The Financial Materiality of Stakeholder Engagement
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The tragedies of the collapse of the Rana Plaza factory complex in Bangladesh in 2013 and the destruction of the Juukan Gorge cultural site in Australia seven years later in 2020 are emblematic of how poor engagement with affected stakeholders - in the case of Rana Plaza, mostly young female factory workers and in the case of the Juukan Gorge, Indigenous Peoples living on the lands - can contribute to broader societal and environmental harms that carry financial consequences. Both cases led to public outrage and a reckoning for the companies involved, and had a financial impact.
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The UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct make clear that meaningful engagement with affected stakeholders is core to conducting HREDD. Companies that engage early and meaningfully with affected stakeholders are better equipped to identify and address human rights and environmental risks before they escalate, triggering legal disputes, regulatory penalties, reputational harm, or operational delays. Input from rights holders is essential for:
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✓ Identifying and prioritizing risks
✓ Addressing salient risks ✓ Designing and ensuring the effectiveness of risk mitigating actions ✓ Designing and operating effective grievance mechanisms ✓ Planning for a green transition ✓ Developing durable benefit-sharing agreements (for land-based investments) |
Meaningful engagement in all of these areas can reduce power imbalances, elevate marginalized voices, create a more resilient and productive workforce, and build trust and accountability, all of which support long-term operational stability and a social license to operate.
For investors, meaningful stakeholder engagement translates into reduced liabilities, particularly as regulations like the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) – despite the potential pairing back of the original requirements as proposed in the Omnibus package – introduces due diligence obligations for investors. In this context, meaningful engagement is not only good governance—it’s financially material.
For investors, meaningful stakeholder engagement translates into reduced liabilities, particularly as regulations like the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) – despite the potential pairing back of the original requirements as proposed in the Omnibus package – introduces due diligence obligations for investors. In this context, meaningful engagement is not only good governance—it’s financially material.
The Rio Tinto Juukan Gorge DestructionIn May 2020, Rio Tinto, a multinational mining company, destroyed a 46,000-year-old rock shelter at Juukan Gorge in the Hammersley Ranges of Western Australia – an area of cultural and archaeological significance to the Puutu Kunti Kurrama and Pinikura peoples. The site provided evidence of continuous human occupation and a 4,000-year-old genetic link of the peoples to the land. Although the company had obtained ministerial consent in 2013 under then-applicable heritage laws, the decision drew criticism given that Rio Tinto had been in dialogue with the communities for over 30 years, and the destruction still occurred.
The incident sparked widespread public and media backlash and led to a formal inquiry by the Australian Parliament, which recommended legislative reforms to better protect Indigenous cultural heritage.[1] Rio Tinto’s CEO and two other senior executives resigned, and the Board’s Chairman later stepped down.[2] Investors publicly expressed concern, including AustralianSuper, and at the 2021 AGM, over 60% of shareholders voted against the company’s executive remuneration report.[3] [1] Calla Wahlquist, “Rio Tinto Blasts 46,000-Year-Old Aboriginal Site to Expand Iron Ore Mine,” The Guardian, May 26, 2020, sec. Australia news, https://www.theguardian.com/australia-news/2020/may/26/rio-tinto-blasts-46000-year-old-aboriginal-site-to-expand-iron-ore-mine. [2] “Juukan Gorge: Rio Tinto Investors in Pay Revolt over Sacred Cave Blast,” BBC, May 6, 2021, https://www.bbc.com/news/business-57018473. [3] Ben Butler and Lorena Allam, “Rio Tinto Response to Juukan Gorge Caves Blast Not Good Enough, AustralianSuper Says,” The Guardian, August 26, 2020, sec. Business, https://www.theguardian.com/business/2020/aug/27/rio-tinto-response-to-juukan-gorge-caves-blast-not-good-enough-australiansuper-says; “Juukan Gorge: Rio Tinto Investors in Pay Revolt over Sacred Cave Blast,” BBC, May 6, 2021, https://www.bbc.com/news/business-57018473. |
The Rana Plaza Factory CollapseOn April 24, 2013, Rana Plaza, an eight-story commercial building on the outskirts of Savar, Bangladesh, collapsed due to structural failures, killing 1,134 mostly young female garment workers and injuring over 2,600. The building housed garment factories producing for several multinational brands. Despite visible cracks discovered the day before, factory owners required workers to return, while lower-floor shops closed. The absence of safe channels for workers to raise concerns contributed to the tragedy.
In the aftermath, global apparel brands faced intense reputational backlash and public pressure to do something. Eventually they formed the Bangladesh Accord on Fire and Building Safety—a legally binding agreement enforced by unions. Consumer and civil society pressure compelled many of the brands to contribute to a $30 million compensation fund for victims.[4] The tragedy also sparked a demand for regulatory changes, leading to France’s 2017 duty-of-vigilance law, Germany’s 2023 supply chain due diligence act, and eventually the EU’s 2024 CSDDD.[5] In Bangladesh, the government amended the 2006 Labor Act to strengthen workers’ rights to freedom of association and collective bargaining.[6] Investor coalitions like the ICCR’s Bangladesh Investor Initiative, representing over $4.5 trillion in assets under management, pressed for stronger corporate accountability.[7] [4] “Who Paid up and Who Failed to Take Responsibility?,” Clean Clothes Campaign, accessed May 28, 2025, https://cleanclothes.org/campaigns/past/rana-plaza/who-paid-up-and-who-failed-to-take-responsibility. [5] “France’s Duty of Vigilance Law,” Business & Human Rights Resource Centre, accessed May 28, 2025, https://www.business-humanrights.org/en/big-issues/corporate-legal-accountability/frances-duty-of-vigilance-law/;“11 Years since the Rana Plaza Collapse Factories Are Safer but the Root Causes of Tragedy Persist,” News Item, Clean Clothes Campaign, April 17, 2024, https://cleanclothes.org/news/2024/11-years-since-the-rana-plaza-collapse-factories-are-safer-but-the-root-causes-of-tragedy-persist. [6] Tuomo Poutiainen, Rana Plaza: More needs to be done to ensure workplace safety | International Labour Organization, April 25, 2021, https://www.ilo.org/resource/news/rana-plaza-more-needs-be-done-ensure-workplace-safety. [7] “Worker-Driven Social Responsibility - Interfaith Center on Corporate Responsibility,” Interfaith Center on Corporate Responsibility - ICCR Builds a More Just and Sustainable World by Integrating Social Values into Corporate and Investor Actions. (blog), accessed May 28, 2025, https://www.iccr.org/issues/worker-driven-social-responsibility/. |
