as:
- Nature
- Employees further down the value chain
Because the ‘affected stakeholders’ experience impacts caused by activities of the organisation (or activities related to the organisation further down the value chain), these are the stakeholders that generally are the focus of the stakeholder consultation process prescribed by the CSRD (and soon also the CSDDD).
2. Users of the sustainability report
Primary users of the annual financial report and the users of the sustainability statements, such as
- (Potential) investors
- Insurance companies.
How do you identify and prioritise stakeholders with a stakeholder analysis?
A good understanding of your organisation's stakeholders is important before consulting them. Your goal is to create a list of the most important ‘affected stakeholders’ for your organisation. The following actions may be used for this:
- Make an overview of the current stakeholder consultation process.
Which stakeholders are you already consulting? Chances are that these are important stakeholders for your organisation.
- Create an overview of the activities in your organisation's total value chain.
Subsequently plot the impacts, risks and opportunities that are relevant here. This is also part of performing a double materiality analysis, which will be discussed in more detail later.
- Engage stakeholders in these impacts, risks and opportunities.
Stakeholders that are expected to be most affected by the activities in the value chain are given the highest priority in the consultation.
It is quite possible that, compared to the users of the sustainability report, the affected stakeholders will be highly prioritised, as stakeholder consultation is intended to get a clear picture of the impact your organisation has on its stakeholders. It is generally the affected stakeholders that experience a greater impact.
What role does stakeholder consultation play in the further implementation of the CSRD?
Double materiality analysis
The double materiality analysis is the foundation of the CSRD. It requires you to identify impacts, risks and opportunities. Your organisation can probably make a reasonable estimation of the risks and opportunities that are involved in ESG themes and how they (may) affect your organisation. However, it is more difficult to provide a realistic and unbiased picture of the impact your organisation has on stakeholders. Especially with stakeholders that are somewhat further down the value chain of your organisation. So, always enquire about this with stakeholders, as this provides valuable information!
Consultation with various stakeholders regarding the sustainability themes that are relevant to them (as set out during value chain mapping), provides your organisation with a complete overview of any impact experienced. You can also ask the stakeholders at the same time about the severity (intensity, extent and recoverability) and probability of the impact. Subsequently, you will include this input in the assessment of the impacts in line with CSRD requirements.
Strategic choices for implementation
In addition to the role of the stakeholder perspective in the dual materiality analysis, this also plays a role in the further specification of material themes in policies, action plans, indicators and objectives from two perspectives:
- Strategic perspective
Stakeholder consultation contributes to gaining a clear understanding of the interests and expectations of stakeholders in relation to policies, actions and objectives. So ask your stakeholders about their interests and expectations regarding the sustainability themes that are relevant to them, and use this information to develop or refine policies, actions and objectives for this theme.
- Reporting perspective
The CSRD asks you to report on policies, action plans, indicators and objectives for each material theme. This requires you to indicate whether, and if so how, you have taken the stakeholder perspective into account in the development of this. To some ‘topical standards’ specific reporting requirements apply in which the stakeholder perspective plays a role, such as in ESRS S2 ‘Employees in the value chain’. It requires you to describe the channel that is in place in your organisation for your employees in the value chain to express their concerns, and whether it has taken account of the interests of the stakeholders, who are the intended users.
Due diligence
A thorough stakeholder consultation is part of a careful due diligence process, which enables your organisation to set out the possible negative impact, for example with regard to human rights or the environment, accompanied by a plan to prevent or mitigate this impact.
The CSRD requires transparency on your organisation's due diligence process. Insight into this impact is the first step in taking responsibility for the impact your organisation has in the chain, for example in the field of human rights or nature. Again, stakeholder consultation contributes to the understanding of the negative impact in the chain and the possible measures to prevent or restore it. The imminent introduction of the Corporate Sustainability Due Diligence Directive (CSDDD) will reinforce the importance of stakeholder input for due diligence.
What options do you have to shape stakeholder consultation for CSRD?
The CSRD does not explicitly prescribe how stakeholder consultation should take place. ESRS 1 and the (draft) EFRAG Materiality Assessment Implementation Guidance do provide directive frameworks. Therefore, you are free to interpret this for your specific organisation. You have multiple options to do this, each with pros and cons. We list a number of options for you:
- Kick-start with internal stakeholder representatives
Colleagues who have regular contact with (external) stakeholders may already have a good insight into the themes that are important to them and the interests of the different stakeholder groups. So, consult with these internal stakeholder representatives. By doing so, you can make a quick start with an inventory of impacts for stakeholders with relatively limited resources.
- Send out (digital) questionnaires
This is a relatively low-threshold way of interviewing a large group of stakeholders. You can customise this questionnaire for each stakeholder group so that you can ask them about the topics that are relevant to them.
- Organise 1-to-1 interviews with stakeholders
This requires a greater time investment because preparing, performing and analysing interviews is a time-consuming process. Nevertheless, the experience is that this way gives you a better chance to obtain high quality information from your stakeholders.
- Organise a focus group per stakeholder group
During a focus group, different stakeholders from the same stakeholder group meet (physically or digitally) come together and discuss the themes that are relevant to them. Organising this requires more time and preparation, but the opportunity to obtain valuable input is greater too!
Get started quickly with the stakeholder consultation process!
From identifying and prioritising stakeholders to carefully considering their interests in policies, actions and objectives - stakeholder consultation is a major undertaking and presents several challenges. It is therefore good to keep in mind that possible positive and negative impacts on stakeholders across the value chain provide your organisation with insight into new opportunities and risks, also at a commercial level.
Involving stakeholders is very valuable, especially for the CSRD, and can help your organisation move forward. Not only is this required by the CSRD, and soon also the CSDDD, but also it simply is a strategically smart and commercial move to place a strong emphasis on stakeholder involvement.
Do you have any questions?
Do you need a sparring partner to share your views about stakeholder consultation?
Contact us
