Embed in management systems

1. Embedded commitment: The company has a policy commitment to ongoing stakeholder engagement, and embeds it in its governance, culture, and management strategy.​

Create a Tailored Engagement Plan​

2. Inclusiveness: The company listens to a full range of rights-holders across the value chain and has a process to identify legitimate representatives.
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3. A Focus on Those Most at Risk​:  The company prioritizes engaging with the rightsholders who are most likely to be harmed by its operations​, and therefore where early engagement is critical.​​

Conduct appropriate  activities

​​4. Informed Participation: The company establishes ongoing, two-way communication with affected rights holders that provides affected stakeholders with relevant critical information well in advance of key decision points.

5. Trust and Accountability: The company establishes procedures, tailored to the context, to build rights holder trust and accountability for its actions.​

Ensure follow through

6. Stakeholder-informed Action Plan: The company analyzes information obtained through affected stakeholder engagement and collaborates with rights holders to formulate an action plan.

7. Monitoring, Transparency, and Continuous Improvement​: The company establishes and maintains a transparent and stakeholder-informed monitoring and evaluation (M&E) system.​

effectiveness criterion 2

our approach

financial materiality

Stakeholder Engagement Main Page > Four Pillars > ​Effectiveness Criterion 1

1. Embedded commitment​​​

The company has a policy commitment to ongoing stakeholder engagement, and embeds it in its governance, culture, and management strategy.

what this means

questions for portfolio companies

What to look for

For workers

High risk situations

A publicly available statement – either as part of other social sustainability policies or as a stand alone – outlining the company’s commitment to ongoing stakeholder engagement and social dialogue and how it is embedded across its management systems. If no statement exists, investors should ask the portfolio company about it. The statement should include the following elements:

• Recognition of the legally protected status of certain groups:
  The company should recognize the protected status of Indigenous Peoples, ethnic, racial, and religious minorities, refugees and asylum seekers, and civilians during armed conflict under international human rights and humanitarian law. 
  
  Indigenous Peoples, under the UN Declaration on the Rights of Indigenous Peoples (UNDRIP) and the Indigenous and Tribal Peoples Convention, 1989 (ILO 169), have rights to self-determination, land, territories, and resources, including the right to Free, Prior and Informed Consent (FPIC). A corporate commitment to FPIC means that the company recognizes that Indigenous Peoples are entitled to approve or reject activities that may affect their rights or territories.
  
  Other groups that face persecution or systemic discrimination—such as the Rohingya in Myanmar, Uyghurs in China, or Roma in Europe—are also protected under international law. Refugees and asylum seekers are protected under the 1951 Refugee Convention and national asylum laws, which guarantee rights such as non-refoulement and access to basic services. Civilians living in areas of armed conflict—international, non-international, and military occupations—are afforded certain protections under international humanitarian law or the “laws of war” (see Effectiveness Criterion 3)
  
  Companies are expected to uphold these protections regardless of the strength of national enforcement (TNFD 2023, 21; OECD 2017, 47–49). Even where these instruments have been transposed into national law, following the law alone may not be enough to secure positive outcomes or to reduce negative impacts on affected stakeholders and related business risks. 
  
  
• Assignment of policy implementation and oversight responsibilities
  A senior manager is accountable for the implementation and oversight of the stakeholder engagement commitment, including respect for freedom of association and collective bargaining. Senior level responsibility strengthens internal accountability while ensuring alignment across activities and reinforces a cohesive organizational approach. (IFC 2007, 100-101).
  
  A public commitment alone does not shift company culture – senior leaders, including the board, must champion engagement with rights holders as a core business practice. Embedding this commitment also requires experienced, dedicated staff to lead engagements, and allocating the necessary resources. Whether by selecting a well-trained team or providing needed human rights training, companies must ensure staff have the expertise, resources (i.e. budget allocations), and authority to conduct effective engagement and follow through on commitments (IFC 2007, 99–102; OECD 2017, 52; TNFD 2023, 26;). The resources needed will depend on affected stakeholders’ interest as well as the location, culture, economic development, and other socio-cultural factors.
  
  
• Setting clear expectations for business partners and suppliers that they undertake meaningful and ongoing stakeholder engagement.
  To ensure alignment across business operations, the company should share its stakeholder engagement policy with business partners and suppliers, making clear its expectations and strategic approach. While direct engagement with these partners may not be necessary in most cases (unless there is a high risk of abuse), relevant clauses of the policy should be integrated into contracts and binding agreements in order to establish clear standards (OECD 2017, 30-31; TNFD 2023, 26).[1] Where needed, partners should also receive training on the company’s engagement approach. 
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• A commitment to operating an effective operational-level grievance mechanism. An operational-level grievance mechanism, as set out in UNGP 31, should be established to serve as a reliable, effective, and ongoing channel for rights holders to raise concerns before they escalate. To ensure it is used, it should be co-developed with stakeholders to reflect their needs and expectations (TNFD 2023, 26–27), and include transparent procedures for how grievances are received, processed, and resolved.

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[1] See Responsible Contracting Project and the Interfaith Center on Corporate Responsibility (ICCR) and Responsible Contracting Project, “Responsible Contracting,” Investor HREDD Precision Tools, March 2024, https://www.investorhreddtools.org/responsible-contracting.html.