3.1 Establish the purpose of the engagement
The organisation shall identify those decisions, actions, issues, questions and challenges that will benefit from stakeholder engagement. The organisation shall define the purpose for each engagement. The purpose shall establish what needs to be achieved.
Stakeholder engagement always serves a purpose. It is important not to jump directly into engagement without first thinking about why you want to engage, what issues you need to engage on, and what you want to achieve. Typically there are two broad categories of purpose: strategy and operations. That is, stakeholder engagement takes place to develop or improve strategy or to help identify and achieve operational outcomes.
The purpose is a general statement of need. For example, an organisation may need to engage with stakeholders because its product design strategy is no longer working. It needs to adjust its product design strategy because it is losing market share. It will then engage with stakeholders to understand better why its designs are no longer attractive and what stakeholders’ changing interests and expectations are. The purpose of the engagement will be to redefine product design strategy. The result of the engagement will be a new design strategy.
At an operational level the organisation may find that it is receiving many complaints from the community it operates in because of noise levels coming from its factory. It will then need to engage with its stakeholder to better understand the nature of the problem and community expectations in order to adjust and improve operational management. The purpose of the engagement would be to develop a mutually acceptable solution to the noise problem.
Depending on the level of engagement, the organisation may involve its stakeholders in defining the purpose of the engagement.
The purpose of the engagement may have to be adjusted based on the views of stakeholders during the engagement.
3.2 Establish the scope of the engagement
The organisation shall define the scope for the engagement. The scope shall include:
When considering the parts of the organisation to include the organisation should consider whether the engagement will address the whole of the organisation or a single business unit or operation.
When considering the geographical regions to include the organisation should determine whether the engagement will address worldwide operations or those of a single country or region.
When considering the activities, products or services to include the organisation should consider whether the engagement will address everything the organisation produces and does, or specific activities, products and services.
When considering the material issues the engagement will address the organisation should consider whether to address all material issues associated with the identified part of the organisation, geographical region and activities products and services, or a single issue because of its importance (e.g. human rights or the disposal of toxic waste).
When considering the time-frame the engagement will address the organisation should consider whether it will look at long term strategic issues or current concerns.
Depending on the level of engagement, the organisation may involve its stakeholders in defining the scope of the engagement.
The scope of the engagement may have to be adjusted based on the views of stakeholders during the engagement.
3.3 Identify the material issues associated with the purpose and scope
The organisation shall identify the material issues associated with the purpose and scope of the engagement.
To refine the understanding of the purpose and scope of the engagement the organisation should identify the material issues associated with the purpose and scope.
Many of these issues will be clear from the purpose discussed above. However, there are issues that may not be immediately obvious that nonetheless need to be identified and addressed.
This range of material issues goes beyond the limited definition of materiality used in financial accounting standards, which are often interpreted conservatively to mean only those issues that are likely to have a measurable short-term impact on the financial health of an organisation. This definition of materiality does not consider broader economic, social and environmental issues and leaves the organisation open to unanticipated risks and unable to identify new opportunities. Without some way of identifying and assessing material non-financial as well as financial issues stakeholder engagement risks getting caught up by the short-term dynamics and moods of public opinion. A key challenge then is to identify those issues which are material to the organisation’s long-term success.
The organisation should have in place a methodology to identify material issues associated with its activities, products, services, sites and the subsidiaries, for which it has either management and legal responsibility or the ability to influence associated performance outcomes (e.g. effects of product use). The organisation should review the material issues determined using this process to identify those that are associated with the purpose of the engagement. If a materiality determination process is not yet in place or has not been implemented, the organisation should consider establishing such a process and implementing it to support the engagement. These material issues will be important to the engagement and may be reconsidered as a result of it.
An issue or concern should be considered material if it influences or is likely to influence the decisions, actions and behaviour of stakeholders and/or the organisation itself.
Depending on the level of engagement, the organisation may involve its stakeholders in defining the issues material to the engagement.
The issues material to the engagement may have to be adjusted based on the views of stakeholders during the engagement.
3.4 Establish the aims and level of the engagement
The organisation shall identify and agree on the aims and level of the engagement. The aims and level shall be based on the purpose, scope and the associated material issues.
The aims and level of the engagement define the nature of the relationship the organisation aims to develop with its stakeholders. The levels, aims and relationships are described in the table below.
In developing the aims and level of engagement, the organisation should determine its ability (i.e. the extent to which it is willing and able – including available human, technical, financial capacity) to respond to stakeholders in a coherent and adequate manner and in a way that meets the purpose for engaging. The organisation should assess its ability to respond to a range of possible engagement outcomes and expectations. As engagement takes place and as stakeholder engagement practice matures, the organisation should involve stakeholders in the design and implementation of its engagement purpose and scope.
To establish the aims and level of the engagement the organisation should first clearly understand the level of engagement required to achieve the agreed purpose. Will the purpose require, for example:
The aims and level should be selected to achieve the requirements of the purpose.
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