Stakeholder Engagement Doesn’t Have to Be Management’s Nightmare

Stakeholder engagement is generally presented as a cornerstone of responsible business conduct under every major human rights due diligence scheme. It is intended to ensure that workers, communities, and other affected stakeholders can raise concerns and influence corporate decisions that affect them.

Yet conversations with corporate teams often reveal a very different perspective. For many companies we have worked with, stakeholder engagement is associated with uncertainty, operational complexity, and difficult decisions. Rather than being viewed as a valuable source of information, it is often perceived as a process that may create additional work, delays, costs, and risks.

The reason for this perception lies in the nature of stakeholder engagement: Unlike many compliance processes, stakeholder engagement is not designed to evaluate information that a company already knows. Its purpose is to identify blind spots, challenge assumptions, and uncover risks that may otherwise remain invisible. This is precisely what makes it unpredictable for companies.

As a result, companies shy away from engaging directly with stakeholders and rather adopt approaches that minimize or replace meaningful engagement altogether. These strategies, however, bear greater risks than engaging with stakeholders, particularly in conflict-affected and high-risk areas. As a way forward, we recommend a non-exhaustive list of principles that help companies simplify stakeholder engagement in complex environments.

Why Corporations Fear Stakeholder Engagement

The hesitation of many companies towards stakeholder engagement is often rooted in three factors: (1) uncertainty about the outcome, (2) a perceived loss of control over decision-making and project timelines, and (3) logistical and security challenges associated with the process.

Unpredictable Outcome

Probably the main reason for corporate hesitation towards stakeholder engagement is the unpredictability of its outcome. The purpose of engagement is to uncover new perspectives and information that help identify blind spots in a company’s activities and remedy potential harm. By definition, it is therefore difficult to determine in advance what stakeholders will say during a consultation. Will they raise risks, concerns, or human rights issues that the company has not identified yet? Will they highlight impacts that require management attention due to their scope, severity, or scale?

The purpose of engagement is to uncover new perspectives and information that help identify blind spots in a company’s activities and remedy potential harm.

This uncertainty is amplified in conflict-affected and high-risk areas. Due to access restrictions, companies may have never interacted with affected communities before. Publicly available information may be limited, and civil society organizations often face similar restrictions, security risks, and operational constraints. As a result, companies may have little understanding of stakeholders’ perspectives before consultations take place.

Operational Implications

Once stakeholders raise concerns, management no longer fully controls the agenda. If consultations reveal human rights impacts that have not been considered in the project design or risk management system, stakeholders may expect the company to act. They may request remedies, changes in project implementation, or increased participation in decision-making processes. In turn, the project implementation gets delayed, and the company may need to allocate additional financial and human resources. For instance, a recent McKinsey study from the mining sector reveals a delay in over 80% of all projects with lack of effective stakeholder engagement as a reason for delay in nearly one third of the projects.

Unlike many compliance processes, stakeholder engagement does not necessarily create closure. Instead, it often generates further questions. Which concerns should the company address? How should it prioritize them? Which mitigation measures are both effective and feasible? Addressing these questions may require changes to project implementation or the company’s due diligence measures. Such adjustments can trigger lengthy internal alignment and approval processes and potentially affect project timelines.

The operational implications are particularly significant in conflict-affected and high-risk areas. Changes in project design or due diligence measures may involve additional logistical arrangements, security considerations, and costs.

Security and Logistical Challenges

Stakeholder engagement also comes with a range of logistical and security challenges, particularly in large-scale projects and multinational companies with diverse stakeholder groups.

Companies must navigate a series of difficult questions. Who are the relevant stakeholders? Who legitimately speaks for a community? Which voices are absent from the discussion? How do local power dynamics influence what people are willing to say? What happens when communities themselves disagree? How can stakeholders be accessed safely? Should companies engage directly or through representatives? How can consultations be conducted without exposing participants to reprisals?

In conflict-affected and high-risk environments, these challenges become even more complex. Access may be restricted, information on local developments may be scarce, and actor relationships and power dynamics may be highly fluid. Addressing these challenges requires additional time, resources, and expertise, further increasing the corporate efforts required for stakeholder engagement.

The Result: Strategies to Avoid Meaningful Stakeholder Engagement

Faced with uncertain outcomes, operational implications, and logistical challenges, companies often look for ways to reduce the burden of stakeholder engagement. The result is a range of strategies that minimize or replace direct engagement altogether. In practice, companies may decide not to engage at all or substitute consultations with desk-based research, AI-constructed information, or proxy consultations.

Faced with uncertain outcomes, operational implications, and logistical challenges, companies often look for ways to reduce the burden of stakeholder engagement.

No Stakeholder Engagement at All

The most straightforward strategy is not to conduct stakeholder engagement at all. The 2023 Corporate Human Rights Benchmark, which scrutinized the world’s 110 largest apparel and extractive companies for their human rights due diligence systems, revealed that 73% of the companies did not engage with their stakeholders. This approach is particularly common when companies consider the risks associated with their activities to be low or when they perceive the likelihood of regulatory scrutiny to be limited. Companies may then conclude that the costs of stakeholder engagement outweigh its benefits.

In other cases, companies justify the absence of stakeholder engagement by arguing that they already understand the local context, or that no significant concerns have been raised through their whistleblowing tools. Yet the absence of complaints does not necessarily mean the absence of risks. It may simply indicate that stakeholders do not know about or trust the grievance mechanism or have not been given a meaningful opportunity to voice their concerns.

Desk-Based Research or AI-Constructed “Stakeholder Input”

An increasingly common strategy is to replace stakeholder engagement with desk-based research or AI-constructed information. Instead of speaking directly to affected stakeholders, corporate teams review publicly available information, NGO reports, media coverage, or academic publications. They may also rely on a wide range of tech solutions to stakeholder engagement offered by third-party providers. These range from digital consultation tools analyzing and summarizing remote inputs from workers to AI-constructed risk predictions based on open sources with no active stakeholder inputs.

The appeal of these digital approaches is obvious. They avoid many of the logistical and security challenges associated with direct engagement. They are often quicker, more efficient, and easier to document than consultations with stakeholders on the ground. Collaborations with NGOs, compliance platforms, or large law firms make them seem even more credible.

Desk-based research or tech solutions may be sufficient for providing a general overview of the situation or understanding stakeholders who are only indirectly affected by corporate activities. However, they are rarely sufficient for identifying the experiences, concerns, and priorities of the most affected and vulnerable stakeholders. They tend to rely on publicly available information, which is often incomplete, outdated, or filtered through the perspectives of third parties.

Proxy Consultations

A third strategy is to engage primarily with intermediaries rather than with stakeholders themselves. Companies may consult NGOs, community-based organizations, trade unions, local associations, consultants, or other actors who are assumed to represent the interests of affected stakeholders.

Proxy consultations are not inherently problematic. Human rights due diligence frameworks, such as the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), explicitly recognize this engagement mode as it may be the only realistic option in some situations. Direct access to stakeholders may be difficult to establish, stakeholders may refuse to engage with the company, or security considerations may make direct consultations impossible.

The challenge arises when proxy consultations become a substitute for meaningful stakeholder engagement rather than a complement to it. Companies should critically assess whether logistical and security challenges genuinely prevent direct consultations or whether they could redesign the engagement formats to address these challenges.

Even where proxies have strong local knowledge, they do not necessarily reflect the full diversity of stakeholder perspectives. They may have different priorities, experiences, cultural backgrounds, or political positions than the stakeholders they represent. If proxies themselves have limited access to affected communities, their understanding of local concerns may be incomplete. And as information moves through multiple layers of representation, important nuances can easily get lost in translation.

Why these Strategies Often Fail in High-Risk Settings

The strategies of avoiding stakeholder engagement altogether or substituting it with desk research, tech solutions, or proxy consultation are rarely sufficient approaches for interacting with affected people. In conflict-affected and high-risk contexts, they are even more inadequate for three reasons: They (1) increase risk exposure, (2) rely on potentially outdated information in rapidly changing contexts, and (3) risk contributing to community tensions.

Limiting Engagement Increases Risk Exposure

Companies often try to reduce uncertainty by avoiding or at least limiting stakeholder engagement. This strategy results however in an increased risk exposure at three levels:

Operationally, the lack of meaningful stakeholder engagement removes one of the few mechanisms for understanding what is actually happening on the ground. Human rights or environmental risks exist regardless of whether companies consult with stakeholders. Stakeholder engagement merely makes these risks visible. Thus, by not engaging with stakeholders, companies may overlook certain risks and fail to take appropriate due diligence measures to address them. This may trigger reputational and liability consequences later.

Human rights or environmental risks exist regardless of whether companies consult with stakeholders. Stakeholder engagement merely makes these risks visible.

Legally, there is a growing trend across jurisdictions to render stakeholder engagement and consultation mandatory on corporations in high-risk areas and sectors. From Europe to Africa and Latin America, international organizations, regional bodies, and states have enacted regulations requiring companies to consult with local communities at least under certain conditions. Failing to comply with these rules may result in sanctions and reputational damage.

Reputationally, public scrutiny of corporate activities in high-risk contexts and their interaction with local communities has risen in the last years with increased social media and news coverage of companies’ local impact and (alleged) collusion with abusive governments. This has led to formal complaints against companies. Most recently, nonprofit organizations filed a complaint against a Canadian company under the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct because it completed an environmental impact assessment for a construction project in Myanmar’s active conflict zone without consulting with relevant stakeholders. The complaint illustrates that stakeholder engagement is no longer merely a matter of good practice but is increasingly scrutinized as part of companies’ due diligence obligations.

Rapidly Changing Contexts Outpace Desk-Based Approaches

High-risk contexts invalidate static assessments, as information is very short-lived. Political developments, security conditions, local actor relationships, and community priorities may change within days or weeks, making it difficult for companies to rely on information collected at a single point in time. This renders active stakeholder engagement even more crucial and shows the limits of approaches that rely on desk-based research or AI-generated analyses.

Desk-based research relies on published reports and news that may already be outdated when companies access them. Without a very solid understanding of the local context, it is also very difficult to identify what information is still accurate. Similarly, AI can process vast amounts of information in seconds, but it cannot determine whether the underlying information is complete, current, or representative of realities on the ground. In high-risk environments, stakeholder engagement is not a one-off exercise but an ongoing process of updating information as contexts evolve.

Fragmented Communities Lead to Contested Representation and Consultations

The assumption that communities speak with one voice rarely holds in conflict-affected and high-risk environments. Large scale projects or high-risk corporate activities often polarize local communities. Some community members may perceive them as an opportunity for economic growth, while others emphasize potentially negative human rights or environmental impacts. This may lead to fragmented communities with multiple representatives, thereby complicating proxy consultations.

The assumption that communities speak with one voice rarely holds in conflict-affected and high-risk environments.

Choosing to speak to formal representatives or proxies only may unintentionally reinforce existing power structures while excluding other affected groups. Some community members may not feel heard and challenge the consultation process in court. A recent case involving two US-based companies seeking to establish a carbon offset project on indigenous lands in Brazil exemplifies this situation. One indigenous association signed a contract with the company and participated in an impact assessment. Other indigenous groups on the territory, however, successfully challenged the project before court and obtained an order suspending all project activities until indigenous representation and consultation processes are clarified.

This case also shows another challenge: proxies or representatives may not give the full picture. This leads companies to have an incomplete understanding of the risks and local perspectives, increasing their risk exposure in the future.

A More Practical Approach to Stakeholder Engagement

In high-risk environments, the challenges associated with stakeholder engagement are considerable, as are the risks of approaching it superficially. There is no universal methodology that works across all contexts, and effective stakeholder engagement always requires adaptation to local realities. Nevertheless, several practical principles consistently help companies make engagement more practical and meaningful in complex environments. The following are three that have proven particularly valuable in our experience.

Start with Risks, Not Stakeholders

Companies have an overwhelming number of stakeholders: workers, investors, suppliers, customers, industry associations, regulators and legislators, affected third parties, the public, as well as representatives of these groups. It is impossible and unnecessary to engage with all of them at the same level, and companies need to make a selection.

The most effective way to prioritize stakeholders is a risk-based approach. The greater their exposure to the corporate activities and vulnerability to abuses, the more direct the engagement. While there are different methodologies to determine who is exposed or vulnerable, the most affected and vulnerable stakeholders should be the ones with the deepest engagement. For those only remotely affected by the company’s activities, monitoring of their position and relationship to the company may be sufficient.

Prioritize Meaningful Engagement over Comprehensive Coverage

Once companies have identified their priority stakeholders, they should evaluate and design engagement modalities. As a start, a practical and resource-efficient manner is to focus on the most affected and vulnerable stakeholders and initiate a meaningful exchange. What is considered meaningful needs to be determined based on the specific context and stakeholders.

Regardless, this approach is better from a regulatory and liability perspective than not conducting stakeholder engagement at all or turning consultations into a performative exercise. It reduces the risk exposure and allows companies to save their resources on the most critical stakeholders. Human rights due diligence frameworks generally do not require companies to engage all stakeholder groups with the same intensity. Rather, they expect companies to make reasonable, risk-based efforts to engage those most affected by their activities.

When Engaging with Stakeholders, Ask a Lot of “Why” Questions

Many factors contribute to a meaningful stakeholder engagement, but what stands out as a success factor in our experience is overcoming the “language barrier.” Stakeholder engagement is not only about transferring words but also about translating perspectives. Companies often describe impacts through the language of legal obligations, mitigation measures, or project implementation. Affected people, by contrast, may describe the same impacts through values, livelihoods, traditions, dignity, or relationships. “Preventive measures” for companies may be “restricted access to land” for communities.

Meaningful engagement therefore requires companies to move beyond their corporate language and seek to understand why stakeholders say what they say. Asking follow-up questions and exploring the underlying concerns often provides more valuable insights than documenting statements at face value.

Stakeholder engagement in conflict-affected and high-risk environments will never become simple. Uncertainty, rapidly changing dynamics, and logistical challenges are inherent to these contexts. Yet avoiding or limiting engagement rarely reduces these challenges; it merely makes the risks associated with corporate activities less visible to companies. The objective should therefore be to conduct meaningful, risk-based stakeholder engagement that enables better decision-making in complex environments.

Stakeholder engagement in conflict-affected and high-risk environments will never become simple.