5 steps to Stakeholder Engagement and Labor

By Fabiana Di Lorenzo, EMG Consultant

Strategic stakeholder engagement (SSE) is a cost-effective approach to safeguarding human rights (including labour rights) along the supply chain and in business operations. It foresees a combined effort of different stakeholders and business to guarantee compliance with human rights. Since the Global Compact was established, companies have come to play a major role in ensuring that human rights are protected. This task becomes particularly challenging when business operations are located in emerging markets, where law enforcement is weak. Consider the footwear industry, cocoa or the cotton industry. Most of these firms have their headquarters in Europe but their outputs are produced in Asia, Africa or South East Asia where legal enforcement and human rights remain weak. However, these firms remain under the scrutiny of the international community especially where they are headquartered and a company associated with alleged human rights violations will inevitably suffer negative impacts in terms of image and reputation but will also see a weakened commitment of its employees.
An effective SSE includes assessing and preventing risks, forging partnerships with key stakeholders while liaising at different degrees with minor ones. A poor strategy can push a company into facing even greater financial and reputational risks than expected benefits.

Assess risks and consider human rights with due diligence

Take the time to look around and assess which human rights your company is knowingly or unknowingly violating or might be at risk of violating. Human rights and due diligence should always be assessed by a respectable independent expert to avoid biased analyses. It must be holistic and not only be an indication of what business can do. It must include what the government and other players can do on their side to promote good governance and relevant public policy on different interconnected levels: political, economic, business, environmental.

Having identified the risks, consider the possible impacts, set your goals and then identify all appropriate mitigations and remedy strategies.

Assess your strengths and look for complementary skills

A company has outstanding business expertise but not necessarily knowledge about human rights compliance procedures and good governance. A SSE ensures that all key organisations are approached to put in synergy complementary skills.

Ensure the central government is engaged effectively

Sometimes companies rush into simplified stakeholder alliances without considering the importance of good governance and good business practices. An ethical company can take care of its business and ensure legal compliance through a number of strategies. However, long term and sustainable results cannot be achieved without the government managing the playground.

Human rights are not only about companies complying with legislation, but also about governments meeting their obligations in terms of good governance and public policy. Bring on board the central government when possible. Consider civil society organisations to ensure transparency and communication with communities.

Look around

Identify all possible market and non-market stakeholders and their organisational objectives. Market stakeholders are those actors who are engaged in economic transactions with the firm. Non-market stakeholders are defined as those that, although not directly engaged with company economic activity, are still affected by the company operations, or affect its policy, decisions and operations. Remember, the environment is a stakeholder! Human rights and environment are closely linked as a healthy environment is essential for the enjoyment of basic human rights.

Set your objectives and prioritise!

Make a stakeholder prioritisation by identifying which one can support your business plan and help you comply with the legal framework. Move beyond the obvious and consider the contribution that each stakeholder can make to ensure good governance is in place and that the company’s business expertise can be leveraged to achieve success.

Define the level of engagement with each stakeholder.

Go beyond your supply chain: what happens on the ground?

Companies could make the mistake of not looking at what happens on the ground with other business sectors. Other companies in other sectors may be active on the ground and learning about their experience can reduce risks of duplicating mistakes and help establish valuable synergies for the purpose of compliance with human rights.

EMG Author

Fabiana Di Lorenzo: Fabiana is EMG Consultant, specialised in public-private partnerships (PPPs) and legal compliance. She previously trained and consulted companies, workers and public players on compliance with labour and human rights. Through strategic stakeholder engagement she designed practical solutions to minimise reputational and corruption risks in Europe and Africa.