#AboutESG | ESG Strategy #1 | Stakeholders

Knowing what ESG is (if you don't, check our article), we can move on to defining our organization's strategy in this area. What is ESG strategy, and why is it important? Reporting in ESG areas under the CSRD directive is meant to help companies minimize their negative impact on the environment and eliminate the socially harmful effects of their operations.

Which areas require changes in our organization? How costly will these changes be? How long will their implementation take?

But also – who will they affect?

Stakeholder – who is it?

To approach the ESG strategy appropriately, we must determine the organization's current state and business environment. To do this, we start by identifying stakeholders—individuals, groups, or organizations involved in or influencing the company's activities.  

Stakeholders include, for example: 

Shareholders and investors

Both company shareholders, institutional investors, and financial analysts directly and indirectly impact the company's actions. From active participation in shareholder meetings to voting on the company's development direction or investment decisions, shareholders' actions affect the company's ESG situation. Quoting the classic: "With great power comes great responsibility." A similar situation occurs with investors – large financial institutions often actively dialogue with the company's management to express their expectations regarding strategy, financial results, or risk management. This also has a significant impact on the organization. Financial analysts, in turn, play more of an advisory role, and their recommendations can directly impact company decision-making. As these recommendations can have positive and negative environmental and social consequences, financial analysts are another group covered by cooperation in ESG reporting.

Employees

Employees make the company and make numerous decisions and actions within the organization. Their influence on the company and its sustainable development is crucial. However, employees are a very diverse and non-homogeneous group of people. So, who will be a stakeholder? Every employee? Only office workers? Department managers? Trade unions? Who should be considered when preparing the report? 

Every employee is a stakeholder, as are trade unions as a group and potential employees, as each impacts decisions made in the organization. However, this does not mean that every employee needs to be surveyed when preparing for reporting. Instead, each department/department manager should be consulted, and conversations should be initiated with trade unions if they exist in the organization.

Fot. Weronika Dyląg

Customers / consumers

It is worth asking: Why do my customers buy from me, not the competition? Is it about price, delivery, quality... or business responsibility? In the case of the clothing company Patagonia, love for nature, nature observation, and experience are significant factors, along with the company's actions demonstrating respect for nature. Customers choose Patagonia because, like them, Patagonia wants a change in the way they shop, and its actions support that goal. They want a company that allows them to experience nature and take care of it. Therefore, Patagonia introduces various services, such as clothing repair, to meet the expectations of its customers and fulfill its mission. In Poland, SOLAR has introduced clothing repair, following SLOW FASHION principles.

Understanding customer needs and how the organization meets them makes consumers another group with a genuine impact on the company. Therefore, we should communicate with this group to understand their views on the company's ESG activities. For B2B service providers, obtaining such information may seem more manageable. However, regardless of the difficulties, B2C companies should consider it when creating an ESG report and strategy.

Suppliers

From energy suppliers to printer paper suppliers to IT service providers – each of them, as they collaborate with the organization, becomes a stakeholder in the context of ESG reporting. The more knowledge about the sustainable practices of suppliers, the more consciously we can build our ESG strategy. When selecting suppliers, we broadly influence ethical work, environmental protection, and social justice issues. If we aim to develop sustainable supply chains and minimize negative environmental impacts, we will try to choose suppliers with similar ambitions. Therefore, information obtained from suppliers – both feedback on our organization and information about their operating methods – will be crucial in the context of ESG reporting. In some cases, proper reporting will depend on information obtained from suppliers. Hence, the entire supply chain must be aware of and engaged in ESG issues.

Local communities

No company operates in a vacuum, and each impacts local communities. A small plant, a local store, will primarily impact the community geographically closest to its location, while global corporations directly and indirectly impact various local communities. It is worth examining which local communities our organization affects and in which—and how—it is already actively involved (e.g., organizing local initiatives, engaging in dialogue and cooperation with residents).

Non-governmental organizations (NGOs)

Active collaboration with non-governmental organizations can be incredibly helpful in building and evaluating ESG strategies – especially in identifying areas that need improvement and understanding social expectations. NGOs often work in specialized areas, and those dealing with ESG issues frequently serve as ethical and environmental watchdogs. NGOs collaborating with the organization can be an invaluable source of valuable information about the company's actions and opportunities for future actions.

Governments and regulartory bodies

It cannot be denied that regulations issued by various regulatory bodies significantly impact the obligation to report ESG, the extent to which a company is legally obliged to conduct sustainable operations, and the limitations in this matter. It is essential not only for the organization to be up to date with all regulations but also – in the context of ESG reporting – for how much the organization engages, within its capabilities, in legislative actions and dialogue with regulatory bodies.

Media and public opinion

Media and public opinion influence corporate actions. On the one hand, the role of the media is to observe and analyze actions that affect social well-being and inform society. A well-built information strategy regarding the company's sustainable activities – allowing for transparent and factual communication – will be an essential element of the ESG strategy. Media can also be invaluable allies for companies that will build educational initiatives – whether for local communities or larger groups – about the company's ESG-related initiatives or actions that community representatives can implement with the help of organization members.

Competitors and the business environment

As already mentioned – no entrepreneur operates in a vacuum. When creating an ESG strategy, we should not only analyze the competition and the business environment of our organization in the context of ESG activities that can be an inspiration and benchmarks for good practices but, above all, carefully examine how the pursuit of competitiveness in other areas affects decisions regarding sustainable development and how – while remaining a competitive organization – mitigate this impact in the ESG area.

Industry organizations

One way to mitigate the effects of competition is to cooperate with industry organizations that bring together companies from our area. Such organizations enable the exchange of experiences, the establishment of common standards, the development of industry strategies, and the promotion of innovative ESG solutions, whose individual implementation could be less effective or, due to market conditions, impossible. Industry organizations can also be an invaluable source of feedback and ideas for ESG solutions that are well-grounded in industry realities. Reporting on joint actions contributing to the development of the entire industry toward sustainable development will undoubtedly also positively impact the company's image.

Fot. Weronika Dyląg

Accurately defining stakeholders, their roles, and their impact on the company and communicating with them – gathering information from them and transparently informing them about ESG actions – is the key to starting work on a coherent and effective ESG strategy. No strategy will ultimately be effective if it does not reference the needs, actions, and limitations dictated by internal stakeholders (shareholders, employees, management) or external ones (customers, suppliers, industry organizations, local communities, NGOs, media, governments, or competitors). Only by meticulously recognizing its situation – and the influence of individual stakeholders – can a comprehensive model of responsible business be created and, consequently, build a lasting and positive social, environmental, and economic impact.

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