CSRD Stakeholder Engagement
Stakeholder engagement is not optional under CSRD — it is a mandatory input to your double materiality assessment and a required disclosure under ESRS 2. Companies that treat stakeholder engagement as a box-tick exercise face assurance findings and credibility challenges from investors and regulators.
Stakeholder engagement is not optional under CSRD — it is a mandatory input to your double materiality assessment and a required disclosure under ESRS 2. ESRS 2 SBM-2 requires companies to disclose their approach to stakeholder engagement — who they engage with, how, and how stakeholder views are taken into account in strategy and materiality assessment.
What ESRS 2 requires on stakeholder engagement
ESRS 2 SBM-2 requires companies to disclose their approach to stakeholder engagement — who they engage with, how, and how stakeholder views are taken into account in strategy and materiality assessment.
The disclosure must cover: the categories of stakeholders engaged; the purpose of engagement for each category; how engagement is organised — frequency, format, channels; how the results of engagement are incorporated into the company's decisions; and how the company ensures affected stakeholders have genuine opportunities to raise concerns.
SBM-2 is not a one-time disclosure — it describes an ongoing process. Companies that conduct stakeholder engagement only when preparing their CSRD report, rather than as a continuous business activity, will find it difficult to produce credible SBM-2 disclosures.
The connection to materiality: ESRS 1 Appendix A requires stakeholder engagement as an input to the double materiality assessment. The views of affected stakeholders — particularly those experiencing negative impacts — must inform the impact materiality scoring. Assurers will check whether the stakeholder engagement process described in SBM-2 is consistent with the materiality assessment methodology described in the report.
Identifying and categorising stakeholders
ESRS 2 distinguishes between two broad stakeholder categories:
Affected stakeholders: People and communities whose interests are affected by the company's operations — employees, supply chain workers, local communities, consumers, and the environment (represented by civil society). These stakeholders are primarily relevant to impact materiality — their experiences of the company's impacts inform the assessment of impact significance.
Users of sustainability statements: Investors, lenders, insurance companies, and other capital providers who use sustainability information in financial decisions. These stakeholders are primarily relevant to financial materiality — their information needs shape what financial risk and opportunity disclosures are required.
For most companies, the stakeholder universe includes: own employees and worker representatives (trade unions, works councils); supply chain workers (represented by NGOs or sector bodies where direct engagement is impractical); local communities near operational sites; customers and consumers; investors and lenders; civil society organisations; regulators and public authorities; and business partners.
Prioritisation: You cannot engage equally with all stakeholders. Prioritise affected stakeholders who are most exposed to negative impacts — those in high-risk supply chain relationships, communities near industrial sites, and vulnerable groups disproportionately affected by company operations.
Designing and documenting stakeholder engagement
A credible CSRD stakeholder engagement programme has four elements that must be documented for assurance:
Mapping: Who are your stakeholders? Document the full stakeholder universe and the basis for prioritisation.
Engagement: How do you engage? The approach must be appropriate for each stakeholder group — online surveys for employees, bilateral meetings with investors, community consultations for affected communities, NGO roundtables for civil society. Document the engagement activities, dates, participants, and topics covered.
Output: What did stakeholders say? Summarise the key inputs from each engagement activity — the sustainability topics stakeholders identified as important, the concerns they raised, and the perspectives they offered on company impacts.
Integration: How did stakeholder input change your decisions? Document where stakeholder input led to topics being included in the materiality assessment that would otherwise have been excluded, or where stakeholder concerns led to changes in company strategy or practice.
The assurance test: Assurers will request evidence of stakeholder engagement activities — meeting minutes, survey results, consultation reports. 'We engaged with stakeholders' without documentation is not sufficient. Build documentation into the engagement process, not retrospectively.
Frequently asked questions
Can we use existing HR consultation processes for CSRD stakeholder engagement?
Yes — existing processes (works council consultations, employee surveys, union negotiations) count as stakeholder engagement under ESRS 2. Document them as such and extract the sustainability-relevant inputs. The key requirement is that the engagement is genuine and that outputs feed into materiality assessment — not that new processes are created.
How do we engage with supply chain workers we have no direct relationship with?
Through intermediaries — sector NGOs, trade union federations, multi-stakeholder initiatives, and supplier company worker representative bodies. Direct engagement with individual supply chain workers is impractical at scale. Engaging with organisations that represent their interests is an accepted approach under ESRS, provided the engagement is genuine and the organisations are representative.
What if stakeholders raise topics we believe are not material?
You must assess them through your double materiality process and document your conclusion. If the assessment supports exclusion despite stakeholder concern, disclose the exclusion rationale referencing the stakeholder input. Assurers and investors will scrutinise exclusions of topics raised by affected stakeholders — the rationale must be robust.