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 3

our approach

financial materiality

Stakeholder Engagement Main Page > Four Pillars > ​Effectiveness Criterion 2

2. Inclusiveness​​​

The company listens to a full range of rights holders and has a process to identify legitimate representatives.

what this means

questions for portfolio companies

What to look for

Issue & SEctor considerations

for workers

High risk situations

A clear plan for identifying actual and potentially affected stakeholders, including workers or local communities in the company’s value chain or business relationships. The plan should include:

• How it identifies affected stakeholders.
  The company should be able to clearly describe how it identifies affected or potentially affected stakeholders across its operations, supply chains, and business relationships—including workers and local communities (CHRB 2022 B.1.8.S1). Affected stakeholders include individuals or groups who are directly or indirectly impacted by the company’s activities, or who may influence outcomes—positively or negatively. These can be internal (i.e., direct employees) or external (i.e., supply chain workers, local communities). Identification efforts should pay attention to characteristics that may result in differential impacts, such as migration status, gender, or other vulnerabilities. Stakeholders may include workers, local residents, their formal or informal representatives, civil society organizations, government authorities, religious or community leaders, academics, or other businesses (IFC 2007, 10). Some people are not aware that they are stakeholders until harmed by the business activity (OECD 2017, 44; TNFD 2023, 28). 
  
  
• A process to identify legitimate representatives.
  Companies should seek out trusted representatives of affected stakeholders before doing so directly (TNFD 2023, 29). These may be formal actors (i.e., trade unions, local governments, community-based organizations) or informal ones (i.e., community leaders) (OECD 2017,  49–50). NGOs and community-based organizations that represent affected groups are also key engagement partners (IFC 2007, 24), as are tribal leaders, local councils, customer panels, community action groups, and local labor unions.
  
  Selecting and verifying legitimate representatives is critical. In the case of Indigenous Peoples, companies should be aware that under the UNDRIP and ILO 169 Indigenous Peoples have a legal right to choose their own spokespeople. Where settled communities (people living in a particular locale for a long period) have established community protocols, which often include a designated spokesperson, companies should respect them. If the community has not established a formal process, firms can engage with local organizations for help in identifying individuals with genuine community backing. Since leadership dynamics can shift over time, these determinations should be revisited throughout the project lifecycle (OECD 2017, 49–50). To prevent conflicts of interest, representatives must be independent of the enterprise; companies can verify legitimacy by sampling affected people or conducting targeted surveys (IFC 2007, 20).
  
  ​​Local governments often have established relationships with both community and national stakeholders, making them useful partners for outreach, convening discussions, and facilitating project approvals (IFC 2007, 23). However, companies should be aware that in some contexts, local authorities have suppressed dissent, silenced human rights defenders, and reinforced power imbalances, and therefore exercise caution.[1]

A rights holder viewpoint
A Guatemalan community member explained that the mining company spoke only to municipal authorities about community concerns instead of engaging directly with them. This indirect approach left them feeling sidelined and invisible in a process that should have centered their experiences.

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[1] “The Fourth Pillar Initiative” (Fourth Pillar Initiative, May 2024), 4, https://fourthpillarinitiative.org/.